Issue 2/The Case for PriFi
Understanding Whole Systems
TLDR: PriFi, or private finance, is a technical design philosophy espoused by Logos. It involves deploying privacy-preserving financial primitives on peer-to-peer infrastructure and hardware you control. PriFi is not privacy bolted onto existing systems, but rather systems designed from the ground up to allow counterparties to conceal valuable and exploitable information, so they can confidently enter into trades.
The transaction supply chain
- Discovery. Finding a counterparty who has what you want.
- Diligence. Verifying they are who they claim.
- Negotiation. Agreeing on price and terms.
- Contracting. Committing in enforceable form.
- Ordering. Deciding whose transaction goes when.
- Settlement. The only link where value moves.
- Enforcement and recourse. Making the outcome stick, or proving what happened when it does not.
Blockchains solved one of the oldest economic problems: how to make a promise hold even when the party making it would prefer otherwise. But transactions do not begin or end at settlement; they comprise steps before and after, including discovering someone to deal with, checking they can uphold their end of the bargain, and so on. If security is concentrated at the moment value moves, while information and discretion remain exposed everywhere around it, the transaction remains vulnerable. PriFi aims to secure the entire transaction supply chain.
For most of crypto’s history, we have treated onchain transactions as if they were atomic events. We tend to consider them as self-contained moments: a signed instruction enters the network, executes, and settles. In reality, they comprise a series of links in a wider chain. They include discovery, diligence, negotiation, contracting, ordering, settlement, and enforcement.
Settlement is where blockchains are extraordinary. Bitcoin demonstrated that monetary rules could be enforced without reliance on a central operator who can make exceptions. Ethereum extended the principle to programmable agreements. A valid state transition is accepted; an invalid one is rejected. Counterparties do not need to trust a minister, bank manager, or platform operator to consistently honour rules.
Institutions have always struggled with the problem of credible commitment: How can we trust that a party will act in accordance with agreements made when breaking their word may be in their interest? Blockchains realised historically unprecedented guarantees by removing the discretion to defect and making rules self-enforcing.
Yet the absolute transparency that enables blockchain to structurally constrain defection introduces new attack surfaces by making information about the transaction available to every network observer. These attack surfaces discourage wider participation in onchain finance and define the problem space for those building PriFi infrastructure.
The proposition is not simply that financial transactions should be “more private”. It is that the correct unit of analysis is the entire transaction lifecycle, and that strengthening commitments requires heightened privacy and security at each link.
Read the full article: “PriFi: Securing the Entire Transaction Supply Chain”, logos.co/prifi.