Bitcoin Must Become Untraceable

Bitcoin's creator designed it to be radically transparent, but the tools exist to make it as hard to trace as cash.
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Full text and links: https://reason.com/video/2022/07/20/bitcoin-can-become-untraceable/

Bitcoin's true believers hold on through the wild price swings because they see enormous value in its properties as a currency with a fixed number of units that can't be inflated by a central bank and its "uncensorability," meaning no government or corporation can prevent one party from sending value to another no matter the reason.

"We support [bitcoin] because we've seen a need from dissidents under authoritarian regimes for it," says Alex Gladstein, the chief strategy officer at the Human Rights Foundation and author of Check Your Financial Privilege: Inside the Global Bitcoin Revolution.

Gladstein sees bitcoin as a tool of liberation—especially for people living under oppressive regimes around the globe. Activists, dissidents, and human rights workers often face prosecution by hostile regimes for receiving money from foreign sources.

"They need to receive earnings from abroad in a way that can't be easily traced. That's impossible to do using the banking system, but it's quite possible to do with bitcoin, and we've seen it happen," says Gladstein.

Bitcoin proved hard to stop in Canada. Prime Minister Justin Trudeau declared a state of emergency after truckers parked their rigs outside the national capital and blocked a border bridge in protest of the government's vaccine mandates and other COVID-19 restrictions.

His administration ordered financial institutions to freeze donations flowing into the truckers. But hundreds of thousands of dollars worth of bitcoin still got through.

As one bitcoin activist involved in the fundraiser told Reason in March: "Here's the thing with bitcoin versus [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 actually take possession of them. And that asymmetry, it gives you the high ground as a defender."

This man, who requested anonymity and who we'll refer to as "Caribou," was involved in organizing a bitcoin-based fundraiser called Honk Honk HODL, which raised more than $1 million USD worth of bitcoin on behalf of the truckers, about two-thirds of which got through to them.

"[Bitcoin] actually makes the law have to work first before action is taken," says Gladstein, who pointed out that the Canadian government simply froze money raised by more traditional crowdfunding sites.

"They were able to just freeze it with a phone call or a button click…But with bitcoin, they can't do that. So they have to literally file an injunction. They have to use police officers. They have to go to people's homes," says Gladstein. "It makes the government do the work…which is really important."

Bitcoin may be as hard to stop as cash, but it has a major limitation that makes it far less useful to political dissidents: After the fact, it's not hard to uncover the real identity of someone who has sent or received bitcoin.

But advocates say many of these problems are temporary and that many privacy tools already exist that would protect bitcoin users. They just need wider adoption.

"I think [the trucker protest] woke people up to the idea of maybe we need to have some funds, at least, that the government can't just freeze, that we have access to no matter what," says Raw. 

Integrated into Sparrow Wallet is PayNym, another tool for creating different payment addresses for every transaction, throwing off the sleuths.

It's not always easy being a bitcoin HODLer. This past year, the world's most widely held cryptocurrency lost more than half its value, down 70 percent from its all-time high of about $69,000 USD.

But the true believers say it's still early days and that 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 be able to see everything that we do from a transactional point of view?" says Raw. "It's a very Orwellian world where all of that stuff is just available…So really, I'm just trying to put technology out there that allows people to transact in a private way."

Produced by Zach Weissmueller. Edited by Danielle Thompson; graphics by Lex Villena, Nodehaus, and Thompson; camera by Jim Epstein and Noor Greene.  

Photo credits: Emin Dzhafarov/Kommersant Photo / Polaris/Newscom; Anonymous / Universal Images Group/Newscom

Music Credits: "Boot Sequence" by Jimmy Svensson via Artlist; "AANChOR" by 2050 via Artlist; "Left Unturned" by Jamie Bathgate via Artlist; "Exploit" by Jimmy Svensson via Artlist; "In Orbit" by Ian Post via Artlist; "Cellar Door" by Generation Lost via Artlist; "Full Access" by Jimmy Svensson via Artlist; "Cyber Runner" by 2050 via Artlist