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9/11 and the Need for Private Bitcoin

Bitcoin was born from the rise of the surveillance state. Let’s not let it become part of it.

Sep 13, 2021 at 5:32 p.m. UTC
Updated Sep 13, 2021 at 5:45 p.m. UTC

The Patriot Act was passed 45 days after 9/11. It was the first of many national security laws that expanded the U.S. government’s ability to listen in to the communications of people around the world (including all Americans). In contravention of constitutional rights, presuming guilt rather than innocence, the law turned “regular citizens into suspects,” as the American Civil Liberties Union said.

Two decades later, surveillance has become the norm. Our bodies are scanned with facial recognition, gait detection and a network of an untold number of security cameras. The same is true, and possibly worse, for our online activity. Emails can be monitored, our bank and credit records collected and normal web-surfing watched.

This article is excerpted from The Node, CoinDesk’s daily roundup of the most pivotal stories in blockchain and crypto news. You can subscribe to get the full newsletter here.

It’s all part of an extrajudicial and anti-democratic infrastructure built in conjunction with the private sector. It was also the impetus for cyberpunks to start building digital tools to reclaim a bit of privacy. Bitcoin, the first cryptocurrency, was built with cash in mind. It offers users final settlement and the ability for people who don’t know one another to remain pseudonymous while they interact directly, like handing a bill to a barista, in a digital context.

But Bitcoin is far from private, and it’s getting less so every day. The growth of blockchain analytics as an industry and the expansion of “know your client” (KYC) guidelines show how crypto is absorbed easily into the surveillance state.

Developers and users must resist this where they can. And, as the cryptocurrency with the greatest chance of establishing itself as a globally accepted monetary standard untethered from governments, bitcoin must lead the way.

Bitcoin has what’s sometimes called functional privacy. Depending on how someone acquires it, uses it and stores it, they could remain a fully pseudonymous entity – a string of alphanumeric gibberish, as far as the blockchain is concerned. Think Satoshi Nakamoto, the fabricated persona behind the Bitcoin network.

This isn’t easy. It requires people to take care at every step of the way of using bitcoin, from buying BTC from non-KYC sources to concealing its blockchain history, rather than treating it as flippantly as cash. Entrepreneur Matt Odell has a useful guide on how to use bitcoin privately.

That’s why it’s key for developers to be thinking about ways to maximize bitcoin privacy. It cannot be left to users (and certainly not exchanges) alone to preserve the cyberpunk ethos of Bitcoin.

The upcoming upgrade Taproot will expand the usability of the Bitcoin network by making it easy to create smart contracts and Lightning channels and hide them as regular transactions. This has positive privacy implications for bitcoin (though it might make things worse in the short term).

There are other crypto projects Bitcoin can learn from. There ought to be more discussion of creating natively secret transaction types that blockchains like Monero and Zcash provide. Bitcoin development is slow by intention, every upgrade or technical change comes with tradeoffs, but privacy needs to be part of the roadmap.

Some defend bitcoin from its overblown associations with the criminal underworld by noting that it’s far easier to track digital coins on a blockchain than actual coins. Let’s make bitcoin like the hard money we’re used to.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Daniel Kuhn is a reporter on CoinDesk's Features team. He owns BTC and ETH.

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