Privacy Coins and The Shadow Economy

[exstasie]

I guess the real question is whether true privacy coins can exist. In a world where backdoors and logging is built into nearly everything. Believing an anonymous and private cryptocoin can exist. Its like logging onto an anonymous blogger platform through TOR and assuming no one can figure out your identify.

Open source code greatly reduces the likelihood of an actual backdoor. The real problem for me is a privacy coin could be secure for years, and then a breakthrough could come along that compromises past blockchain activity. Encryption methods have a finite shelf life, so relying on them in the context of permanent public logs can be quite dangerous, depending what you're involved in.

[1714780559]

1714780559

[1714780559]

1714780559

[TheUltraElite]

Well to be honest, even bitcoin is not that useful is hiding tracks. But is that of concern to the people who are dealing with it in a legally approved fashion? No, the ones who are going to be spooked are the money launderers and straight up criminals who are using bitcoin and/or privacy coins for for wrongdoings.

Whether every and every privacy coin is useful or not is a different question. XVG and PIVX are shitcoins in my view, you all might think different. XMR is still useful but I always prefer bitcoin over anything else because even if it is pseduo-anonymous, I have nothing to hide.

Moreover not every government is going to spend their resources to track down users. They have other work at hand but chances are there if in future bitcoin gains a bigger share of the economy then changes might be seen.

[hugeblack]

Governments are beginning to feel the dangers of privacy currencies, so more research is being done to develop programs to track these currencies^[1].
Bitcoin was used for privacy, but over time it became difficult to use it.
Countries will impose restrictions on remittances and mining operations, and thus the prices of those currencies will decrease. The lower prices will make them worthless even if they are of high privacy.

Imagine that the price of Monero is less than 1 dollar and the price is constantly increasing.


[1] https://bitcointalk.org/index.php?topic=5259690.msg54725595#msg54725595

[Botnake]

Governments are beginning to feel the dangers of privacy currencies, so more research is being done to develop programs to track these currencies^[1].
Bitcoin was used for privacy, but over time it became difficult to use it.
Countries will impose restrictions on remittances and mining operations, and thus the prices of those currencies will decrease. The lower prices will make them worthless even if they are of high privacy.

Imagine that the price of Monero is less than 1 dollar and the price is constantly increasing.


[1] https://bitcointalk.org/index.php?topic=5259690.msg54725595#msg54725595

This is the risk I'm thinking of holding a privacy coin, the government are slowly entering the crypto market with their regulation and there's no way they would spare a coin that will be exempted from regulated, everything will be treated equally, so it's possible that privacy coins would become illegal in the future and we know how big the influence of the government is, and that would result to its price dumping because people are moving to other coins.

Privacy is our right, but under the government and their regulation, we can't ask that if we want to be compliant at the same time.

[slapper]

People have already used shadow coin for many years ( Bitcoin has been used in the deepweb since 2009 and people bought drugs, weapons, and illegal information there ) and still no sight that this system will be shut down in the near future. However, many people tend to live in normal life in which they don't have any conflict with the government or the people with authority.

Therefore, they choose to give away their privacy and information instead of using some sort of shadow coin. There are others who understand the fact of those coins but they only want to benefit themselves by making more money with them. I guess it is hard for these coins to rise. It may take several years for people to fully understand the important part of their own privacy

[alexforneus]

Cash is still more popular for shadow economy but i guess that popularity of privacy coins will slowly grow

[Abiky]

Sorry but you have no idea what you're talking about. You are confusing privacy coins with mixers. There is NO way you can trace a monero transaction for example; stealth addresses are used so people can't discover the funds you hold with your public address. Also monero has a built in mixer, the mixing takes place every time funds are sent, it's called ring signatures.

The only *possible* problem you can face with most privacy coins is that an entity can scan your traffic and know that you are using monero for example, but they can't know what you actions/transactions you have done in the network and if you use tor/vpn you are already immunized against this anyways..

Exactly. It's extremely difficult to be able to track & trace Monero transactions on-chain. The complexity of RingCT + Confidential Transactions makes government's efforts useless. The more mixing inputs there are for an XMR transaction, the more difficult it'll be for anyone to obtain the origin of funds. It's this feature which makes Monero extremely useful for the Shadow Economy. Even ordinary people like you and me, will find Monero to be an indispensable tool for preserving privacy against "prying eyes". So far, Monero is the strongest and most decentralized privacy coin available on the market. It could experience a "boom" in price if darknet markets and everyday people use it more thoroughly. I think it's better than Bitcoin in many ways.

While privacy coins like Monero bring strong anonymity, the ability to be traced relies solely on yourself. As long as you take the necessary precautions to hide your identity, no one will be able to link transactions to you. But acting irresponsibly could expose yourself to the public even if you use the strongest privacy coin in the world. I think that as Fiat becomes debased by governments worldwide, more people will be using privacy coins both in the Shadow Economy and the traditional economy.

What do you mean by "shadow economy"? Only the darkweb or the entire criminal economy?
If you are talking about the entire criminal economy(conducted offline on the streets),fiat money will dominate forever.
If you are talking about the darkweb,Bitcoin is still the cryptocurrency that is widely adopted by those .onion darknet marketplaces.Monero is the second most adopted cryptocurrency,but it might become number 1.
The goverments will try to ban privacy coins for sure,but that won't damage their usability,since they are mostly used for buying and selling illegal stuff anyway.The price of monero might go down to a few dollars,but criminals would still use it,because they aren't crypto traders,so they don't care about price volatility and profits from crypto trading.

I'm referring to the "illegal economy" both in the real world and in the dark web. I know that most people use privacy coins for good things, but governments don't see it that way. It's no secret that the Shadow Economy relies more on Fiat than crypto itself. Even with many darknet markets accepting privacy coins like Monero and Zcash, Fiat continues to be dominant. I think that's largely because Fiat is stable in price, while crypto is not. Privacy coins can provide the best features in the world, but if they're unstable in price, a very small minority of people will be using it to conduct "illegal transactions". For the sake of the entire crypto industry, it's best for it to be this way in order to bring some level of legitimacy to privacy coins. Only then, governments will allow the widespread use of privacy coins in the mainstream world.

Imagine if privacy coins were only used in the "illegal economy". They would certainly face a ban from many governments worldwide. Even now, these entities are claiming that privacy coins are used for tax evasion and money laundering. It's evident that the government doesn't want you to use something they can't control or keep track of. It'll be an never-ending war as privacy coins try to find their way to "fit" in the mainstream world. Just my opinion

[sandra_x]

Privacy coins are like the golden child of the crypto ecosystem because they give real liberty from tyranny of some Government and corporations. The advent of government controlled centralized exchanges have wiped-off the initial anonymity earlier provided by crypto in general. Privacy coins should be protected for the very fact that they offer protection to users against undue restrictions.

[mersal]

In these times of crisis, it's evident that people recur to illegal ways to get access to goods and services. The privacy coins will allow anyone to achieve true freedom and financial sovereignty that was never thought possible before. With truly anonymous cryptocurrencies like Monero, Grin, and Beam, the shadow economy could grow towards unprecedented rates. I think that governments will start to "hunt" for privacy coins now more than ever because of this.

Do you think that privacy coins will be largely adopted in the shadow economy? Or will Fiat continue to dominate? If we put aside price volatility of privacy coins, and focus on their utility, the shadow economy could work as intended without the need to rely on banks (Fiat) ever. Only then, the shadow economy will become truly unstoppable.

What are your thoughts?

Fiat still dominates at every illegal activity related transactions because most people don't know about crypto currencies yet so eventually the one who is involving in illegal activity also uses fiat more compared to cryptos.When it comes to privacy coins, government always wanted to stop them but it is really possible? No if someone using privacy coins then there is no way to stop them all they can do is to stop the trading platforms but people from darkweb always have a path when government make it as illegal in any places.

[meto012]

Privacy coins are like the golden child of the crypto ecosystem because they give real liberty from tyranny of some Government and corporations. The advent of government controlled centralized exchanges have wiped-off the initial anonymity earlier provided by crypto in general. Privacy coins should be protected for the very fact that they offer protection to users against undue restrictions.

but op says that if crypto is going to replace current fiat banking system - privacy coins are going to adopt all shadow economy of fiat so they're going to seem "dirtier" than they are now
I don't see how crypto can prevent such actions, perhaps it is build upon a basement of total trust to people

[Abiky]

Privacy coins are like the golden child of the crypto ecosystem because they give real liberty from tyranny of some Government and corporations. The advent of government controlled centralized exchanges have wiped-off the initial anonymity earlier provided by crypto in general. Privacy coins should be protected for the very fact that they offer protection to users against undue restrictions.

Privacy coins may be good and all for everyday people. But if they're heavily used in the "Shadow Economy", they could face constant opposition from governments worldwide. This would lead to a full ban on privacy-oriented coins like Monero, Grin, Beam, Zcash and the likes. While Fiat is commonly used for illegal activities (instead of crypto), we cannot discard the possibility of privacy coins being used massively in the "Shadow Economy" sometime in the future. For that to happen, crypto prices must be stable on the market. Otherwise, there will be no use for a crypto-oriented "Shadow Economy".

As long as privacy coins are used legally, the government won't crackdown on it anytime soon. One would expect governments to declare privacy coins "illegal" if they were used at a large magnitude by drug dealers, money launderers, and other criminals. Even now where privacy coins are barely used for illegal activities, governments are being skeptical about them. We all know that the government wants to have power over one's capital. Considering that some privacy coins are completely fungible, it makes government's efforts to spy on you totally worthless. This will be a never-ending battle, as privacy coins try to find their way in the mainstream world. Of course, there are people like you and me which uses privacy coins legally for preserving privacy against prying eyes. But the government doesn't care as long as it gets what it wants (which is the ability to track & trace transactions for taxation and other purposes). The "Shadow Economy" will continue to use Fiat (physical cash) as it's stable while being anonymous at the same time. Just my thoughts

[MCobian]

I am among those who believe that privacy coins are used for illegal activities, especially in a crisis situation like now that there are
certain people who want to make money illegally. Shadow economy will further develop, because I believe transactions use privacy coins
can't be traced yet. Or maybe the government does not intend to pursue the use of privacy coins for illegal activities, because I believe
Many corrupt government people use privacy coins for money laundering.

[XZERO1]

Do you think that privacy coins will be largely adopted in the shadow economy? Or will Fiat continue to dominate? If we put aside price volatility of privacy coins, and focus on their utility, the shadow economy could work as intended without the need to rely on banks (Fiat) ever. Only then, the shadow economy will become truly unstoppable.

I would say yes, privacy coins have more chance of being adopted worldwide in the shadow economy comparing to the Fiat and the traditional way of transferring value, the reason for that is how much easier it is to use privacy coins instead of Fiat and paper currency without the use of banking system at all, add to that the better security and total privacy that it will provide you with, and about the volatility of privacy coins I must say that once the adoption goes really worldwide because of higher liquidity and volume volatility would be a bit less and I don't suppose any business that is working under shadow economy cares that much about 5-10% less or more.

[beerlover]

I never really understood why it was so important for people who didn't do shady stuff as well. However if that is a thing that people really want and who am I to judge them, if that is their thing they should do it. But there is no way this could get better and one day become something huge.

I mean we are talking about something that could keep the pedophiles of the world hidden thanks to being such a privacy focused thing, now don't get me wrong I am not saying every user has to be shady, some of the mare quite smart people who just doesn't want others to be in their finances and that is a very good reason, but just because you are using it for the right reasons doesn't mean that everyone else does it as well. So in the end privacy coins could face some troubles in KYC form.

[LeGaulois]

@beerlover

I call this a fake problem. Despite all the AML regulations we have, it doesn't stop the pedos. Currently, banknotes are perhaps the best way to stay under the radar, governments will never ban to use banknotes. (That's also perhaps one of the reasons governments are looking into CBDCs).
It's impossible, for many reasons (unbanked/debunked people, seniors, and so on)

What could they do with privacy-centric cryptocurrencies? At best they could force exchange platforms to not list any coins, the same for marketplaces, anything run by a company that abides by the laws. Other than that? They won't be able to stop people to download a wallet and trade with someone P2P.

[Hydrogen]

Open source code greatly reduces the likelihood of an actual backdoor. The real problem for me is a privacy coin could be secure for years, and then a breakthrough could come along that compromises past blockchain activity. Encryption methods have a finite shelf life, so relying on them in the context of permanent public logs can be quite dangerous, depending what you're involved in.

Open source software has the same problem as scientific peer review.

No one is paid full time to scrutinize work and determine whether its legitimate.

Some open source applications contain millions of lines of code. No one will read it all to check for backdoors and exploits. They'll utilize an automated scanner to check every line of code and identify the most obvious flaws. But it will be far from a comprehensive approach. There are many methods of concealing backdoors in plain sight. Intelligence agencies like the NSA and CIA work around the clock to persuade developers to include backdoors and exploits in software and encryption products. There are historical examples of this being an industry standard for decades.

That's a good point on encryption standards having shelf lives. I think as much as 80% of theft in finance and banking industries are inside jobs. (Its vague but I'm fairly certain the percentage is a high number.)  It may be fair to say if a security breach occurs, its not a fault of technology. Rather a failure in the human trust aspect that is built into the system.

[Abiky]

I am among those who believe that privacy coins are used for illegal activities, especially in a crisis situation like now that there are
certain people who want to make money illegally. Shadow economy will further develop, because I believe transactions use privacy coins
can't be traced yet. Or maybe the government does not intend to pursue the use of privacy coins for illegal activities, because I believe
Many corrupt government people use privacy coins for money laundering.

That's certainly true, mate. Since the US imposed sanctions on several countries around the world, government officials from those countries have started using privacy coins for their own benefit. Even some people in the mainstream world have been using them illegally for tax evasion and money laundering. While Fiat is still "King" when it comes to illicit activities, privacy coins could follow suit as the "Shadow Economy" grows in these unprecedented times. Once there are many people using privacy coins for illegal transactions, you can expect governments worldwide to start cracking down on the entire ecosystem as we know it. While privacy coins can still be used regardless of a ban (due to their decentralized nature), they won't be traded at mainstream exchanges (which will negatively impact their price over the long term).

Let's hope that privacy coins are used more legitimately in the mainstream world than anything else. As long as Fiat remains dominant in the "Shadow Economy", governments will give the "green light" for the growth of privacy coins worldwide. With stablecoins, and De-Fi on the rise, the crypto industry will see increased regulation bringing legitimacy to the entire Blockchain ecosystem. Just my opinion

[rodskee]

Or maybe the government does not intend to pursue the use of privacy coins for illegal activities, because I believe
Many corrupt government people use privacy coins for money laundering.

Very possible that it's really happening, there are corrupt politicians who understand
the used of this privacy coins
They've take the advantage to transfer their money without any noticed, this knowledge
from this system gives them advantages.
The capabilities to work in the shadow and make things easy transferring wealth without any
thinking of possible tracked.


Money that untraceable gives additional power to this illegal doers, they are not visible as
they can transact any time without worries.

[Abiky]

Very possible that it's really happening, there are corrupt politicians who understand
the used of this privacy coins
They've take the advantage to transfer their money without any noticed, this knowledge
from this system gives them advantages.
The capabilities to work in the shadow and make things easy transferring wealth without any
thinking of possible tracked.


Money that untraceable gives additional power to this illegal doers, they are not visible as
they can transact any time without worries.

That's certainly true, mate. Privacy coins can serve as a safe-haven for wrongdoers in the mainstream world. The Shadow Economy could adopt them to a full extent in the future, after the introduction of CBDCs by governments and central banks worldwide. Since physical cash will no longer exist (or at least, it'll be phased out from circulation), people doing illegal activities will need to rely on an alternative that focuses on privacy than anything else. And we all know, that CBDCs will not be feasible for The Shadow Economy due to their high level of surveillance from governments worldwide.

While most people use privacy coins legitimately, there's nothing stopping governments from banning their use completely. Their main excuse is that privacy coins serve as tool for money laundering and tax evasion. But we all know, that's not the truth. For now, The Shadow Economy relies on Fiat currencies because of their price stability and widespread acceptance. Wait until there's a stablecoin with privacy features, and The Shadow Economy will never be the same. Due to the bad reputation surrounding privacy coins, some exchanges have begun delisting them. It seems that the future for privacy coins may not be as bright as I've once thought it would be. Just my thoughts