Why Are So Many Digital Currency Players Anonymous?
Published on January 2, 2014 at 01:00 BST
Sunny King may be the mastermind behind two different altcoins, but that doesn’t make him any less difficult to pin down. When CoinDesk interviewed the creator of peercoin and primecoin, he refused to chat via any of the normal channels that we use – telephone, Skype, or IRC – and instead restricted himself to either the secure, private online chat program Cryptocat, or the online chat system at peercoin’s web site. In the age of NSA spying, we understand the difficulty in finding secure channels – but the question is, why be anonymous at all?
Anonymity is understandable in some digital currency-related activities. Bitcoin was used exclusively to trade for illicit goods on the Silk Road online black market, and Ross Ulbricht, its founder, was paranoid about his anonymity because he didn’t want to be arrested. He wasn’t paranoid enough, and was apprehended anyway.
But bitcoin itself isn’t illegal, and neither are the alternative currencies introduced by people like King. On the face of it, you might think they have nothing to hide from. But the prevailing sentiment among those that do choose to remain anonymous is that they might, in the future, if governments change their minds.
Worries about the political climate
“I just think the current political climate is not very nice, so I could buy some more time if it turns bad,” King said when we first spoke to him. “If an authority bans currency development that [sic] maybe I can still continue for a while.”
“If you know a bit of history about online currencies (eg e-gold) and peer-to-peer file sharing networks (eg grokster), even software developers are not safe from government prosecution/persecution,” he added recently. “I think many people share these concerns, and not surprisingly, the father of cryptocurrency, Satoshi Nakamoto, was also of similar opinion.”
King isn’t alone in wanting anonymity. After all, bitcoin’s founder, Satoshi Nakamoto, disappeared from the community two years after he launched the project, and hasn’t been heard from since. Others in the community, such as those running pools, often seek to preserve their privacy, going by online handles rather than revealing their true selves.
Others choose anonymity to keep personalities away from altcoin projects. A researcher going by the name Eric Gonzales, who published a paper in July 2013 proposing an alternative to bitcoin, told us that he and his colleague decided to remain “pseudonymous” because their paper was about the message and not about personalities.
Like others, he hinted at fears over possible government retribution in the future.
“It is potentially counterproductive for the project to have faces attached, especially if it gets implemented,” he said at the time. “Satoshi Nakamoto’s decision to stay anonymous was very wise and I don’t think it was a coincidence that he left the scene just after Gavin Andresen gave his talk at the CIA.”
Charles Lee, the founder of Litecoin who now works at Coinbase, has been less publicity shy, although he was taciturn about admitting that he worked for Google when he was there. He understands the reasons why some prefer to remain anonymous, however.
“People are always afraid of government intervention. Cryptocurrency is such a powerful concept that it can almost overturn governments,” he told us when we first interviewed him. “Controlling the coin is so important to a government. So if BTC comes along and disrupts the reserve status of the USD, the USD would probably do something about that.”
The need for accountability
The problem with all of this is that anonymity can also lead to a lack of accountability. When people are identifiable only by an online handle, it makes it easier for them to change direction or renege on agreements. When the developer for Phenix exchange, an exchange for the Phenix altcoin, went AWOL with the exchange’s code, leaving many of the coins stuck in the exchange, it was difficult for the community to track him down and hold him accountable. A combination of anonymity, and the concentration of power in the hands of one or two individuals, created the perfect conditions for the implosion of the coins.
John Manglaviti, who left the UNOCS initiative to bridge phenixcoin, feathercoin and worldcoin after it fell apart, became the frontman for peercoin earlier this year, working alongside Sunny King.
For a coin to really flourish, it needs a public face which is easily contactable, Manglaviti points out. “When we talk to different magazines and publications, they want someone that they can talk to,” he says, pointing out that he became involved in the coin after it had already been conceived and launched.
“I was just a projects guy that wanted to help out. My name was already out there. You can’t put the genie back in the bottle,” he says. “I’ve nothing to hide. I’m just kind of the middle man, and I have no say over what direction the currency is headed.”
For those people seeking to deal with large investors in the digital currency space, it’s difficult to be anonymous. Venture capitalists like to know who they’re dealing with. This seems to draw distinct lines between the hobbyist/grassroots communities, and those trying to move digital currencies into the mainstream commercial space.
However, this doesn’t mean that all grassroots altcoin founders or core devs are anonymous. The founders of altcoins such as feathercoin and freicoin are open about their real names and backgrounds. And of course, those currently guiding bitcoin, especially those guiding local or international organizations to promote it, publicize their true identities.
Nevertheless, there are still some people who consider governmental displeasure – and worse – a serious threat.
“Bitcoin ownership may prove to be a bigger threat to state control than gun ownership,” said one prominent bitcoin entrepreneur, always outspoken in the community, who asked us to keep his comments non-attributable for this article. “For that reason, many bitcoin owners may want to remain anonymous.”
What do you think? If you’re not trying to score venture funding and charm the regulators into accepting digital currency, does it pay to keep your head below the parapet, and stay anonymous? And should you try to stay unidentifiable even when simply holding bitcoins?
Anonymity image via Shutterstock
Blockchain.info Sponsors British Woman In Solo Row Across...
Lebanon's Central Bank Issues Bitcoin Warning