Bitcoin Forum

Might be a naive question for some - but why is anonymity such a priority for BTC ? Why is Amir concentrating on it with Dark Wallet ? How will the anonymity of transactions benefit the average Jo (who probably won't have 2 bits to scratch his arse with anyway) ? I can see how it would be of benefit to the wealthy and their respective tax liabilities  ;)

   Is it a security issue ? Or is it ideological ?

   It just seems to me that the main benefactors of BTC transaction anonymity would be the privileged class/wealthy/elite etc.

   I don't ask the question to make a rhetorical point - I'm guessing the likes of Amir must have a good reason for it - I'm just not sure I understand that reason at this point  :-\

Bitcoin is not as anoymous as people think just take a look at the scam accusations and how many people get caight almost 90%.

I wouldn't say that it is anonymous, but rather the connection between a Bitcoin address and a person is weaker.

For a bank account you need to provide identification and address details, whereas you can just create a new Bitcoin address ad-hoc. You have ownership of that account.

But with the Bitcoin address, it is simply a reference point that you choose to use, maybe for a few minutes, maybe for months. But it would take a lot to pin an actual person to that particular address, even if they post it with their forum handle etc.

I would describe Bitcoin as being much more lightweight than services like PayPal or banks, much more like digital cash transactions.

Because some people value anonymity and privacy, and various governments are trying to spy on everything we do, and to some people they don't want governments to know every detail of their lives or what they might spend their money on.

IMO it is not the anonymity of each specific transaction that matters.   It is more so important that the government doesn't have eyes on, or can at the click of a button seize all your liquid assets.   Anonymity is important to protect your net worth. 

Of course, in order to preserve anonymity then the user needs to play by certain rules. The problem is what if they are being spied on during their Bitcoin transactions?

That probably isn't a concern for the average Joe, but more for the likes of people who are already on a spy list lol.

It provides neutrality for everyone whether you are wealthy or not, and it provides protection from oppressive governments.

With the combination of decentralization and anonymity, a true democracy is suddenly within reach.

Some people in the world do not have the luxury of rights and freedom. For them circumventing the systems that would persecute them is moral, in my opinion. What if you are a Syrian fighting the government?
Even us in the U.S.A. face attempts to stop us from donating to wikileaks or Edward Snowden. Anonymity must be preserved as a balance against tyranny.

the answer to bitcoins anonimity is the same question people ask about governments trying to remove bank notes, where everyone is forced to use debit cards.

do you really want your bank selling your personal information to businesses
do you really want to have your wife finding out about that expensive gift you bought your mistress
do you want banks to inform the tax man of that $£100 your gran sent you as a birthday gift, where they would bite £$20+ out of it
do you really want you bank manager knowing you frequent casino's when you try to apply for a loan and be told that your a financial risk
do you really want to have no privacy?

There are some other legitimate reasons for the need for some degrees of privacy associated with bitcoin transactions that no one else has mentioned.

For example for companies to protect certain trade information that they are not required otherwise to make public and might be an advantage to competitors...or for example to prevent employees from being able to deduce what other coworker salaries are etc.

In many ways the blockchain actually can be "more" revealing with respect to transactions of some people than the way things are done now.

There is a new anonymous cryptocurrency (http://razorsforex.blogspot.com/2014/02/darkcoin-anonymous-cryptocurrency.html) called Darkcoin that uses the "coinjoin" technology. Sound promising so far. There are many reason to have an anonymous blockchain. Think Wikileaks, Gambling, Whistle blowers, Investigative Journalism etc...

Article on Darkcoin: http://razorsforex.blogspot.com/2014/02/darkcoin-anonymous-cryptocurrency.html

What happened to that zerocoin or whatever it was that they were meant to be developing on top of the blockchain or something?

It is being developed as an independent stand alone crypto separate from bitcoin.

Zerocoin from what I have read is still theoretical and the math behind it has not been tested for loopholes yet. There are issues with the block chain bloating as well.
So it is a long way away from a fully functional crypto.

Fungibility. Good money needs to be fungible or the whole system of that money is inefficient as a medium of exchange and will inevitably break down.

It is not about anonymity per se but traceability. In the realm of digital money it must be untraceable to be fungible. Any piece of bitcoin must be indistinguishable from any other piece of bitcoin.

Anonymity can be a natural side-effect of untraceable digital money but is not necessarily a goal in itself.

It is anoymous if the right guidelines are followed and most people follow them pretty good and I would say that the scam accusation area is normally filled with newbies or don't value annoymity and just want to scam coin quickly luckily they do that and we can find out who they are.

That's because they stupidly tie themselves to their identity in some way. If you want to remain anonymous you can do.

no idea why people want to own something anonymously, with governments all over the world being more trustworthy than ever, like this

http://www.zerohedge.com/news/2014-02-16/money-launderer-until-proven-innocent-italy-imposes-20-tax-withholding-all-inbound-m

some say anonymity is for criminals, others say it is a protection from criminals, it is a matter of definition  ;D

http://en.wikipedia.org/wiki/Executive_Order_6102

bank vaults were opened by IRS agents and the gold stolen, excuse me, upgraded to paper - what a coincidence that anonymous gold purchases are not allowed anymore in the US, and sure enough, anonymous BTC are considered money laundering.  ::)

back then the gold was needed to finance the attack against Germany, today there is much more that needs financing.

Yes - I can see the benefit there.




The idea being that if I (Practical Dreamer) deposit 2 BTC to Wikileaks, and its traceable back to me - then those 2 BTC then become worth a different amount (less) on the open market than they would if they had been 2 BTC transferred from the Queen of England to Barack Obama ??
 How does that work ?

  I can understand the idea of it being desirable for the BTC transaction to be untraceable (for our idealist purposes lets say a donation to Wikileaks) - but why would it make those 2 BTC any less fungible in the event of that transaction being transparent/traceable/not anonymous ? Why would they be worth any more or less ?

   In other words, wouldn't BTC still be fungible without anonymity ?

I always find the obsession from some quarters over anonymity odd.  You know whats anonymous?  Cash.  People have been evading authorities by using cash for as long as its been around.  You know whats not anonymous?  Electronic transfer, especially if the parties are not physically present.  That electronic transfer leaves finger prints and trails all over the place, while having something shipped mean giving out your name and address.  In person trade with a paper wallet is best chance of anonymous transaction, if you generated the address offline.

As far as a transaction goes between two people; anonymous is synonymous pseudonymous.

You really can't have an "anonymous" transaction between 2 parties for as long as more than 1 still lives...

How much further can a currency go before it becomes impossible to identify a payment status of a specific order?

I think Bitcoin is about as "anonymous" as is effectively possible until somebody links your ID with your wallet address...

I should be able to pay my plumber "cash in hand" for the pipe he just fixed ? BTC, to succeed, should be able to act as cash - for better or worse ? Is this the general idea ??


   My question is - who will be the main benefactor of this "cash in hand" economy ? The average Jo ? Or Goldmann Sachs ?


Wouldn't BTC have more utility to the greater number if it sacrificed this anonymity (whilst still in any case retaining its fungibility ) ?

[edit: lets not forget that the plus side of traceability is that the transactions of the global multinationals/high net worth individuals would be transparent.]

Bitcoin will never be as simple as cash because the main thing that makes cash easy is the ability not to record a transaction. When you hand somebody a $20 they don't always record that in a ledger as income. If every person who took a cash payment were to record it in a ledger then a Bitcoin transaction would be much easier with fewer steps than a cash transaction...

Bitcoin will never be as easy as cash *can be* and it's not really a disadvantage as long as you can keep your wallet ID dis-associated with your real identity.

It's really very simple and can be summed up in one word:

POWER

Put simply, money is power. Those who control the money control the power. It's not that Bitcoin needs to allow anonymity, or that it needs a limit on coins at 21 million, or that it needs transfers without middlemen where accounts can't be frozen.

It's that it makes these options available to those who want it, to use to their ends, even the most common person in the streets. The flip side of that is giving these options not to common people, but only a top class of privleged people (bankers/politicians).

Where would you rather see the power of the world?

Suppose instead that if you steal 2 BTC from me, that I can report the theft and get those coins black-listed, meaning they cannot be converted into pounds sterling (my jurisdiction): then those coins become worth a bit less. Even more so if Britain shares its blacklist with Europe and America. We can imagine a world in which most miners are required to refuse to accept transactions involving blacklisted coins, and where the "dark" miners that accept them also charge higher transaction fees.

That is the kind of evolution of Bitcoin that some governments seem to think is desirable for purposes of preventing money laundering. That is, to make it harder for wrong-doers to profit from their crimes. They may legislate to that end, and require miners and exchanges within their jurisdiction to conform. It would mean bitcoin would be less fungible.

Blacklisting will not happen and will not work and will not be accepted by anyone.

Well that would be basically the death of Bitcoin. I'm not really sure how something like that could be implemented considering Bitcoin works with inputs and outputs merely referencing a wallet balance rather than individual coins... Of course that doesn't make it impossible; it just means I don't know how it would be done...

I do know that anything that could be done would use the blockchain and everybody or anybody would have the same information.

Imagine the thief sold those coins on an exchange before you could have them blacklisted and 10 people bought a portion. Those 10 people would take a loss.

I would rather a person with stolen coins track the wallet address as far as possible and then identify the thief by conventional detective work.

If somebody steals from me; I don't expect the community to reimburse me what I lost. It would be between the thief, the law, and me as to what I can recover.

That 10% are smart and rich.
Anonymity is important for the average joe.

I believe that Dark Wallet - for e.g. - is aiming to make BTc transactions very similar to cash transactions i.e.. although the transaction may be recorded they would not be traceable.

I'm not disagreeing. Just elaborating on marcus_of_augustus point about fungibility and traceability.

Well, a lot of interesting points here.

First thing that springs to mind is how would you prove that the BTC have been stolen in the first place ?

Next - the value of the stolen BTC may be worth less in GBP than "legit" BTC - but then again why would they ? They wouldn't be forgeries would they ? And they might hold their value (for e.g.) in dollars/yen/rubles etc - if indeed they were to ever be converted into fiat. Would they really be less fungible on a global network ?


But the main question is - how would anonymity of BTC transactions protect you at all in the event of theft ? Surely it would make it more difficult for you to recover your BTC - just the same as if someone stole used banknotes from under your mattress ?

I'm thinking that Bitcoin will always have extra steps compared to just pulling a bill out of your pocket and handing it to another person.

As it is now You can create a new wallet using a connection through a VPN, or use a non home ISP like a coffee shop; transfer your existing Bitcoin to an exchange; trade all your Bitcoin for Litecoin; transfer all your Litecoin to a different exchange; trade all your Litecoin for Bitcoin; then transfer your Bitcoin to the new wallet address.

Now you've pretty much eliminated any link you once had to those Bitcoins...

+1

I see your point - but it seems to me that in the light of the MT. Gox fiasco that BTC is crying out for some sort of regulation. There is, for me personally, at the moment no safe secure UK based exchange for eg. I have to go to an exchange that is based in Bulgaria/Slovenia etc.
   No offence to these exchanges but the average Brit would be much more likely to develop trust with regard to BTc if there were a UK based trustworthy regulated and accountable exchange. BTC at the minute has too much of the feeling about it of buying something out of the boot of someones car  ;)

   "regulation defeats the purpose of crypto" ?

Which purpose ? And for whom ?

This is an important point



And so is this

Important part are not why you buy but what are you buying. Even though anonymity is never perfect, stil it might be less likely to get abused by someone. Our personal data are very important and we should defend them at all cost. Moder companys collect them and use them in various ways, not only targeting, marketing but also enforce they will on our consumer lives. Not to mention that I dont want everyone knows what kind of stocking i am buying and why and for whom. It is my data and i wana do what i want with them and have the most control i can get over them.

This.  For there to be decentralised voting that is fair and free from bribery it needs to be anonymous.  If someone bribes you to vote for someone/a policy and you have no way of proving who or what you voted for (short of them physically standing there and watching you vote) then they can't bribe you.  

This set up, for a true direct digital democracy, of course requires an additional system of ensuring 1 person 1 vote, rather than shareholder voting where votes are allowed proportionally to the investment size of the shareholder, but anonymity is a vital part of it.

Darkcoin looks like it's the leader in this field so far.

From Unsystem.net :- "We are dedicated to creating popular tools that promote privacy, independence, and integrity in contradistinction to those used for mass surveillance and suppression."

   I understand this - but the other side of the coin is that a public and transparent ledger means that the powers that be suddenly become accountable to us in a way that they haven't been before. Its a two way street this anonymity business. The blockchain isn't just a way by which the masses can have their financial transaction monitored and surveilled. It becomes a means by which the powerful now become accountable for their movements of monetary capital. Its a double edged sword.

It's NOT anonymous it's more anonymous than Fiat but still not.

Is it?

It's arguable either way. You could even say Bitcoin is more traceable than cash. If I hand cash to someone in the street there's no record, but there's a record of every Blockchain transaction.

Even with the blockchain somebody would need to know that you have access to the private key for that address, and even then it doesn't prove that it was you who made the transaction.

I'm definitely with hilariousandco on this one; bitcoin is way less anonymous than cash. It doesn't matter that "someone would need to know you have access to the private key" - the fact that there is an unavoidable record made of every transaction is the thing. After that it's correlation of metadata, which is something that investigators of all stripes excel at.

I think that most governments are not as stupid as they look and do know this. It just suits their agenda to keep harping on about anonymous money laundering.

Of course there is circumstantial evidence, but there has to be enough of it to be of any use.

Btw, I never suggested that cash was less anonymous than Bitcoin, merely captioning what is often overlooked.

Addresses don't belong to people, they are merely associations. Ad-hoc references as it were. I guess my point was that Bitcoin allows you to be as anonymous (to a degree) or obvious as your care allows for.

Having thought about it we can say that the cat is out of the bag - or rather, its not a case of if BTC anonymity becomes ubiquitous but when.

  I know that Unsystem and the Dark Wallet project have ideological reasons for believing this to be a desirable outcome - and it has been stated on this thread that for BTC to be fungible it has necessarily to be anonymous- but I ask again, is not this anonymity going to work against the average citizen, all things being equal ?

   Governments are struggling enough as it is to raise tax revenue from the likes of Amazon and Google - they won't stand any chance with BTC (once it inevitably is able to be transacted anonymously)

    Say I earn 30BTC per annum - OK, I may wish to give some of that via donations to Wikileaks, maybe even Unsystem.net, and so I may benefit in some way from my financial transactions being hidden (though in my case we'd only be talking about a few satoshi's anyway in truth  :-[)
    And then compare my predicament to (lets say) Richard Branson (who apparently thinks BTC is great) - his annual gross income is what ? 30000BTC ?

  I'm not paying any tax on my 30BTC anyway - but Mr Branson is paying (possibly) 50% on anything over 45BTC on his personal income - and the profits of Virgin PLC are liable to Corporation tax at 30%ish.

   Traditional profit and loss accounts will not be worth the paper they are written on (they aren't worth too much today, lets face it).

   Would it therefore be Schedule E (taxed at source) employee taxation that would bare the brunt (relatively) of the tax burden ?


    I ask again - who will anonymity truly benefit ?  

Fungible coins and paper cash were both great advancements for humanity and economic good for all societies that used them. Many positive correlations in history are well-documented going back hundreds and thousands of years.

There is no reason to expect fungible digital 'coins/cash' would be any different, probably a greater relative advance in respect of it it being a non-physical medium of exchange capable of transferring values anywhere on the planet anonymously.

I think in retrospect it will be come to be seen that the last 20-30 years of traceable digital money substitutes (not fungible) was a historic anomaly bought about by the botched transitioning of legacy paper ledger banking system unsuccessfully into the digital realm. A huge mistake by people who did not understand monetary science all that well but assumed they knew what was best for society (no doubt while feathering their own nests in the process).

So long as Bitcoin remains decentralised, it can only really apply pressure toward achieving a level playing field.  If it does work against the average citizen, it will be because the average citizen is currently enjoying an unfair advantage over some minority.

If Bitcoin were to significantly affect taxation (a huge if), it would benefit those that currently pay high taxes, and disadvantage those that receive benefits*.

*Taxation is a drag on the economy.  A good case can be made that those who would be immediately disadvantaged by reduced taxation will benefit on net over a sufficiently long period of time.

Cash is useful only for face-to-face transactions. There has to be trust in non-face-to-face transactions.

Banks offer some trust by moderating transactions that use currencies that cash is based on. The banks are benefited in two ways. They get their fees for moderating, and they regulate inflation through the the central banks, the Federal Reserve Bank, and the International Monetary fund. The banks are the thing that has made the world to grow as well as it has in the past. It is the greed of the individual bankers, who have exploited the flaws in the current banking system, that is bringing the fiat currencies down.

Anonymity is for one basic reason, only. It exists to do transacting without the danger of the banks and the governments intervening.

The banks are failing, though it can't be seen easily. The governments are based on the money of the banks that are failing - the governments are failing - and they don't like failure. Bitcoin threatens to bypass such things like income taxes and excise taxes through anonymity.

In the U.S., income taxes can be as high as more than 50% of earnings. Cutting this down to only 10% by having only 10% of the sales visible, is a great advantage for people, and a great detriment for banks and government.

:)

Taking the gov out of economy, where they should never be.

The usual ways. If I pay for a product in BTC, and the product doesn't get delivered, then the fact that I paid to the correct address can be proven, and proving non-delivery is the same as in non-bitcoin transactions.

For the reason I explained: because there would be restrictions on what could be done with them that wouldn't apply to non-stolen BTC. (Not now, but in a future where bitcoin is regulated by governments.)

Did you miss the point made by marcus_of_augustus : "In the realm of digital money it must be untraceable to be fungible" and anonymity being a consequence of being untraceable.

To go back to you original question and take a different direction:
Let's imagine that he protocol required every bitcoin address to be registered to a verified real-world name. Completely non-anonymous. Then everyone could tell, from the block-chain, where you spent your money. They'd know which supermarkets you used, whether you frequented pubs and off-licences, how much you spent at the chemist, whether you paid for porn. They could infer a lot more, such as whether you likely had a mistress across town. It would be a massive invasion of privacy.

I doubt a public block-chain would be acceptable to most people if it weren't anonymous.

If it has not already been mentioned, TIPS (aka Fedora) has just implemented coin mixing to be anonymous. Was launched this week.

Built into the latest TIPS 0.6 wallet.

This is not hard to implement.

I take the point about BTC potentially having a huge impact upon Governments monetary policy - and I'm all for this.

The problem I have is the impact BTC will have on Government fiscal policy.

I know some of you want to get rid of Government altogether - I don't personally. Decentralised government and a devolvement of power ? Yes, definitely. But I don't want to get rid of it altogether. What role will there be for Government when BTC transactions are anonymous and raising tax revenue becomes essentially a voluntary act - nay, an act of charity ?

  I happen to believe in the welfare state as outlined in the Beveridge Report http://www.sochealth.co.uk/public-health-and-wellbeing/beveridge-report/ (http://www.sochealth.co.uk/public-health-and-wellbeing/beveridge-report/) - I also believe that a way out of this recession might be if the Government invested in the nations delapidated and Victorian infrastructure - God knows it needs it. Where would a Government find the money when they can't raise tax ?


ps. re.stolen BTC - ["If I pay for a product in BTC, and the product doesn't get delivered, then the fact that I paid to the correct address can be proven, and proving non-delivery is the same as in non-bitcoin transactions."   -  how will you manage this when the identities involved in the transaction have been anonymised ?]

anonymity breeds culture and vibrancy:

http://chrishateswriting.com/post/76431353368/the-anonymity-i-know

this drive to normalise and purify our activity leads to groupthink and acceptance of imposed limitations.

protecting the small guy is empowering voiceless communities.

for a deeper explanation of the ethos:

https://en.wikipedia.org/wiki/Hacker_ethic#The_hacker_ethics

Yes - and empowering voiceless communities is what its all about for me also.

Having thought about the tax implications of BTC I don't think anonymous transactions would necessarily have the impact that I initially feared.

Income tax is the largest contributor to the coffers - income tax + VAT +National Insurance are the 3 largest contributors. Of these I can only see income tax as being problematic.
   But it turns out that of income tax raised , 90% is raised via Pay as You Earn (employee contributions). This would be unaffected (for tax raising purposes) wether BTC transactions were anonymous or not.
    Corporation tax would be affected by anon BTC - as would income from self employment. But these taxes are even at the moment a question of pot luck anyway. How much a firms profits and/or an individuals Schedule D income could be manipulated (using anonymity) to reduce tax I don't know - but maybe not as much as I intially thought. [edit:- a progressive consumption tax could be part of the solution here]
       Certainly most other taxes would/should be unaffected   ie. fuel duty + inheritance tax + CGT + local taxes (based on property or income) etc etc.


  Of course - the growing digital economy and its "intangible" products are another matter altogether - and would obviously be problematic with regard taxation.
   I guess if devs in the open source/hacker community aren't receiving remuneration then there's nothing to tax.

But how you gonna put food on the table if you aren't getting paid ?

Good thread (except for the posts from the author of the OP which is myopic socialist illogic (https://bitcointalk.org/index.php?topic=455141.msg5309735#msg5309735)).

I discussed many of the points made in this thread in my own thread (https://bitcointalk.org/index.php?topic=455141.msg5023887#msg5023887) which also has links to past threads that discussed anonymity.

Coin taint (destruction of fungibility) is a critical flaw in Bitcoin.

CoinJoin and DarkWallets (Darkcoin nor anoncoin) don't solve this problem adequately in my opinion.