Privacy is important, but bitcoin doesn’t help
3502 sats \ 43 comments \ @frostdragon 5 Aug 2023 bitcoin
It’s interesting to see so many in the community talk as though bitcoin solves the problem of internet privacy…. It doesn’t. But that’s ok.
We have to remember that A) bitcoin is a public ledger, B) privacy is not one of the fundamental aspects of sound money, and C) the internet just isn’t a private place.
Regarding A - are there ways to set up your wallet without KYC and hide your identity? Sure - this whole post is coming from someone calling themself frostdragon. Do these practices really stand up against a nation state’s cyber capabilities and general digital forensics? Nah, not really. Not practically for most people, anyway. It’s internet money. If someone with hacking abilities really wants to find out who you are… they will.
Regarding B - I think most of us agree that sound money has to be salable across time and space. Interestingly, privacy doesn’t fit into that equation. If any of you have read the bitcoin standard, you might remember the example of Rai Stones. IMO, that’s actually the closest real world example of a public ledger system we’ve had…. And, to state the obvious, there was nothing private about that system.
Which brings me to C - my hunch is that on a bitcoin standard, we actually see a LOT more non-digital (yes, physical) transactions, especially in the form of bartering. Actually, I think bitcoin pushes more people off the internet in general.
For example, (this is a bit of a tangent) - think about Nostr. It’s social media as a protocol in the same way bitcoin is money as a protocol. You don’t have to use Nostr for long to have a new understanding of the internet. Everything you post via Nostr is public and permanent forever - and you really feel that when you use it.
But then… the only difference between Nostr and the rest of the internet is that the data you post is being relayed to the public as opposed to collected on someone’s server. That realization isn’t a great feeling - that’s when you realize internet privacy is an illusion.
Long term, that’s going to result in two things: less time interacting with the internet, and more services built as trustless, transparent protocols, just like Nostr.
Therefore, enter: in person, physical transactions / bartering.
Privacy is done better off the internet. Bitcoin is on the internet, and that’s ok.
Thoughts and criticisms welcome.
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194 sats \ 1 reply \ @quark 5 Aug 2023
Bitcoin is not private by default but the community keeps improving tools to make it more private. And I think the future of private Bitcoin is even brighter but not by default. Also, it seems privacy is not so important for most people. Otherwise I think we would have better easy privacy by default now.
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0 sats \ 0 replies \ @guts 7 Aug 2023
Is not important for most people but they are now aware how important will be in the future. Most people are not right.
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93 sats \ 2 replies \ @nullcount 5 Aug 2023
Can't have freedom without privacy. What good is a money that can be sent to sanctioned addresses if the Feds come to put you in a cage the day after you send it?
Sound money is a huge deal but freedom (f*** you) money is what enables free markets.
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0 sats \ 1 reply \ @frostdragon OP 6 Aug 2023
Eh, that’s the thing though… Bitcoin doesn’t have to be 100% private to have freedom. There are other ways transact with people that aren’t digital if you need a trade to be 100% private.
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0 sats \ 0 replies \ @nullcount 7 Aug 2023
In person deals suffer from tyranny of place. I don't have access to 99.9% of in person trades because I live in a certain jurisdiction and any travel I do incurs cost.
Just look at the most free markets alive today: dark net markets. Most of them don't accept BTC and if they do, it's common to put a BTC tax on the price. So even if you wanted to pay privately with BTC, not only will you pay more fees in CoinJoin, or other expensive privacy techniques, but you also pay the market an extra fee for their burden of "washing" the BTC you send them. This is the reality that "sovereign" bitcoiners dismiss, but it's damning for BTC's use as free market money.
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84 sats \ 6 replies \ @BITC0IN 5 Aug 2023
have you ever used coinjoin before? joinmarket? lightning? silent payments? payjoin? analog coinjoins via satscards/opendimes ?
Bitcoin can help with your privacy if you know how to use it privately.
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325 sats \ 5 replies \ @frostdragon OP 5 Aug 2023
Did you order your hardware wallet online? Did you have it shipped to you? Do you exclusively use tor? Have you religiously kept all of your devices, including your router, up to date with the latest security updates? Have you ever indicated online that you just bought or sent bitcoin?
Assume your adversary is your ISP, your cell service company, your hardware wallet manufacturer, and owns every server you’ve ever interacted with. You have to think through anything you’ve ever done that could make it easier to find out what your public keys are.
You’re right, there are things you can and should do to obscure your digital footprint, but there’s a saying in the cyber security community… obscurity is not security.
And… The things that help with privacy are not inherent to bitcoin itself. They’re tools built around bitcoin, and it’s not likely they’ll be used by the general public. That’s ok, it’s not essential.
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11 sats \ 0 replies \ @pepetrueno 5 Aug 2023
The internet doesn't have privacy enabled as default. That is not bitcoin fault. If you are really interested in making your online life more private, you can.
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10 sats \ 1 reply \ @TonyGiorgio 5 Aug 2023
Sure, if you want to assume every single person, device, or service is against you then yeah you can run around and say everything is broken and that it's "easy" to break. Great analogy. We should pack up and go home.
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0 sats \ 0 replies \ @frostdragon OP 6 Aug 2023
I mean, yeah we kinda should get our lives off the internet as much as we can tbh.
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2 sats \ 1 reply \ @BITC0IN 5 Aug 2023
You are right to be worried about those privacy best practices when concerning state actors.
My point still remains. You, I and many people can still use Bitcoin privately, and do today.
Being aware of the tools available, how to use them properly, and what not to do is the first step.
Is it easy? no.
Is it possible.
Yes.
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1 sat \ 0 replies \ @frostdragon OP 6 Aug 2023
Yeah I mean my main point is just… a lot of people think bitcoin solves the privacy problem as well as every other problem, but privacy is still a matter of knowledge and intentionality.
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10 sats \ 2 replies \ @2bithits 5 Aug 2023
Well... They didn't catch Satoshi (yet) so there must be ways to do bitcoin & tge internet privately
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21 sats \ 1 reply \ @frostdragon OP 6 Aug 2023
Satoshi also hasn’t transacted in years, so there’s also that… if he did, and did regularly, it’d be way harder to keep his identity a secret.
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0 sats \ 0 replies \ @energycurrency 7 Aug 2023
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100 sats \ 0 replies \ @kepford 6 Aug 2023
I'm curious who in bitcoin is saying "bitcoin solves the problem of internet privacy"? I have not heard this. Also, as compared to what? I have heard queit the opposite in bitcoin circles.
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10 sats \ 1 reply \ @Dash_1971 6 Aug 2023
Interesting take. Bringing up resistance to state level attacks is a bit of a strawman because if the state is determined enough they can track down your cash transactions (serial numbers, cameras in shops etc.) Bitcoin can be used privately in most threat models as long as it's not acquired from a KYC source and as long as reasonable precautions are taken like coinjoin, payjoin, use of LN, etc. But I get your point about the Internet in general not being a great place for privacy. I agree that in an ideal world people would move more offline in response to this revelation but a) most people don't care and b) if we're honest about it, we kind of are already merged with and completely dependent on the Internet, for better or for worse. We are not putting the toothpaste back in the tube. So probably privacy is going to be a human fight rather than a human right, and we are going to have to spend a lot of time and energy in an attempt to protect whatever privacy we can, because I don't expect it will ever be the default.
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0 sats \ 0 replies \ @frostdragon OP 6 Aug 2023
Yeah I agree with most of this. I kinda thing privacy can and will improve somewhat, because while most people don’t care, most people also aren’t developers. I think devs will have a better idea of what’s going on and will build things differently. All it takes is one thing to take off for everyone to see that there’s demand for it. I think Nostr will be the first domino. We’ll see 🤷🏻‍♂️
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10 sats \ 0 replies \ @guts 7 Aug 2023
I don't think this will be solved with Bitcoin, Bitcoin won't be one solution for all.
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5 sats \ 1 reply \ @dtonon 5 Aug 2023
Therefore, enter: in person, physical transactions / bartering.
So, Cashu.
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0 sats \ 0 replies \ @frostdragon OP 6 Aug 2023
Physical layer 2 is definitely an interesting solution. Different threat model, but useful in a lot of cases.
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0 sats \ 10 replies \ @beorange 6 Aug 2023
Without privacy there is no fungibility, without fungibility Bitcoin cannot be viable currency long term.
If you think fungibilty is not important, wait a bit until you get some tainted coins without knowing.
So privacy is important, it needs to be addressed and solved.
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0 sats \ 7 replies \ @frostdragon OP 6 Aug 2023
What does privacy have to do with fungibility? Interested to hear your reasoning.
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0 sats \ 6 replies \ @beorange 7 Aug 2023
All bitcoins (outputs) should be equal and traded the same way, you should not be able to distinguish one from the other (like all $,€, etc). If you can look for the whole past of each individual bitcoin/output (the privacy part), different outputs have different histories and are distinguishable, meaning different values can be assigned to them based on their past (the fungibility part).
One practical example is if you receive tainted coins for some reason (outputs that have an undesirable past, such being used in illicit activities). Businesses and exchanges can refuse to accept them, meaning those coins end up being less valuable than clean bitcoins/outputs.
There are many companies providing these analytics services to other companies.
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0 sats \ 5 replies \ @frostdragon OP 7 Aug 2023
That’s exactly how the public ledger works, though. It’s too late, the cat’s already out of the bag. Do you think the bitcoin that’s been used for terrorism and black market sales is going for any less? It’s not, that’s now how it’s worked. The value of bitcoin is its immutability.
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0 sats \ 4 replies \ @beorange 7 Aug 2023
Do you think the bitcoin that’s been used for terrorism and black market sales is going for any less?
It is definitely harder to use (and depending on the circumstances it will have an impact) . Ask around to people that got ETH assets frozen or rejected, due to having a link with tornado cash addresses in their "history".
There are privacy improvements that can help fix some bitcoin shortcomings as a currency. Lightning Network already helps with this, but more is needed.
Privacy is done better off the internet. Bitcoin is on the internet, and that’s ok.
That's not 100% ok, bitcoin can and should improve on that front.
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0 sats \ 3 replies \ @frostdragon OP 7 Aug 2023
ETH is joke land. I mean that literally - We all saw the quote where Vitalik said ETH shouldn't have to adhere to the laws of physics. Dude thinks he can write his own truth.
You can't freeze bitcoin! That's a huge reason why it has value.
Bitcoin should absolutely not improve. We shouldn't be adding new features or making any changes. Layer 2 solutions have promise and are interesting, but the base layer needs to stay unchanged. Changes are vulnerabilities. Money should not have any inherent additional "features". Leave that to shitcoins and fiat.
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0 sats \ 2 replies \ @beorange 7 Aug 2023
ETH is joke land. I mean that literally - We all saw the quote where Vitalik said ETH shouldn't have to adhere to the laws of physics. Dude thinks he can write his own truth.
That's not the point, it was one example. The same kind of thing happens when trying to use BTC with businesses (and will be more common in the future). They run chain analysis on the funds you send and reject the funds if their have a bad history.
This is a real problem for a currency, and it doesn't matter if you like it or not.
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0 sats \ 1 reply \ @frostdragon OP 7 Aug 2023
Nah, I just solidly disagree. You can't wash a public ledger, and eventually every sat will have been used for something shitty, because we live in a fallen world. I think people can and will eventually accept that the ones and zeros are arbitrary enough to use for their immutability.
We can agree to disagree on that, I suppose.
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0 sats \ 1 reply \ @mallardshead 6 Aug 2023
Bitcoin is fungible. 1BTC=1BTC. These are the protocol rules. You're not selling fresh mined coinbase BTC for more on a DEX than you are conjoin or random coins. I've never seen an example of this. I'll buy anyone's tainted coins (there's no such thing) for a discount. Fungibility is a mathematical reference. You're using it informally as a social reference outside the protocol for what governments try to enforce, because they have no authority in the enforcement of bearer assurances, where the protocol is the supreme court there.
If you look at the people who need privacy the most, you'll find they use bitcoin, mostly. This goes for darkweb marketplaces (mostly bitcoin volume, some exclusively bitcoin), ransomware (mostly bitcoin), cartels (mostly bitcoin), laundering (mostly bitcoin), journalists, privacy mail like proton, etc.
The privacy issue with bitcoin arrises when people use centralized exchanges, which is the vector that blockchain forensics lever, because they're useless without CEXs. But imagine a world where bitcoin has a robust circular economy, and with enough goods and services priced in bitcoin, using a CEX is unnecessary. Also imagine with more and more global users, the volume spikes, and the global data set is enormous.
What remains of the privacy problem is being solved on L2, where with Taproot channels and splicing, submarine swaps, etc, privacy overkill can be achieved, and it's going to be achieved in the background with no work required by the user.
Lastly, consider that protocol privacy and anonymity are meaningless for many transactions. If for example, you order something from Amazon or PizzaHut, you provide a shipping address; or if you pay insurance-utility-rent, it's linked to a name.
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0 sats \ 0 replies \ @beorange 7 Aug 2023
Bitcoin is fungible. 1BTC=1BTC
Until one of it has a some problematic owner/origin in the past (the ledger is public, each output has a different history). Then it isn't accepted is many places. You can deduct the rest of the story. There are many examples in transparent chains of this happening.
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0 sats \ 1 reply \ @ceife 6 Aug 2023
Your thoughts on Bitcoin and internet privacy are interesting. While Bitcoin's public ledger does present challenges to privacy, there are ways to set up wallets without KYC and enhance anonymity. However, you're right that against a determined nation-state's cyber capabilities, it might not stand up for most people. Regarding sound money, the concept of privacy isn't a fundamental aspect, as seen in historical examples like Rai Stones. You raise an intriguing point that Bitcoin might push more people towards non-digital transactions like bartering. Additionally, the realization that internet privacy is an illusion might lead to a shift in building trustless, transparent protocols. In-person, physical transactions could become more relevant in the long term. Overall, it's essential to consider the trade-offs between privacy and transparency in the digital world.
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0 sats \ 0 replies \ @frostdragon OP 6 Aug 2023
Tell me this wasn’t pasted from ChatGPT lol
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0 sats \ 3 replies \ @mallardshead 6 Aug 2023
  • Have you kept up with innovation and developments on the Lightning Network?
  • Barterning...so we're going to go back in time to a less efficient system? I'm uncertain you understand what bartering is, or how it works. That happens in the absence of money and homogeneity.
  • Bitcoin pushes people off the internet...hmm, it's called magic internet money for a reason, and in order to enforce the bearer assurances, the internet is required, or at least a mesh network.
  • Internet privacy is an illusion...I'd suggest learning the privacy tools, from VPN's and Tor, to browsers and email. The internet can be as private as you want it to be.
I'd suggest first defining the motif of your post—privacy. What is privacy?
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0 sats \ 2 replies \ @frostdragon OP 6 Aug 2023
  • lightning definitely has potential for some good solutions here, but the jury is still out IMO. The protocol is complicated as frick, so I’m not convinced it’ll be as robust in the end as we think. But I’m open, time will tell.
  • bartering doesn’t always happen in the absence of money, and it’s actually good for the economy in a lot of ways - especially the local economy. I think in general, Bitcoin is a de-globalizing force, and bartering can cohere with it quite nicely.
  • I’m not saying bitcoin erases the internet, I think it changes people’s relationship to it
  • let’s just say my professional familiarity with this topic is the reason I stand by the statement that internet privacy is not near as robust as people think. It’s also why I argue very strongly that your seed phrase should never touch the internet… because [insert thousands of zero days]
And, you do have a good point - privacy should be clearly defined. I’ll get back to you on that when I have more time to type that out.
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0 sats \ 1 reply \ @mallardshead 6 Aug 2023
  • The jury is not out on Lightning. It's turning a corner. Think about about where we were with it just 2 years ago. It's complicated like the interdependent protocols making up the internet is. Splicing, Bolt12, LNURL, Zaps, non-custodial...very new stuff. The mainstream doesn't follow it.
  • No place in the developed world is barter commonplace. Efficient marketplaces don't do that. We have Forex markets now and developed commodities markets where the base/quote pairs are not commodities/commodities
  • It'll change peoples relationship to the internet in that it will allow FOSS to thrive. The world is rapidly digitizing, where many goods and services are themselves being digitized: porn, music, film, sports, medicine (esp psychiatry), communication, work (esp remote), shopping etc.
  • People having keys touch the internet and losing their bitcoin was mostly a problem years ago. We now have NFC, scripting, a possible vault BIP, better education, and hybrid custody. The directional trend of this are fewer exploits. The main concern and how the majority of people lose their bitcoin is losing their keys
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0 sats \ 0 replies \ @frostdragon OP 7 Aug 2023
  • "very new stuff" is why the jury is still out. Just needs more time, and we need to get to a point where new features aren't continually being added. Each new addition is a new thing that could go wrong... Don't get me wrong, it's all very promising. It just hasn't quite stood the test of time yet, and that's important for something that's supposed to be a global solution.
  • No place in the developed world is off fiat yet either, and globalization reigns at the moment. I'm not saying large companies and transactions will happen via bartering, I'm saying on the individual level, in local communities, if people want to keep their transactions private, the easiest way to do that will be some form of non-digital transaction. It's hard for us to imagine that in the world we live in, but so it bitcoin in general. There's no underestimating how it's going to displace everything.
  • Some services are being more digitized, but others are pushing the market further offline. Music is a good example - since music has become digital, live music is where the real money is. Building a following in person, at shows, is what's highly recommended in the music industry. Digitizing medicine, so far, is a terrible idea so far. It's been a HIPAA nightmare. Telehealth platforms are literally selling PHI to Facebook.
  • Yeah, most of those solutions include keeping your private keys from touching the internet. That's exactly my point.
Privacy = sharing private information with a trusted party, while keeping it hidden from others.
When you're thinking through privacy, think about how many trust barriers there are between you and the person you want to share private information with. Over the internet, there are a lot of barriers and even individuals you have to trust to be competent enough to write code securely and have enough integrity to keep your data locked down. Unfortunately the insane hustle culture we live in doesn't exactly incentivize that kind of thing. I think that'll change as consequences get worse and as more people realize the insane state cyber security is in, but I think it'll also push people to spend less of their lives on the internet.
Just a theory. I appreciate the thoughts and criticism, truly.
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0 sats \ 0 replies \ @Athena_Alpha 6 Aug 2023
For anyone who's interested in Bitcoin Privacy (and the closely related security) we have an entire category dedicated to it.
We also have a quite detailed Beginner Bitcoin Privacy Guide that covers a good number of very straightforward ways to hugely increase your Bitcoins privacy. Because privacy is a human right, and everyone should have it.
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0 sats \ 1 reply \ @llamabyte 6 Aug 2023
If someone with hacking abilities really wants to find out who you are… they will
How though ? Most hacks require you to make a mistake or download the wrong thing while being targeted. social engineering and malware. It's not magic.
Are you not aware of tor and monero. ?
I'm doing opsec, hardware and software wrong, therefore everything will one day be offline. The post.
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0 sats \ 0 replies \ @frostdragon OP 7 Aug 2023
How: OSINT, zero days, database breaches, targeted phishing, etc etc… Really going to depend on the target. And yeah, most hacks require a mistake to happen somewhere… and there are always mistakes.
Tor is great, you just have to use it exclusively, and you have to ensure your home network is completely locked down and up to date with security patches.
I have a hard time seeing monero actually scale, but maybe it won’t go to zero. It’s not bitcoin though, and this post is about bitcoin.
Definitely didn’t say everything is going offline.
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0 sats \ 0 replies \ @Jon_Hodl 5 Aug 2023
An interesting thought and well articulated but privacy and anonymity are not the same thing.
You can have private and still know who is sending data to others and just not know what they are saying.
You can also have anonymity without privacy like a message that is not encrypted at all but you don't know who sent it and who is receiving it.
I think what we are all ultimately looking for with money that offers both privacy and anonymity. We might never truly realize it but if you're willing to take the necessary steps, you can have both private and anonymous transactions.
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0 sats \ 0 replies \ @BlokchainB 5 Aug 2023
Great post!
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