You hear it every time. It’s like the gospel of the crypto fanatic.
Bitcoin is an anonymous, decentralized, trustless payment system that will soon replace FIAT currency & give the power back to the people.
Nevertheless, when someone questions Bitcoin’s mainstream usage and argues the number one cryptocurrency is in fact mainly used for shady business, the same fanatics conveniently change the narrative and brag about the blockchain transparency and how it can be used to catch criminals.
Which one is it, then? Is Bitcoin anonymous or transparent? Let’s find out.
Before we dive into the transparency argument though, it is necessary to also analyze one of Bitcoin’s and in fact all blockchains’ main feature: immutability.
What does it mean? It basically means any transaction you send on the blockchain is irreversible. Once you send an amount in bitcoins, you can’t quite cancel your transaction.
It also means ALL your Bitcoin (or any other cryptocurrency for that matter) transactions will be stored on the blockchain forever. You don’t have the right to be forgotten which some advocate in today’s world wide web.
Even though it may sound like a good idea, immutability comes with its fair share of inconveniences. For example, when a fraudster or hacker steals your crypto funds, in most cases, you will never see your ‘e-money’ ever again. That is why the cryptocurrency market is an ecosystem that is crawling with criminals who hack users’ funds and even more dangerously, they target exchanges that don’t invest nearly enough in security.
This is not necessarily because Bitcoin is used for nefarious activities, but because hackers can get away with it. Once they transfer funds to their crypto wallets, the coins are theirs forever.
With that being said, there were cases when developers had to interfere and scratch the immutability property out of existence. The notorious Ethereum DAO hack is one example while Bitcoin’s 92 billion ‘error’ is another, even though it is much less known than the Ethereum case.
In 2010, developer Jeff Garzik discovered a block that somehow contained around 92 billion BTC. Garzik and Nakamoto had to return back in (the blockchain’s) time, and ‘undo’ the actual ‘error’ to solve the problem.
What about anonymity?
By now, everyone knows Bitcoin (YES, even the hackers) is NOT anonymous. It’s actually pseudo-anonymous at most, if not close to transparent, given today’s regulations.
Indeed, you can easily track & trace any Bitcoin transaction as the blockchain is basically a history book, a ledger waiting to be accessed and read. Since all major cryptocurrency exchanges are now compliant to the Know-Your-Customer (KYC) and Anti-Money Laundering (AML) legislation, all users who plan to trade big amounts of cryptocurrency to FIAT are thoroughly verified. Moreover, if you spend Bitcoin, for example, physical products, you would still need to give away information (name & address). This means someone – not necessarily a tech person – can track & identify you quite easily if you are indeed targeted.
However, a hacker who knows what Bitcoin actually implies can find ways to cover his/her track. The hacker can use the Bitcoin mixers that ‘launder’ the funds by breaking the connection between a sending and receiving address. Furthermore, a user can always use truly privacy-centered coins like Monero to avoid all the fuss revolving the Bitcoin hype. Obviously, if we are talking about big hacks and stolen funds from exchanges, the hackers can rely on other methods like social engineering to trade their stolen goods into real FIAT money.
The Bigger Picture
In conclusion, can Bitcoin’s immutability & (let’s call it) pseudo-anonymity change our future for the better? Not necessarily. In fact, given the past examples and how we used our inventions throughout our history, there is a likelihood Satoshi Nakamoto may have actually laid the foundation for a dystopian society.
Look at the broader perspective: a worldwide ledger were each & every transaction is stored forever, with third parties (lucrative or not, legal or not) having the ability to track & trace the data, plus identify who is behind that data.
Look at what is happening today: IT corporations going all out to track you, learn everything there is to know about you, only to control you in one way or another, afterward. Now, what would happen if the same IT corporations would have access to the transaction data stored on a blockchain? What if the only way to spend would be through this new e-money & its underlying technology, the blockchain? Is this a bright future or just the exact society George Orwell envisioned in his famous novel 1984?
Maybe Bitcoin won’t become the worldwide dystopian currency, although it does have characteristics that would make it suitable IF the right people will control it. Maybe the world’s leaders would just adapt Nakamoto’s idea to create an e-currency to rule them all… one with all transactions stored on a worldwide permissioned blockchain, one that would give them all the insights they would ever need to ultimately control us.
How’s that for a future, crypto fanatics & Bitcoin maximalists?
What do you think? Is a future with the blockchain technology center-staged dystopian? Or is it the future we all dream of? Let us know in the comment section below!
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