Secrets are lies - Part 1

Statement: 'Cryptocurrency is used for illicit purposes.'

Sigh. I'm going to choose to quote Forbes, the United Nations and SWIFT here:

“The majority of cryptocurrency is not used for criminal activity. According to an excerpt from Chainalysis’ 2021 report, in 2019, criminal activity represented 2.1% of all cryptocurrency transaction volume (roughly $21.4 billion worth of transfers). In 2020, the criminal share of all cryptocurrency activity fell to just 0.34% ($10.0 billion in transaction volume). According to the UN, it is estimated that between 2% and 5% of global GDP ($1.6 to $4 trillion) annually is connected with money laundering and illicit activity. This means that criminal activity using cryptocurrency transactions is much smaller than fiat currency and its use is going down year by year. “

Sure, drug-markets were among some of Bitcoin's first use-cases. [fill in puerile counterpoint about criminals and cash here]. It should be noted that the coins that went through these sites or through obfuscating mixers are also increasingly being viewed as 'tainted' by the community, somewhat akin to how 'black money' without traceable origin was viewed 20 years ago. Almost like secrets are lies. Or crimes. More on this later. I'd like to stress that framing crypto in this way is very biased.

Why not frame it as the robust way through which Wikileaks was still able to obtain funding after its capacity to receive funds the classic way was unilaterally cancelled by Visa, PayPal and the rest, because they are an organisation that supports whistle-blowers? Or as a way to send remittances to the home-front by immigrants all around the world without getting essentially legally robbed for draconian fees by Western Union? Or as a way for an unbanked Nepalese person to monetize their work? Or simply as a currency that has a predictable supply, not at the mercy of the next FOMC meeting. Or, wait for it, last one, I promise, as a payment system by which the transactions of a refugee and that of a wealthy American with 4 houses will be treated exactly the same?

A plethora of strong suits that are seldom highlighted in the average discussion about blockchain. Just saying.

And I was told repeatedly that it was worthless ànd useless.

Statement: 'Cryptocurrency is anonymous and untraceable.'

This is so misguided that I don't even get how this ever managed to get such traction in the first place, but it has brought me to some interesting thought experiments that I'd like to share with you. But first, the rebuttal: every transaction on the network is verified by all the participants and permanently stored (!!) on a distributed and immutable database or ledger that everyone in the world can access and audit. It is the least anonymous way of transacting known to humankind. For example, when using cash, you and the counterparty know the details of the transaction. When using a bank, that would be you, the counterparty, and the bank. On the blockchain, it's theoretically everybody. This stance is just....not a thing.

Privacy

OK, but what about privacy coins?

“Still some regulators may point to Zcash and other “anonymous” privacy coins as the source of money laundering concern. Privacy coins often use zero knowledge protocol to shield customer information from another party in a transaction. (…) According to a 2020 report by SWIFT (Society for Worldwide Interbank Financial Telecommunication), “cases of laundering through cryptocurrencies remain relatively small compared to the volumes of cash laundered through traditional methods,” the report states. “

Rebuttal finished. That sure didn't take very long for something which appears to be so deeply ingrained in the hearts and minds of the average sidelined observer.

So let's talk about privacy in more detail.

In reality, if we could all see each-other’s transactions on the blockchain, are we really going to spend our time looking at them? Wouldn't we just get bored of it? It's difficult enough getting someone’s attention, why would they look at your wallet all day? Wouldn't the novelty quickly wear off? Besides, we take our own pictures, dubbed selfies, and our worst fear is that nobody is watching them. That is the path large parts of society appear to have chosen in the last two decades or so. Could this mean that privacy is not only about laws, but also about habits?

I'd like to make it absolutely clear that I certainly don't want to diminish the tireless battle that data privacy defenders have been fighting for years. Certainly not in this menacing epoch.

Big Tech slowly but surely ended up owning all your data, basically in exchange for a good UX. Imagine if you walked in to a shop in the real world and on top of your digital belongings they owned your physical stuff, too. And on the other side of the isle, citizens are essentially viewed as guilty until proven innocent and sick until proven healthy in the eyes of governments around the globe as a newfound way of life. So, I'm certainly not arguing that the battle for privacy as a basic constitutional right isn't critical. What I'm pondering is that we may already have lost that battle. In fact, we now have long-winded legal frameworks and voyeuristic customs which in practice heedlessly underscore and compound that loss on a daily basis.

What if we could reignite the privacy debate while focusing on another battle first? We might have to sacrifice a pawn in order to gain a very beneficial strategic development. Not to speak in over-dramatic hyperbole, but the fact that the blockchain is in fact the opposite of private might not only be misunderstood. It might just help restore contemporary democratic imbalances outright.

Continued in Part 2:

Secrets are lies - Part 2