Bitcoin Forum

I've been working on a white paper with regard to using Bitcoin in non-trivial ways, and one of the issues that came up again and again was the concept of anonymity.

I've tried to determine the value that the anonymity brings to Bitcoin, and repeatedly failed.

I understand how important the anonymity in our society is, especially from the government+financial conglomerate perspective (and the reasons they fight it with all they have).

But what is the value that it brings to Bitcoin?

I would like to hear from the broader user base.

what do you mean by "brings to bitcoin" ?!?
if i - as a non native speaker - understand you correctly, our collective answer is "nothing" or "not applicable".

Yes, perhaps I could try to rephrase.

The question is what does the Bitcoin (or the users of Bitcoin) gain from having the feature of being anonymous.

If we take the green addresses for example, they by definition remove the anonymity and add trust to Bitcoin.

What if all Bitcoin becomes green (eliminate anonymity completely), no exceptions - will that make Bitcoin better, more relevant, more useful to broader user base?

Privacy. I don't want anybody looking into what, where and when I spend my money, like banks are doing nowadays.

Could you imagine what hassle it would be to keep a track and verify the names and addresses of all bitcoin users?  I'm not even sure it would be possible to do this in a decentralized way (some have tried with alternate systems, and it's not much convincing).



So basically bitcoin is anonymous because it's much simpler this way.   Also, nobody prevents you from publishing all your bitcoin addresses and to refuse payment from anyone who does not give his real name.

That's a lost cause. Just like you don't write "private" matters on postcards or in emails, you shouldn't expect private online transactions, be it with credit cards, wires, or bitcoins. Sure, you can make it hard to tie your identity to a transaction with any of these, but not impossible. The only reason Bitcoin offers a significant degree of anonymity today is that it is still  a new, obscure technology.

Rather than obsessing over the impossible, we should note that Bitcoin brings in the possibility of public audits. Unlike todays surveilance society, where access to complete information is exclusive, asymmetric, and therefore unfair, Bitcoin can win the battle to make acess to financial information fair. The citizens' transactions are monitored by the State and corporations, ay the same time these entities harras, imprison, and even murder citizens who try to do the same. Bitcoin can be a path to a more transparent, accountable government and corporate sector.

I don't think you see this correctly (on a technical level)

Bitcoin itself can be seen as a large, ever growing array of boxes, like this:
http://images.veer.com/Marketplace/2839285_P_metallic-mailbox-array-tidy.jpg

They are in itself completely anonymous! Only, if there is a CCTV cam watching you* accessing boxes and stuffing money into others, the anonymity is lost. but those cameras are not part of Bitcoin. Therefore, this is not applicable and your green address example is only confusing you.

* i.e. you internet network traffic is monitored

This is more or less where I am ATM in my thinking.

If Bitcoin evolves into "Only-Green-Address" Bitcoin, then the existing financial structures will loose the use of one of their weapons - that the Bitcoin is anonymous and it could be used by [insert a favourite enemy here] to harm the society.

I see one particular drive to anonymity because the people do not want their freedom restricted by the powers, hence by acting anonymously they hope to avoid from being prosecuted for their actions. They seek to protect their privacy by remaining anonymous. But in many places on the Internet, people do not stay anonymous, yet they ensure to remain "private" by not disclosing any private information.

Do you see the difference between the concepts of Anonymity and Privacy?

Let's look at a hypothetical scenario - everyone who uses Bitcoin does so by using only one, uniquely associated with them address, for all their transactions. But on the other end of the address, their identity is not obscured , but limited to only a name, or any other unique identifier and nothing else - no personal information of any nature is disclosed.

In such case, the anonymity is eliminated, but the user of Bitcoin has his privacy protected and no one could restrict his actions, as no personal location is available (like his address or telephone number). And if the powers of the day do not know where the person is and cannot contact him, how could they possibly restrict his actions?

Let's make another example. [insert your favourite extremist here] declares his Bitcoin address openly to the public. Everyone would be able to see the transactions he makes and can envy the riches he accumulates, but no one would be able to (1) stop his transactions, (2) seize his funds or (3) prevent anyone from transacting with him.

Of course, anyone can disclose his personal information to the powers and associate it with his Green-Bitcoin-Address as there is no protection from one harming himself, but that would not be a systemic problem.

What I am suggesting is to separate the Anonymity from Privacy - I think that we then will be able to see more opportunities than limitations in using Bitcoin.

Like giving chance to everyone who doubts the Bitcoin and its efficiency compared to the fiat money a chance to adopt and use it.

Over time the plan is to introduce some notion of identity into (most) Bitcoin transactions. See the payment protocol discussions for concrete details of what this means. It's needed for security anyway, too many people have virus-infected computers that might be playing games with swapping addresses and so on.

The key point being that whilst you have a proof of ID from the seller, they may not have one from you, and if you do give them one, it's private to the two parties. It isn't leaked to some random third parties, like banks or foreign intelligence agencies.

Anonymity isn't really a binary yes/no thing. You can be anonymous to some people and not others, you can also have anonymity but not privacy and vice-versa.

I wouldn't worry about this. Bitcoin has strong/common sense arguments for why it works the way it does, and over time new features will be added that address common needs around identity, privacy and anonymity. Right now our website is very poor so those arguments are difficult to find, but that's easy to fix.

... ooohhh, you are working on a white paper. Other people are programming OS s/ware and the best stuff gets adopted.

Fungibility is a desirable property for any good money. Traceable units of currency are not fungible with other untraceable units, that is why the market values anonymity in any type of money. Do you really want to know how many hookers, drug-dealers, banksters hands that $100 bill in your wallet has gone through?

The next layer of crypto-currency development that will attract the most market share will put financial privacy beyond question. Bitcoin is actually deficient in this respect but it is a good first effort, although introducing identity into bitcoin transactions will only make it worse. In the future,  if someone gives you a piece of digital cash you will never have to wonder "did someone do something bad with this once upon a time?" because you will be mathematically incapable of ever knowing ... and that is exactly how good money should work (just like cash and gold, silver, etc)

I believe BlockChain offers something which prevents them posting your transactions. That's all I have to contribute here. I'm not one to care for anonymity, as bitcoins are an investment to me, not a method of buying drugs  ;)

Sorry, but that's not what privacy is about! If I may quote Wikipedia:


What you are talking about is censorship resistance which is another fine quality of Bitcoin but please don't mix it up with privacy!


As soon as you have everybody using only a single address that is uniquely associated with them you eventually lose all anonymity and privacy.
Traditional financial transactions are considered private because banks and governments are the only ones that have full access to that data and they are required by law to handle it confidentially. You don't have anything like that in Bitcoin - all transactions need to be public, so your only chance to regain some of that privacy is that you can use as many addresses as you want and can largely control which of your private data is associated with which address. Having to run all your payments through one "official" green address would totally remove that ability.

As to your original question: anonymity is essential to Bitcoin in that you cannot really have financial privacy without having the possibility to use Bitcoin anonymously! Over time, blockchain analysis tools will become more sophisticated and widely available and I'm sure that few companies would be thrilled to use a currency where the whole world (including their competitors) has access to exact and complete real-time information about all their internal payment flows.
If you want to take Bitcoin's potential to be used anonymously you're basically advocating a post-privacy financial society which is definitely not something I'm looking forward to.

How exactly would you enforce this in a decentralized project?  Force every new user to send a copy of their passport to Gavin, before they can be assigned a bitcoin address?

Right now, bitcoin gives you the choice between making transactions (pseudo-)anonymously and publicly.  People have different uses for bitcoin. Some value anonymity, some value the benifits of green addresses. 

How you can think that talking away that choice would make bitcoin more useful, is beyond me.

The value it brings is protection from government control or misuse in general.

Imagine for a moment that Bitcoin had all it's current features, except that it was not anonymous. There would be no Silk Road. There would be fear of a government ban on using Bitcoin. The government could easily ban the use of Bitcoin because it could easily track down its users. That would be just as bad as if Bitcoin were issued by a central authority. It would destroy one of the core purposes of Bitcoin.

The fact that I no longer have to be held ransom to a rigged economy that forces me to fund my governments war efforts alone is something extremely valuable to me, with how well Bitcoin is working at the moment I may consider just donating directly to the NHS if the government starts going bankrupt from either printing too much or Bitcoin becoming really popular :P

I think I'm right in saying most people love being able to be on a level playing field and even more like not having there money messed with.

Bitcoin does not need anonymity just because of Silk Road & co!

Who in their right mind would use for example PayPal if all your transaction dates, amounts and names of your transaction partners were publicly available for everybody and all eternity?
Even generation Facebook starts to realize that these "privacy" options can sometimes be useful...

Again: this has absolutely nothing to do with evading taxes or buying drugs! I've never bought anything illegal with Bitcoin and don't plan to, but I'd never use it if I were required to only transact using a single "official" green address. Please give it some more thought and think about how you could possibly maintain Bitcoin's decentralized and censorship resistant nature in your proposal - it simply cannot work.

You're free to start a Panopticoin project but that's something Bitcoin will hopefully never be!

Ok, so I define privacy as the ability for two people to execute a transaction and no one else know about it.  The two people might know each others' identity.  Anonymity is for the ability for two people to execute a transaction and neither one knows the identity of the other.

Both privacy and anonymity are essential if anyone wants Bitcoin to have a future.  There are many reasons, but here are a few I can think of right away:

- Companies will not use Bitcoin if it doesn't protect the privacy of their transactions.  Period.  In the legacy banking system you have a situation where there is some measure of privacy because the financial institutions that process transactions would suffer from a loss of reputation and business if they revealed private transaction data.  Companies will need to use mixing techniques to ensure their transaction activity cannot be reverse engineered from the block chain.  And if you think people wouldn't do it because it's just too bothersome, you're mistaken.  What would be the value of Apple knowing Samsung's transaction data?

- Anonymous transactions are essential for anyone that has any reason to fear that their transactions might be disclosed (voluntarily, involuntarily or by accident).  This could be a Chinese dissident paying for a blog hosting service.  It could be someone speaking out against inhuman religious practices.  It could be someone blowing the whistle on corporate corruption.  It could be someone ratting out a corrupt politician, or the mafia.

- Anonymous transactions are also useful in cases where there is simply no need to expose private, identifying information.  Buying a song or movie online.  Splitting the check at a restaurant.  Buying a coffee at Starbucks.

- Anonymous transactions are also useful in cases where you don't want someone to know who you are.  Buying a coffee at Starbucks when you don't want to be spammed to death with advertisements based on tracking your buying habits.

Don't forget that the lack of anonymity with credit card transactions is precisely what has led to the current disastrous state of affairs where a significant portion of the worlds GDP is lost to fraud and theft.  Credit cards offer privacy, but they don't offer anonymity.  The lack of anonymity is what creates the situation where your personally identifying information is littered all over the Internet and vulnerable to the latest zero day exploit or the carelessness of some service provider.

There seems to be a segment of people in the Bitcoin community that are fearful of government response if Bitcoin was too good at what it does (i.e. providing privacy and anonymity for financial transactions).  I believe there are some agencies within government that would understandably be worried about these things (IRS, US Marshals, FBI).  There are other entities (Banks and possibly the FED) that would see Bitcoin as a competitive threat and try to influence politicians to neutralize that threat.  But there are other agencies (NSA, DoD) that would actually want to Bitcoin to push the envelope.  They would want Bitcoin to push the envelope because if Bitcoin can do it, so can anyone else and these agencies are interested in knowing what's possible and not being surprised by technology.

The following are some articles that might shed some light on the thinking at agencies like the NSA (these were actually sent to me by a friend that worked for the NSA for over 20 years):
http://www.crypto.com/blog/mcconnell_clipper
http://www.wired.com/opinion/2013/01/wiretap-backdoors/
http://www.schneier.com/blog/archives/2012/05/backdoor_found.html

In short, security flaws (or back doors) that compromise security are the very exploits that bad people use to do bad things.  A lack of anonymity or privacy in Bitcoin would be viewed by companies and these agencies as a flaw in Bitcoin.  With such flaws, people and companies will look to alternatives to Bitcoin.

So, to answer the question, does Bitcoin really need anonymity?  Yes, or there is no future for Bitcoin.  The people in the Bitcoin community that seem hesitant to make Bitcoin as anonymous and private as it can be are the biggest threat to Bitcoin's future.

This is entirely correctly.  Anonymity is one of the foundations of bitcoins ability to undermine government currencies.  It has the potential to give us back our personal responsibility and freedom to choose who, when, why, where our money goes.  This ability cannot be understated when considering personal freedom. 

Fantastic post.  And especially the last paragraph, should be FAQ'd or stickied verbatim.

Yes, I see this as mostly logical (where it does not mix the anonymity and privacy), but I think you have missed my point - my question is to determine the value the anonymity brings to Bitcoin (if any), not the value the anonymity brings to the users of Bitcoin. I am looking to find the "public good" in Bitcoin anonymity, and so far I have not found it. Hence me questioning it.

@ wareen

You've completely misunderstood the example in my post (perhaps I have not made it clearer...) - an my point goes further, beyond the status quo, so I would not even try to apply the example in the currently prevailing system, I know it would not work.

How can the information held by public companies or public office can be deemed private? Any private information passed to a bank, or a Government, or any other person, would automatically be deemed compromised. I, for sure, cannot possibly entrust any person, particularly the Government, with my private information - once it leaves me, its is no longer private. As simple as that.

And that is exactly what my motion was - if we completely separate the anonymity from the privacy by (1) disclosing the identity of the person, but (2) never linking it with any personal information, I believe then the value of anonymity (or lack of it) will be easily identified and qualified.

Let me try this one extra example - imagine a commercial BTC operator that only holds information that can positively and uniquely identify you, so you do not have the possibility to repudiate a transaction. If you transacted, it could only be you, and everyone would know that it was you who transacted. But that's the only bit of information about you the operator (or anyone else) could possibly hold - no residential or business address, no telephone number, no who you parents are/were, no when and where you are born, no copy of your fingertips, [add more personal information here]. Nothing else. That's what I was suggesting. Only identity.

Now, can anyone suggest how can the Government, or anyone else for that matter, would be able to enforce anything on you based on the transaction details they are staring at?
Everyone would know that you did that transaction, but they would not be able to do anything about it - neither legally or illegally. And that was my point.

But, if the government cannot claim that the transaction was anonymous, and changes its perception of Bitcoin as a result, is there is any value added to Bitcoin by that?

Today the Governments (and their stooges and propaganda machines) claim that many criminals and terrorists fund their acts by using Bitcoin. But they have no proof - because of the anonymity of Bitcoin no one can prove or disprove their statement. Imagine if there was a way to prove them wrong - that most of the Bitcoin transactions were lawful and the only reason to hide the individual's details private had nothing to do with Bitcoin. I think that would increase the strength of Bitcoin in the long term.
 
@ Mageant

I disagree with you, no Government would be able to ban Bitcoin just because it knows who is using it. Would you care to support your view in more detail?

@ Timo Y

 :) Being a pacifist, I would never enforce anything on anyone, but also, I usually do not participate in anything where someone enforces something or coerces someone to enforce something on others. Here I was merely asking a question to which I was struggling to find an answer, and so far have received great deal of reaction in this topic.

@ everyone

Great debate, thanks a lot, please keep it coming.

The bolded text is fantasy and delusion.

The public ledger will enslave the 97% but the 3% will be entirely anonymous, because only they control the means (NSA, packet sniffing on all networks, etc) with which to break anonymity regularly.

I see so much of this stoopid delusion among the Bitards:

https://bitcointalk.org/index.php?topic=363852.msg3889591#msg3889591

Its good to have the choice.

But as adoption becomes mainstream, the wider public has shown that they don't mind their privacy being compromised - e.g. cookies ads tracking on their browsing or street cameras - provided they get a better price, convenience, or there is some element of security or safety reassurance.

People may not like the fact that once their identity is known, their purchases could be tracked by the blockchain. But that can be relatively easily dealt with, its more upfront perception than anything else.

Many people that like Bitcoin do so because of its anonymity features. There are some that are trying to make it more decentralised, less prone to government intervention and more secretive by encouraging the use of peer-to-peer exchanges.

So again, its nice to have the choice, but cash still offers the ultimate anonymity. It should be outlawed.

What choice? What anonymity? (https://bitcointalk.org/index.php?topic=363852.msg3889591#msg3889591)

Me thinks you are naive.

i think bitcoin will go more mainstream and will be less anonym and Zerocoin will be for libertarians and other businesses.

https://bitcointalk.org/index.php?topic=362468.msg3878992#msg3878992

If we go into a Madmax world where the governments are bailing-in all the bank deposits, they are instituting negative interest rates to charge you money every month for having money, and the IMF's proposed net worth tax, etc...

Then all those who have wealth will want anonymity. And all those who don't have wealth and suck the tit of government, will not want anonymity.

Which one of those categories applies to you?

Do you think that Madmax outcome is not coming before 2020?