Does Bitcoin lack anonymity?

Previously, we introduced two arguments in the article "Bitcoin is not scarce" (2022/4/6) and "Bitcoin does not have the best marketability" (2022/4/8) by digital currency trader Patrick Korda in his critical article "Bitcoin Bubble 2.0" (2013/3/5). Today, we will introduce his third and final argument - "Bitcoin lacks anonymity".

He said that many people promote the anonymity of Bitcoin transactions, which brings a certain freedom, such as online gambling or buying and selling prohibited items, but this is just wishful thinking of those involved in illegal activities because all Bitcoin transactions are permanently recorded in the public blockchain ledger.

Ironically, there are others who criticize Bitcoin as a so-called crime currency because they believe that the anonymity of Bitcoin is enough to help criminals escape legal sanctions.

This creates a strange situation: some people who love anonymity think Bitcoin is anonymous, some people who criticize anonymity also think Bitcoin is anonymous, and finally some people who have no attitude towards anonymity criticize Bitcoin for not being anonymous.

In fact, Bitcoin employs a unique privacy model.

In A Cypherpunk's Manifesto published on March 9, 1993, Eric Hughes made a clear distinction between "privacy" and "secrecy." "Privacy is not a secret. A privacy is something that a person does not want the whole world to know, and a secret is something that a person does not want anyone to know. Privacy is a power, a power to selectively disclose self-information to the world." In other words, privacy is a right to choose.

Hughes used the scenarios of shopping transactions and email services, noting that “when the implicit requirement of the transaction is to obtain my identity information, I lose my privacy. I have no choice but to disclose my information every time.”

"Privacy in an open society therefore requires anonymous transaction systems. Cash has been the preferred such system to date. An anonymous transaction system is not a secret transaction system. An anonymous system empowers individuals to disclose their identity information when and only when they want to. This is the essence of privacy."

In Section 10 “Privacy” of the Bitcoin white paper published by Satoshi Nakamoto in 2008, the privacy model of Bitcoin is proposed:

“The traditional banking model achieves a level of privacy by limiting access to information about the parties involved and to trusted third parties. The need to publish all transactions precludes this approach, but privacy can still be maintained by cutting the flow of information at another point: by keeping public keys anonymous. The public can see that someone sent a certain amount to another person, but there is no information linking the transaction to anyone. This is somewhat similar to the level of information disclosure on a stock exchange: the time and size of each trade, the “tape,” is public, but it does not reveal who the parties were.”

“As an additional firewall, a new key pair should be used for each transaction to prevent them from being linked to a common owner. Since multi-input transactions necessarily reveal that their inputs belong to the same person, some linkage is still unavoidable. The risk is that if the owner of a key is revealed, the linkage can reveal other transactions belonging to the same owner.”

Satoshi Nakamoto did not design the ledger to be secret, but on the contrary, the ledger is completely public and transparent, which leaves the responsibility of severing the connection between real identity and address to the user.

Unlike some so-called "anonymous coins", Bitcoin's unique privacy model and the delicate balance between system, user and regulation make Bitcoin more regulatory compatible, allowing network analysis and law enforcement violence to be sufficient to deter criminals who use Bitcoin, while users who pay attention to privacy protection can obtain sufficient security.

Just as external forces that crack down on mining will help decentralize Bitcoin computing power, cracking down on criminals who try to use Bitcoin for secret transactions will help Bitcoin stay away from illegal use, thereby achieving its own purification.

The most anonymous and untraceable currency is the US dollar bill, which is the real criminal currency. Bitcoin is not.

(Official account: Liu Jiaolian. Knowledge Planet: reply “Planet” to the official account)