Traditionally, trust was placed in centralized institutions like banks, payment networks, and clearinghouses—closed systems where users relied on external audits, government regulation, and long compliance histories to feel secure. Though effective, this model entails trade-offs such as opacity, concentrated power, and limited innovation. A new trust model has emerged with blockchains and decentralized applications (dApps), which rely not on institutions but on the underlying code itself. This shift is founded on the principle of open source, which is mandatory in blockchain. Open source enables anyone to inspect protocols, audit smart contracts, and verify system behavior; without it, users cannot truly know what they engage with. At first glance, open source and privacy seem contradictory: if code is public, how is confidentiality maintained?As blockchain adoption grows, balancing transparency and privacy has become a key and often misunderstood challenge. Open source builds trust without intermediaries and underpins decentralization. Public codebases are continually reviewed by developers and security researchers, leading to robust, secure systems like OpenSSL, Linux, and Bitcoin, whose security strengthens over time. This approach traces back to the 19th century cryptographer Auguste Kerckhoffs, who asserted that a secure system remains secure if its design is public but its secret key remains private—Kerckhoffs’ Principle, a foundation of modern cryptography. Open source implements this by making code public for independent verification, distinct from data transparency. Protocols can be open source yet still protect user confidentiality, which is the current direction in blockchain technology. Initially, blockchains prioritized transparency with publicly visible transactions—a necessary compromise before privacy-preserving technologies existed, much like how the early web’s HTTP traffic was unencrypted until TLS emerged in 2006.

Today, publicly recording sensitive information like salaries or personal finances is unacceptable, so the challenge is restoring privacy without sacrificing auditability. Privacy-preserving technologies (PETs) address this issue. While some PETs, like trusted execution environments (TEEs), are not open source, all cryptography-based PETs used in blockchain are open source. For example, zero-knowledge proofs (ZKPs) allow proof of truth without revealing details, enabling private on-chain transactions and identity verifications. Modern ZK systems such as PlonK, Groth16, and STARKs are open source and globally reviewed. Fully homomorphic encryption (FHE) permits computing on encrypted data, allowing smart contracts to operate without decrypting inputs; its cryptographic libraries, like TFHE-rs, are also open source. Secure multi-party computation (MPC) enables multiple parties to jointly compute results without revealing individual inputs, and many MPC protocols, including threshold signatures and distributed key generation (DKG), are likewise open source—because trust demands transparency of mechanisms. Ultimately, achieving on-chain privacy begins with code transparency. Open source is not a privacy threat; rather, it is essential for ensuring confidential systems function correctly, free from hidden flaws or backdoors, and open to community improvements. The future of blockchain and decentralized finance hinges on balancing privacy with auditability by openly revealing system workings and allowing rigorous examination. This is the purpose of open source and, in our view, the only viable path forward.