Be a Trusted Third Party but not a Privileged Insider

ABSTRACT A significant achievement of blockchain technology is its ability to enable distributed consensus‐based systems to operate without relying on a trusted third party (TTP). However, anonymity within privacy‐preserving distributed applications (DApps) remains a double‐edged sword, balancing privacy with potential misuse. Implementing distributed conditional privacy algorithms complicates this balance, frequently leading developers to adopt centralized approaches that conflict with blockchain's decentralized principles. Consequently, achieving an optimal balance between fully distributed and centralized architectures often fails to meet community expectations. In response, this study introduces a streamlined and effective theorem, “ Managing under Limitation ”. Unlike advanced cryptographic tools (which often rely on TTPs) or nested schemes (which are complex to implement and analyze), this approach allows legislatures to enforce regulations without directly accessing users' sensitive information as privileged insiders. This approach is expected to streamline regulatory compliance, foster trust among stakeholders, and promote broader adoption of blockchain‐based services.