Will blockchain survive the crackdown on mixers and anonymization?

[Z-tight]

Bitcoin's original purpose was to create a method of transacting that could not be traced by governments, and could not be stopped by them.

Since the blockchain is public, then i am sure anyone using BTC should know that there is a possibility of their coins being traced if they do not adopt privacy solutions. The orginal purpose of BTC was instead to be a p2p electronic cash that is censorship resistant and permissionless, and it is still that, if you do not use custodial and centralized services, you cannot be censored and your coins cannot be confiscated.

I don't know where you are going with your arguments, but what makes you think that now BTC can be stopped by the government, i don't see any single point of failure.

[Helena Yu]

When did Proof Of Work is the only one consensus in blockchain?

POW and decentralization is the reason why Bitcoin transactions are slow and expensive compared to other coins, but it's not make the whole blockchain is slow and expensive! check Stellar and Nano.

Blockchain is just a ledger that contains data, a public blockchain is actually make anyone can trace it. If US crackdown on privacy, only private blockchain are in danger.

[legiteum]

Bitcoin's original purpose was to create a method of transacting that could not be traced by governments, and could not be stopped by them.

Since the blockchain is public, then i am sure anyone using BTC should know that there is a possibility of their coins being traced if they do not adopt privacy solutions. The orginal purpose of BTC was instead to be a p2p electronic cash that is censorship resistant and permissionless, and it is still that, if you do not use custodial and centralized services, you cannot be censored and your coins cannot be confiscated.

Bitcoin is no longer "censorship resistant", by which we mean something that can be safely used by those breaking the laws of their government. It hasn't been for years. (No Bitcoin user values "permissionless" and they don't know what that means or care).

You can see what most consumers want by observing that almost all Bitcoin user use centralized wallets, which are no different than bank accounts.

I don't know where you are going with your arguments, but what makes you think that now BTC can be stopped by the government, i don't see any single point of failure.

I never said that BTC can be stopped by the government--no world government wants to do that because there would be no point.

When I say "blockchain" here, I mean the blockchain architecture and I mean it's use in new projects going forward. There's no reason to use blockchain to create the next Bitcoin.

[examplens]

Yes, and the reason you need p2p cash--or p2p anything, for that matter--is to evade government subpoenas. If you don't need that, centralized architectures are far more efficient, secure and convenient.

Bitcoin's original purpose was to create a method of transacting that could not be traced by governments, and could not be stopped by them.

The main purpose of Bitcoin is not to hide anything from governments. That turned out to be a possibility. At the same time, Bitcoin is global and for example, only a few governments are putting pressure on privacy on the Bitcoin network, and many are still not interested in it. Just as you have neutral and independent countries when it comes to fiat, so will it be for Bitcoin.

The whole thing will only move most of all services and businesses from restricted countries to crypto-friendly ones. Mixers will no longer be called mixers, they will have a new name, and their founders will do it much more carefully and with more anonymity.

[Abiky]

It would appear, based on the news this week, that major world governments like the US and others are cracking down on the notion of "government-proof privacy", and prosecuting companies and individuals who facilitate money transfer that cannot be potentially traced by a government. They are going after mixers and brokers who do not adequately engage in KYC.

In short, it would seem that governments are trying eliminate the very thing that Bitcoin--and blockchain generally--was originally designed to accomplish.

What does this mean for the long term prospects for cryptocurrencies? Will blockchain survive losing it's original purpose?

My own answer is: "yes", in the short term, and "maybe" for the longer term.

I have written before about different kinds of "privacy" that people might want, and most want privacy from other citizens, from companies, and from criminals: privacy from a targeted investigation from the government is a level that, in my estimation, a "nice to have" for most people, but not a dealbreaker.

Hence in the short term, cryptos missing their original purpose is not something most consumers care about. Most holders of Bitcoin these days do so in a centralized way, e.g. with an app or a broker that keeps their account under their name, in a centralized database.

As for the longer term, this brings up an important question: why use blockchain at all?

Blockchain is slow and expensive to transact in on purpose because of proof-of-work and decentralization. No cryptocurrency will ever come even close to scaling to the billions of transactions each day by people worldwide.

But a digital currency that is not blockchain-based can accomplish this and provide the same mechanism for speculation and value store that blockchain-based currencies provide. In my opinion, the long-term future of the actual blockchain architecture behind today's cryptocurrencies is... unclear.

Blockchains will survive. But only if they remain decentralized and censorship-resistant. Mixers and privacy/anonymization techniques are completely different things. Governments have only been able to shut down centralized mixers, but they'll never be able to stop decentralized ones. Consider how Tornado.Cash survived despite being sanctioned by the US. These actions are not surprising to me, especially when governments don't want people to achieve true financial freedom and privacy.

It will be a long war between crypto (especially Bitcoin) and mainstream governments. I'd say there's nothing to be worried about. Hopefully, crypto will live alongside Fiat for generations.

[legiteum]

The main purpose of Bitcoin is not to hide anything from governments. That turned out to be a possibility. At the same time, Bitcoin is global and for example, only a few governments are putting pressure on privacy on the Bitcoin network, and many are still not interested in it. Just as you have neutral and independent countries when it comes to fiat, so will it be for Bitcoin.

The whole thing will only move most of all services and businesses from restricted countries to crypto-friendly ones. Mixers will no longer be called mixers, they will have a new name, and their founders will do it much more carefully and with more anonymity.

Then you are misunderstanding the basis of Bitcoin, and thus the blockchain architecture.

If you didn't care about the government, then why not just use a plain old bank? Without the ability to evade government subpoenas, what actual added value does Bitcoin have? What can it do that other means of transfer cannot do? Trillions of dollars in payments go across borders every single day. This is not something that is unique to Bitcoin.

Blockchains will survive. But only if they remain decentralized and censorship-resistant. Mixers and privacy/anonymization techniques are completely different things. Governments have only been able to shut down centralized mixers, but they'll never be able to stop decentralized ones. Consider how Tornado.Cash survived despite being sanctioned by the US. These actions are not surprising to me, especially when governments don't want people to achieve true financial freedom and privacy.

It will be a long war between crypto (especially Bitcoin) and mainstream governments. I'd say there's nothing to be worried about. Hopefully, crypto will live alongside Fiat for generations.

Well, it looks like Bitcoin is no longer decentralized because almost all of its holders use it through a broker or an app, and with chain analysis it's not very "censorship-resistant" either, and they are being cracked down on.

To be clear, Bitcoin is absolutely, positively going to "survive". Nobody is questioning that. The only thing to question is whether it's going to stay in the hearts and minds of millions of consumers such that it's market cap remains over one trillion US dollars.

And the other question is whether other digital currencies, which are not based on blockchain and not decentralized, will become more popular among millions of people than Bitcoin is today.

Personally I think the products that are built for a mainstream audience tend to win out in the marketplace in the long run .

[CryptopreneurBrainboss]

What does this mean for the long term prospects for cryptocurrencies? Will blockchain survive losing it's original purpose?

Yes Blockchain will survive its original purpose, irrespective of the fact that the governments are planning on introducing their own centralized Blockchain but the true qualities of Bitcoin Blockchain will still survive. Bitcoin can survive with or without mixers, Bitcoin was active before the mixer so it is not that Bitcoin need them but they're the ones that needs Bitcoin to have a service to render. Using Bitcoin as it was intended brings anonymity with it but it's just the privacy that is missing although there will be other ways which we can use Bitcoin and increase our privacy without making use of mixers. We have the option of using a different address for each transaction we want to carry out  either spending or receiving Bitcoin and our privacy isn't exposed.

As for the longer term, this brings up an important question: why use blockchain at all?

Blockchain is transparent, it's decentralized and trustworthy. It might be slow and costly for now but it won't stay this way forever. There are strong believers of the Bitcoin Blockchain and they're developer too that'll bring out a more acceptable solution in the future and all this will be a thing of the past, we just have to exercise patience and give Bitcoin time. We're still new so the challenges are what we should be expecting because after we have a triumph over this setbacks, only God knows how explosive Bitcoin adoption will get.

[jrrsparkles]

This could effectively kill the entire ability of people to transact in a way that cannot be traced.

But yet the only reason to use blockchain in the first place is to create these kinds of transactions. So why use it?

I believe Bitcoin is not actually created to make transactions with complete anonymity nor either traceable by the government, it's just to eliminate the middle man and still Bitcoin is capable of doing that. Governments are targetting the mixers because they believe these services were used to mix the coins from scams and hacks and laundered it to their customers by taking good money as commission.

[Iranus]

This could effectively kill the entire ability of people to transact in a way that cannot be traced.

But yet the only reason to use blockchain in the first place is to create these kinds of transactions. So why use it?

I believe Bitcoin is not actually created to make transactions with complete anonymity nor either traceable by the government, it's just to eliminate the middle man and still Bitcoin is capable of doing that. Governments are targetting the mixers because they believe these services were used to mix the coins from scams and hacks and laundered it to their customers by taking good money as commission.

Agree with you, what the government is doing is cracking down on anonymous services because they think it makes it difficult for them to track criminals and manage their citizens. The government has no intention of attacking bitcoin or blockchain as the OP is mentioning. If they really want to ban bitcoin and hinder the development of cryptocurrency, why did they accept bitcoin ETFs and introduce a series of regulations for the cryptocurrency market? What they want is to control the market, to control us, they have no intention of stopping the development of blockchain technology or the cryptocurrency industry.

[davis196]

In short, it would seem that governments are trying eliminate the very thing that Bitcoin--and blockchain generally--was originally designed to accomplish.

Privacy and anonymity weren't the "first thing Bitcoin was originally designed to accomplish". Bitcoin was supposed to be peer-to-peer electronic cash, which can be used without the need of banks and third parties. Just read the whitepaper again. Does it mention anything about privacy and anonymity?
The BTC blockchain was never designed to be anonymous and private. Actually, the BTC blockchain is pretty transparent and transparency is a good thing, because it creates trust.
BTC mixers weren't a thing when the BTC blockchain was created. Why would the BTC blockchain be dependent on the existence of centralized third party services like BTC mixers?

[legiteum]

As for the longer term, this brings up an important question: why use blockchain at all?

Blockchain is transparent, it's decentralized and trustworthy.

1. "Transparent" is a bad thing when it comes to preserving privacy.

2. "Decentralized" is just an implementation detail that is supposed to accomplish a benefit. But it's a waste of time if that benefit does not materialize.

3. "Trustworthy" does not describe thousands of blockchain projects, and in fact they are the opposite. Bitcoin is trustworthy because it is carefully governed, supported by many, and has been around for a while. But that all has nothing to do with the blockchain architecture per se.

It might be slow and costly for now but it won't stay this way forever.

Yes it will, and in fact it will most likely get slower and more expensive over time. Blockchain was designed to be intentionally slow and expensive. This is a feature and not a bug. As such, it will not be "fixed".

We're still new so the challenges are what we should be expecting because after we have a triumph over this setbacks, only God knows how explosive Bitcoin adoption will get.

Bitcoin has been around for 14 years now. It's not going to be fixed.

I believe Bitcoin is not actually created to make transactions with complete anonymity nor either traceable by the government, it's just to eliminate the middle man and still Bitcoin is capable of doing that.

Almost any digital currency architecture will "eliminate the middle man". Services like PayPal have been around for 15 years before Bitcoin--and PayPal is today far cheaper and faster than Bitcoin for a transaction.

Blockchain was a complicated solution to a very complicated problem--but it's a problem not many people actually have.

Privacy and anonymity weren't the "first thing Bitcoin was originally designed to accomplish". Bitcoin was supposed to be peer-to-peer electronic cash, which can be used without the need of banks and third parties.

Using banks/third parties is faster, cheaper and easier. Why would you go to all of this trouble to make a digital currency that is slow, expensive, and complicated, as Bitcoin is? It was because Bitcoin was designed to solve a problem the existing services could not solve, which is resistance to government subpoenas.

In other words, this problem did not exist, Bitcoin would have never been invented.

[jrrsparkles]

I believe Bitcoin is not actually created to make transactions with complete anonymity nor either traceable by the government, it's just to eliminate the middle man and still Bitcoin is capable of doing that.

Almost any digital currency architecture will "eliminate the middle man". Services like PayPal have been around for 15 years before Bitcoin--and PayPal is today far cheaper and faster than Bitcoin for a transaction.

Blockchain was a complicated solution to a very complicated problem--but it's a problem not many people actually have.

Technically PayPal is holding the money not by yourself so it's no different from the traditional banking system but it was the beginning of digital payment era when people found that it's easy to make payments with PayPal than going through the banks and their complicated processing for every transactions.

Here you use the blockchain which is not just limited to cryptos so better use the term crypto.

[NotATether]

The US at least, millions of Americans are paid every day for their work in untraceable physical cash, and there are no laws against it all of these years later.

Cash is traceable because the dollar notes have serial numbers on them. That's how they track down gun and drug sales for instance. Foreign currency though.... can't be traced by the local government by itself.

Most people who try to hide their fiat money without using crypto do so with offshore banks, as these cannot be investigated for the funds as they are in some secret jurisdiction like Panama or something.

[m2017]

It would appear, based on the news this week, that major world governments like the US and others are cracking down on the notion of "government-proof privacy", and prosecuting companies and individuals who facilitate money transfer that cannot be potentially traced by a government. They are going after mixers and brokers who do not adequately engage in KYC.

Government policy in this regard is very clear - anonymity and confidentiality will be eliminated

In short, it would seem that governments are trying eliminate the very thing that Bitcoin--and blockchain generally--was originally designed to accomplish.

This is precisely what governments disliked most.

What does this mean for the long term prospects for cryptocurrencies? Will blockchain survive losing it's original purpose?

My own answer is: "yes", in the short term, and "maybe" for the longer term.

Blockchain as a technology will certainly survive, because this technology will become widespread due to its advantages. Governments are also attracted to the same benefits. In the future, blockchain as a technology cannot be eliminated, but in the future, it will undergo some changes to please governments.

If we talk about bitcoin, then it has never been completely anonymous (pseudo-anonymous) and with the imposition of KYC, this, of course, will deal a blow to confidentiality, but anonymity on the BTC-network has never been 100%.

I have written before about different kinds of "privacy" that people might want, and most want privacy from other citizens, from companies, and from criminals: privacy from a targeted investigation from the government is a level that, in my estimation, a "nice to have" for most people, but not a dealbreaker.

In current realities, privacy is primarily needed from government banditry (imagine blockchain in the hands of totalitarian governments).

Hence in the short term, cryptos missing their original purpose is not something most consumers care about. Most holders of Bitcoin these days do so in a centralized way, e.g. with an app or a broker that keeps their account under their name, in a centralized database.

Most users have already voluntarily given up privacy for the sake of the convenience of centralized exchanges, which require verification and KYC.

As for the longer term, this brings up an important question: why use blockchain at all?

Blockchain is well suited in conditions where “transparency” of any activity between all market participants is valued and respected.

Blockchain is slow and expensive to transact in on purpose because of proof-of-work and decentralization. No cryptocurrency will ever come even close to scaling to the billions of transactions each day by people worldwide.

But a digital currency that is not blockchain-based can accomplish this and provide the same mechanism for speculation and value store that blockchain-based currencies provide. In my opinion, the long-term future of the actual blockchain architecture behind today's cryptocurrencies is... unclear.

Are you suggesting we abandon this and take a step back? You can't put the jinnee back in the bottle.

[Darker45]

I don't think Bitcoin and blockchain were originally created to provide privacy or anonymity. While there is a degree of privacy and anonymity offered by Bitcoin, they aren't its main goal. Bitcoin is more or less sufficiently private for ordinary people and their ordinary transactions.

If one day mixers, wallets, blockchains, and others which primarily focus on privacy and anonymity will all be gone, it doesn't mean that Bitcoin and blockchain have already lost their original purpose. They aren't made for people to hide their purchases and other transactions.

On the other hand, it's always a race. Governments will always try to decipher those innovations for privacy and anonymity. In return, innovators would also continue their development. Sometimes they're a step ahead; sometimes the government catches up. It will always remain to be like that.

[NotATether]

On the other hand, it's always a race. Governments will always try to decipher those innovations for privacy and anonymity. In return, innovators would also continue their development. Sometimes they're a step ahead; sometimes the government catches up. It will always remain to be like that.

I agree with the notion that it can be perceived as a race, however given the fact that Bitcoin Core is very slow to add new features, these new advancements on the Bitcoin side have to come in the form of stand-alone solutions, and this makes it very vulnerable against three letter agencies who do not like said advancements and would like to prevent them from being used. So the governments have a bit of an advantage here.

[Harr212]

 

[marlo1001]

Mixers are here to stay but probably not at current scale. There are not as much people who need them.
Anonymization is here to stay while non custodial solution avaliable

[Darker45]

On the other hand, it's always a race. Governments will always try to decipher those innovations for privacy and anonymity. In return, innovators would also continue their development. Sometimes they're a step ahead; sometimes the government catches up. It will always remain to be like that.

I agree with the notion that it can be perceived as a race, however given the fact that Bitcoin Core is very slow to add new features, these new advancements on the Bitcoin side have to come in the form of stand-alone solutions, and this makes it very vulnerable against three letter agencies who do not like said advancements and would like to prevent them from being used. So the governments have a bit of an advantage here.

It's actually exciting to ponder on this race. Maybe for now the governments are at an advantage. Privacy-oriented platforms are biting the dust one after another. But this can't go on forever. Innovators are learning from all this. The next wave of privacy-focused innovations might be much harder to stifle. There are no failures, only lessons. Sites could easily be seized for now and developers easily arrested. But the tide will eventually turn.

I'm not monitoring what Bitcoin Core developers and other contributors are cooking up and whether they're actually slow or not, but there must be a certain amount of slowness as regards adding new features because of the decentralized nature of Bitcoin. It's probably a necessity. But it's a cheap price to pay. Features could have otherwise easily been introduced and implemented if we were in a centralized setup, but this isn't what we prefer. I'd like to believe it's slow but sure.

[stompix]

Blockchain is slow and expensive to transact in on purpose because of proof-of-work and decentralization. No cryptocurrency will ever come even close to scaling to the billions of transactions each day by people worldwide.

Then you are misunderstanding the basis of Bitcoin, and thus the blockchain architecture.

If you didn't care about the government, then why not just use a plain old bank? Without the ability to evade government subpoenas, what actual added value does Bitcoin have? What can it do that other means of transfer cannot do? Trillions of dollars in payments go across borders every single day. This is not something that is unique to Bitcoin.

You have a bad habit of presenting your views on what Bitcoin and blockchain are and for what they were designed for like you are Satoshi!
Well, I don't have to tell you but just to make sure, you're not!

The blockchain was not designed to
- be slow
- evade governments
-  as a competition with banks
- and the proof of work algorithm has nothing to do with the utility of it

Satoshi designed a p2p currency, nothing else, he never mentioned it should be slow because why would he, he didn't think of a way to evade anything other than a third party, and most importantly he never spoke about it as some sort of investment or focused on the money part.

All you try to portray bitcoin as is your interpretation, if you knew how bitcoin was designed and for what we wouldn't have had satoshi we would have gad legitum as the inventor.
Satoshi mentioned the government only once, and you're not going to like it:

"The developers expect that this will result in a stable-with-respect-to-energy currency outside the reach of any government." -- I am definitely not making an such taunt or assertion.