Bitcoin may be untraceable.
True believers of bitcoin hold on through wild price swings because they see a lot of value in its assets as a currency with a fixed number of units that cannot be inflated by a central bank and its “uncensorable”. , which means that no government or corporation can stop one party from sending value to the other no matter what.
“we support [bitcoin] Because we’ve seen the need for it for dissidents under authoritarian regimes,” says Alex Gladstein, chief strategy officer for the Human Rights Foundation and author Check Your Financial Privilege, Inside the Global Bitcoin Revolution,
Gladstein sees bitcoin as a means of liberation – especially for people living under oppressive regimes around the world. Activists, dissidents and human rights activists often face prosecution by hostile regimes for receiving funding from foreign sources.
“They need to get earnings from overseas in a way that is not easily traceable,” says Gladstein. It is impossible to use the banking system, but it is quite possible to do with bitcoin, and we have seen it. “
Halving bitcoin in Canada proved difficult. Prime Minister Justin Trudeau declared a state of emergency outside the national capital after truckers parked their rigs and blocked a border bridge to protest the government’s vaccine mandate and other COVID-19 restrictions.
His administration ordered financial institutions to stop the donations flowing into truck drivers. But hundreds of thousands of dollars worth of bitcoins have still been received.
As pointed out by one bitcoin activist involved in the fundraiser cause In March: “Here’s the Thing with Bitcoin Vs. [government-issued fiat money]: Fiat, you can confiscate first… With bitcoin, you have to go through the process of trying to confiscate funds before you can actually take possession of them. And that oddity, it elevates you as a defender.”
This person, who requested anonymity and who we will refer to as “Caribou,” was involved in organizing a bitcoin-based fundraiser called Hank Honk HODL, which raised $1 on behalf of truck drivers. Of the more than USD million worth of bitcoins raised, about two – a third of which went to them.
,[Bitcoin] The law has to act first before we can actually take action,” says Gladstein, who explained that the Canadian government pooled the money raised by more traditional crowdfunding sites.
“They were able to freeze it with a phone call or the click of a button… but with bitcoin, they can’t do that. So they literally have to file an injunction. They have to use police officers. Gotta go home,” Gladstein says. “It makes the government work … which is really important.”
It may be difficult to hold bitcoin as cash, but it has one major limitation that makes it much less useful to political dissidents: after the fact, it is not difficult to uncover the true identity of someone who sent bitcoin. or have received.
All bitcoin transactions are recorded in a public ledger called a blockchain. At first glance, it appears that all movements between blockchain user accounts – called bitcoin wallet addresses – are given long strings of letters and numbers. But governments have become more efficient at linking those pseudonymous addresses to real ones.
US law enforcement has used “chain analysis” to expose drug dealers transacting in bitcoin, and police recently in Florida for selling logins to streaming services and ride-share apps for bitcoin. Somebody has been arrested.
The Canadian government froze hundreds of thousands of dollars worth of bitcoin targeted to truck drivers after a fundraiser transferred it to a local nonprofit that was under surveillance, and police confiscated his computer. Head of the campaign for the fundraiser’s home raided.
But advocates say many of these problems are temporary and that many privacy tools already exist that will protect bitcoin users. They just need widespread adoption.
For example, Gladstein says Canadian fundraisers can install a BTC Pay server, which generates a new virtual address entered into the blockchain every time someone sends bitcoin.
“With Canadian Truckers, we see how governments can take money, but more importantly, …[that] Once [control over] The money is in the hands of the government, they have shown with 100 percent certainty that that monetary control will be abused,” said Craig Raw, a software developer and entrepreneur who created Sparrow Wallet, a privacy-oriented bitcoin wallet application for holding a wallet. The HODL organizer told Reason that if he had to do it all over again he would use the Sparrow Wallet.
“I feel [the trucker protest] woke people up to the idea that maybe we should have some Funds, at least, that the government can’t just freeze, that we have access to no matter what,” says Raw.
Integrated into the Sparrow Wallet is PayNym, another tool for creating separate payment addresses for every transaction, which spies throws at it.
Are These Privacy-Preserving Tools Illegal? Generally, they are not, unless a third-party service is involved. In April, the Fed confiscated $34 million worth of bitcoins from a South Florida man accused of selling stolen passwords, which they caught linking his online profile to the address listed earlier to receive the shipment.
The suspect was charged with money laundering for using a so-called mixing service that exchanges bitcoins for other bitcoins to throw off the trail.
But Gladstein says that a more decentralized alternative known as “CoinJoin” would be more difficult to define as “money laundering” under current US law.
,[CoinJoins are] “Legally protected as open source software and free speech,” Gladstein says. They are only their open-source code. There is no one to control your bitcoins. This is an ancillary expense. It’s completely legal here.”
CoinJoins, which are built into the Sparrow wallet, combine lots of bitcoins into one and then break them back into pieces, so it’s hard to track whose money is going where.
“I think the best analogy for this is smelting gold,” the developer behind Samurai Wallet, who asked to be identified as “Samurai,” explained. cause, The company created Paynyms and its own CoinJoin protocol called Whirlpool.
“You will have an ounce of gold, and you can melt it into smaller pieces. It will still be gold, and it will still be an ounce. That’s what CoinJoin is for bitcoin,” Samurai says.
A front line in the bitcoin-privacy arms race is developing the Lightning Network, a decentralized payment network for bitcoin. The bitcoin network may never scale to the size of Visa or MasterCard because every transaction needs to be visible on the blockchain, and if too much data is stored in this public ledger, it can become a problem for users around the world. would be too cumbersome to maintain. A constantly updated copy, which makes the network decentralized and thus highly resistant to government control in the first place.
The Lightning Network was designed to increase the potential of bitcoin almost infinitely. This is similar to a one-time tab, in which a number of small purchases are combined and combined into one transaction at the end of the night. But it also increases privacy because, like CoinJoin, on-chain analysis firms cannot easily sort out which transactions were included in the bundle.
“You may have a cash app or coinbase account or something [that] The government is aware of this, and the income is coming to you. But then you’re back into the Lightning Network, and you get the same kind of privacy with deposits,” Gladstein says.
There are cryptocurrencies specifically designed to anonymize transactions, such as ZCash and Monero, which both use “zero-knowledge proof” encryption, but Raw and Samurai have turned their attention to bitcoin because it has a wide range of applications. It is widely adopted, has a larger network, and is more decentralized.
Raw says, “Monero is interesting from a privacy standpoint, but less interesting from a value standpoint, and actually store value, I think, is going to be the driving reason people move to bitcoin in the coming years.” “
One unresolved problem is that all of these privacy-preserving tools require users to maintain custody of their own bitcoins, which requires some technical savvy. It’s very easy to store your bitcoins on an exchange like Coinbase, which requires you to upload an image of your driver’s license to comply with a federal anti-money laundering regulation called “Know Your Customer” or KYC. . Samurai isn’t available for iPhones, and Sparrow Wallet doesn’t exist for mobile at all yet, which greatly limits adoption.
Samurai says it may be more difficult to access bitcoin anonymously, but that’s the secret of a technology rooted in the privacy-obsessed cyberpunk movement of the 1990s.
“that [cypherpunk] As the years go by, the message has weakened,” says the samurai. “But at its root, [bitcoin is] A cyberpunk tool to route you around the kingdom. And it’s only useful if we use it that way.”
Raw says the biggest privacy boon for bitcoin will be a protocol change built into the network that automatically adds transactions—in effect, making CoinJoin the default.
“It’s one of the things that privacy is one of the things that everyone in the bitcoin world has their eyes on. So, for me, it’s the most important thing that I expect in the future,” says Raw.
Gladstein says that in a world where entire countries like Russia are being cut off from the global financial system, the privacy and uncensorability of bitcoin is more important than ever and privacy-preserving tools can make bitcoin look like cash.
“It gives people the option of having the freedom money,” Gladstein says. “Yes, the government will know what flows in and out, but they won’t know what you do with it when you’re gone. And that, which allows us to preserve the secrecy of cash, Which I think is essential for a democratic society.”
Becoming a bitcoin HODLer is not always easy. This past year, the world’s most widely held cryptocurrency lost more than half of its value, down 70 percent from its all-time high of nearly $69,000 USD.
But true believers say it is still early days and eventually the price will catch up with the tremendous value that a fixed supply, censorship-free, and ultimately, private money brings to the world.
“Why should the government look at everything we do from a transactional standpoint?” Raw says. “It’s a very Orwellian world where all that stuff is available… so really, I’m trying to get the technology out there that allows people to transact in a private way.”
Produced by Zack Weismueller. Edited by Danielle Thompson; Graphics by Lex Villena, Nodhaus & Thompson; Camera by Jim Epstein and Noor Green.
Photo credit: Emin Dazfarov/KomersantPhotos/Polaris/Newscom; Anonymous/Universal Images Group/Newscom
Music credits: “Boot Sequence” by Jimmy Swenson via Artlist; “AANChOR” by 2050 via ArtList; “Left Unturned” by Jamie Bathgate via Artlist; “Exploitation” by Jimmy Swenson via Artlist; “In Orbit” by Ian Post via Artlist; “Cellar Door” by Generation Lost via ArtList; “Full Access” by Jimmy Swenson via Artlist; “Cyber Runner by 2050” via Artlist
