I have a crazy idea that might just work. What if we could create something that has the privacy of cash, is uncensorable like cash but could also be digitally transmitted like electronic payments?
Unless you're implying Monero I don't think so.
> is uncensorable like cash
Uncensorable until you get sanctioned like Tornado Cash? Or this is also about Monero?
> but could also be digitally transmitted like electronic payments?
At the same speed, convenience, security and efficiency level?
I wish we could have something like Monero run by the Government backed by gold.
It is cash like in that if you typo the destination address you instantly lose all the money, which is sort of like how you can accidentally set cash on fire.
Who types destination addresses by hand? Probably the same people that expose a hoard of paper money to flames?
If you've ever said anything like "Donations accepted at $ADDRESS", then everyone can see if anyone ever sent anything, and from there it doesn't take much work to see if you ever spent that money on anything and what else you do with it.
You can obscure things some, but the records are permanent and anything people can figure out stays known. If the authorities are after you, then they can get information from exchanges, which at this point require giving them personal information.
Cash is much more private. It takes much more effort to figure out who you gave your cash to.
Variations of that show up everywhere: your employer can review your political donations or decide you spend too much money at the local bar, casino, or anywhere else they don’t approve of.
Major criminals get caught making mistakes on that kind of thing, there’s no way normal people aren’t going to make mistakes – and that’s before you think about what using a mixer actually means: lighting a neon sign saying “something about this transaction is dodgy, examine it!”
It's true that it is not completely anonymous, but it is a huge improvement over the current system we are discussing here. Add that to the other benefits Bitcoin has and I still feel like it's a huge win.
Here's also a flip side benefit to the public ledger. Businesses can, if they choose, cryptographically prove that they have the funds they say they have. Think of the value of that
First, following a chain is not as hard as you’re making out and there are existing companies which provide that service, which they’d pay just like they do credit reporting agencies - made easier by the fact that they’d be providing most of your income so it’d be starting with a known point. Mixers can be defeated but simply using one is a red flag.
Second, ordinary people are not going to perfectly follow a complicated setup – it’s not just that they make mistakes, although that’s a certainty, but also that they already aren’t interested in Bitcoin’s higher costs and slower transaction speeds so making those characteristics worse will not increase adoption. “Harder to use, costs more, still less secure than cash!” is not a compelling ad.
> Businesses can, if they choose, cryptographically prove that they have the funds they say they have. Think of the value of that
You mean they can make the same statements which businesses have been making since ancient times? The problem with all of these systems, as FTX customers can attest, is that the hard part isn’t counting what’s in your ledger but dealing with the real world outside – even if you can see all of my Bitcoin, you can’t know whether I have unrevealed debts or am about to be sued, etc. Since businesses run on credit, that means you still need auditors and courts to deal with the parts of the problem which aren’t simplistic enough for a blockchain.
Using the new tech like Schnorr signatures is not "a complicated setup" that "has to be maintained perfectly." It is (or will be soon) built-in to the wallet software. You won't have to think about it. Maybe you read a lot about early Bitcoin wallets that didn't even provide unique addresses for each transaction (was that ever even a thing?) but times have changed. The ecosystem just gets better and better.
Also, did you read the article I linked to? In another thread I provided some more explanation and links:
All the chain analysis you have heard of is based on likely patterns and typical behavior of address use in common Bitcoin wallet software. New signature and script schemes have been added to Bitcoin in the past several years that disrupt those patterns and make it even harder to find connections between addresses.
Further reading:
https://river.com/learn/bitcoin-privacy-and-anonymity/
https://river.com/learn/what-is-taproot/
On the business transparency, you seem to completely ignore the cryptographic proof businesses can provide, that's not the same statement that businesses have been making since ancient times. It's a mathematical guarantee. All the rest you point out is true though, and so you are right that it's not a total elimination of potential fraud.
It’s a mathematical guarantee in the same way that a bank statement is. It’s extremely rare for the problem to be counting things rather than undisclosed debts, embezzlement, etc. and that kind of thing is just as much of a problem for a Bitcoin user because the real world isn’t on the blockchain. If I look at your balance now, that doesn’t mean that you didn’t borrow 90% of that balance from someone else, neglect to mention that you have paid taxes, transfer it the instant after I signed a contract with you, etc. In all of those cases, we end up in a courtroom where a napkin with the CEO’s signature saying “IOU $1,0000,000” and a witness has the same legal weight as the Bitcoin network.
“Harder to use, costs more, still less secure than cash!”
None of those are absolutely true. For a local transaction in small amounts, yes, cash is easier and cheaper. For large transactions or for transactions with someone who is geographically far away, cash loses on all three of those, big time. I don't even need to explain why do I?
- There are a whole lot of bills to keep track of
- The serial numbers are not easily stored and compared with computers (at least not for private individuals)
That second point, bills not being on computers, is why cash isn't the easy answer to the banking problems we are discussing here. You can't pay someone across the country very easily using dollar bills.
With Bitcoin, there actually aren't any bills or tokens with serial numbers attached to them. There are however, as you point out, unique addresses for each transaction. Like the vast number of paper bill serial numbers, there are a lot of possibly Bitcoin addresses. Far, far more than there are paper dollar bills, sands in the sea, and stars in the sky, actually.
It is, however, somewhat possible to track Bitcoin going too and from the addresses because it is all on computers and this is a trade off of Bitcoin being permission-less and not controlled by a single entity that can decide to unbank you, and online so that you can send it to people across the country.
So, as you point out, if someone publicly associates themselves with a Bitcoin address, and if they reuse that address over and over, you can see how much Bitcoin is going into and out of that address, and if the other addresses in these transactions are also known, then you can easily see that Bob sent Alice some Bitcoin. Address reuse and publicly associating yourself with an address was unfortunately common in the early days of Bitcoin, but practically it never never happens anymore. Instead each and every transaction uses a new unique address, and as I said before, there a vast huge number of possible addresses.
As for exchanges, yes, they do have identities associated with Bitcoin addresses. You can easily accept bitcoin from an exchange and then transfer it again to other addresses that have not been publicly associated with you. Also, hopefully someday exchanges won't be necessary.
It's not "somewhat" possible, it's 100% possible because the history is public and permanent. If you make a mistake once in your entire life Chainalysis will see through anything you previously did to obscure a transaction.
All the chain analysis you have heard of is based on likely patterns and typical behavior of address use in common Bitcoin wallet software. New signature and script schemes have been added to Bitcoin in the past several years that disrupt those patterns and make it even harder to find connections between addresses.
Further reading:
If you're claiming these upgrades made Bitcoin anonymous in 2021, that's obviously not true, since multiple people who stole billions of dollars of bitcoins from exchanges have been caught with chain analysis since then.
https://www.onlineathens.com/story/news/crime/2022/11/08/for...
He definitely wasn't using Schnorr signatures 10 years ago.
Bitcoin is not magical and perfect, trade-offs have to be made in any endeavor. I personally think the ones Bitcoin has made are good ones. Maybe you still disagree.
Of course, all later ones are funnier. People think Ethereum is a distributed computer! But the whole network runs at the speed of a single node.
If you want to trade numbers with people over the internet, I recommend using Google Sheets. Maybe ban people if they edit it wrong.
Cryptocurrency folks do sometimes take the open source Bitcoin code and make small (or large) changes to it in order to do their work. When they do this they create a separate codebase, separate network, and a separate currency. Almost inevitably they do so in such a way as to greatly benefit themselves and to fool you.
I don't see any significant difference between Bitcoin and the rest. Bitcoin was just the first thing that stuck but that doesn't grant it any special privileges.
Yeah, inertia, social pressure, and economic incentives. For instance miners are into it for the money, so to them technology doesn't matter. A technologically superior network is of no use to a miner if mining for it makes less money.
> Or just respectfully stay out of these conversations maybe?
Nope.
Which is stupid, because Bitcoin is THE number 1 crypto, but for some reason they're all claiming it isn't.
In all seriousness, it's not just a talking point. Bitcoin's invention, promises, implementation, and operation has significant fundamental differences from all the others. If all you can be bothered to do is say, "yep, they all look the same to me," then maybe just sit out this conversation?