And if CT is ever implemented for bitcoin itself then bitcoin will no longer be a tier 1 asset and no longer constitute viable money. (At least not in any sociological sense that could support its value).
Just for clarification, by "monetary tier", I meant this: If I use my bike as "money" to pay for something then the bike is the tier 1 money and the contract that says someone owns it is the tier 2 asset. The tier 2 asset can be obscured, burned, washed through the washing machine, without compromising the integrity or value of the tier 1 asset.
In crypto, obscured blockchains (such as CT) potentially have the job of record keeping and obscuring the ownership of a tier 1 asset (bitcoin). But they are not tier 1 assets in their own right (by virtue of being obscured).
I have to say that I like this (totally flawed) argument
because it seems to be convincing at first.
However, it is flawed for two reasons: one economical, and one of principle.
The thing with any crypto currency, even bitcoin, is that there IS NO FIRST TIER. There are no "individual bitcoins as entities existing somewhere", there are only proofs that you ARE ENTITLED TO SPEND an amount of bitcoin.
After all, what happens is that "bitcoins" are UTXO of which you can "solve the puzzle" (of which you have the private key that can easily solve the puzzle). When you have transacted an UTXO, that specific UTXO doesn't exist any more (it is not "unspend" any more). You've created a NEW UTXO and you've destroyed an old one. So each transaction is a "next tier" according to the logic you introduced.
In a certain limit, you may say that "real" bitcoins are the UTXO of the coinbase, when a miner makes a new block. Now, when that miner transfers those coins to someone, he's in fact not transferring that UTXO (he could if he were to *transfer the secret key* but that would be silly to accept). He's giving you a new UTXO, that proves that you are now entitled to spend those bitcoins, and he's not any more. But no actual bitcoin, no actual "bike" has changed hand: a new document has been written, a new notarial act, that tells everybody that the "bike" is now your property.
However, in as much as new UTXO are of exactly the same form as the coinbase ones, you could even say that the coinbase UTXO is already a "tier 2" act of proof of possession, and that there are no bitcoins like there is your bike: there are only successive proofs of possession, which are the successive UTXO.
Next, we come to multiple-input-multiple-output transactions on bitcoin. There too, your argument breaks down. If bitcoin number 57 (what's that ? That's the non-existent equivalent of your tier-1 bike) and bitcoin number 102 are both inputs to transaction 20370 on the chain, and there is an output of 1 bitcoin, and another output of 1 bitcoin, which one is which ? Is the owner of the first output now the owner of bitcoin number 57 (the red bike) or is he now owner of bitcoin number 102 (the green bike) ?
So even on a public block chain there's no such thing as "tier-1 possession" because these objects don't exist: the only thing that exist is PROOF OF RIGHT TO SPEND (your "tier-2" kind of stuff).
And now we come to something essential which is the economic argument: in order for a monetary unit to be fungible, the ONLY thing that should be knowable is the proof of right to spend. That's in fact exactly the same with fiat money in a bank account. When you pay someone, the only thing that is verified is that you have the right to spend so many dollars, and not whether those dollars are representing the green or the red bike. That's called "fungible units".
The only thing that is needed in a payment system is a proof of right to spend. Public block chains fail at that, because they give out MORE information than just that. Obfuscated block chains are a better approach to that ideal.
There is no "first tier" in a monetary unit.
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