Sunday, October 22, 2017

The Horrific Bitcoin Trackability Factor

At the post, The Government Attack on Bitcoin Has Begun, The NAPster writes:
Robert, I don't follow your logic: "Governments can always require that merchants who accept Bitcoin (and other private e-currencies) record the name of the users. There goes the privacy value of Bitcoin. Under such circumstances, Bitcoin is much more trackable than cash---or gold." 
Why couldn't such governments also require merchants who accept cash to record the name of buyers? How is this a particular defect of Bitcoin compared with cash?
There is an old Swiss saying,
"Gold has no smell," by which it is meant that if someone owns some gold, has spends gold, etc., there is no trail as to where the gold came from, i.e. it has no smell.

The same holds for paper currency. So if the government were to require merchants to record the name of the buyer using cash that would be the beginning and end of the trail.

However, with bitcoin, there is a public trail. Once a spend is recorded its entire life can be traced and anything else in the spender's specific wallet.

And don't tell me about bitcoin mixers. There is no way to know when they have been compromised or run by the government in the first place.

Finally, it should be noted that Ross Ulbricht is serving life in jail pretty much because federal agents were able to grab his laptop, which provided a mound of information about his activities.

This would never happen to a street drug kingpin. It takes a tremendous amount of effort and personnel to capture the full operation of a street kingpin who uses cash. One cash transaction doesn't lead to another. There is no open sesame when dealing with cash of the type that e-currencies provide the government.



  1. Is there any truly private cryptocurrency?

  2. This sums it up quite nicely Robert, there is nothing in the digital world that has any real permanence. Electricity is the Achilles for any of it.

  3. Right, but if every vendor had to record each buyer's use of cash and report it to the government, wouldn't the government have a very comprehensive record as to where that same buyer spent his money? With Bitcoin all the transactions using a particular public key can be aggregated, but with the hypothetical cash reporting regime all the transactions with a particular name can be aggregated too.

    1. With commodity money (cash, gold, etc.) transaction records can be be easily falsified (or omitted) and the commodities themselves physically hidden. With crypto-currencies, the currency itself is the transaction record and only exists because of that record.

    2. The other point to note is that the public key doesn't identify anyone by name, and it would take a huge effort by the state to watch everyone's spending trail, identify each owner of a public key, and enforce its regulations against anything but a tiny fraction of the millions of Bitcoin users. And if the state did aggregate all that data, much like with the NSA the state may have so much data it will not actually be able to do much useful with it.

      This assumes Bitcoin users don't keep their coins on centralized exchanges, which would be easier targets for the state.

  4. Snowden has said positive things about Zcash since it is supposedly private.