Viewpoint | Fully open Bitcoin ledger is a double-edged sword

According to foreign media today, Mandica, the project manager of Spectrecoin, believes that "Bitcoin is a monitoring tool; it is a currency used for monitoring."

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Bitcoin transactions use pseudo-anonymity.Because the Bitcoin blockchain's permanent public transaction records make it easy to be tracked by various monitoring companies. When it comes to bitcoin, privacy has always been a hurdle.

However, John Carvalho, CIO of Bitrefill, recently commented that this feature is also an advantage of Bitcoin:

People say that Bitcoin makes monitoring easier. In my opinion, the underlying Bitcoin blockchain is best to be transparent and not have privacy properties. People can seek better alternatives and privacy on the second-tier network and get rid of the underlying blockchain system.

It further stated that it does not object to privacy on the chain:

I just want to have proper privacy on the chain, you still need the underlying blockchain to be transparent. You need to make sure that everyone can trust this auditable ledger to endorse funds. If you want to store your funds, you certainly want it to be very transparent and know that everything is legal.

From a technical point of view, from the realization of the second layer of the lightning network and the side chain Liquid to the CoinJoin transaction, Bitcoin developers have made great efforts in terms of transaction privacy. However, in some cases, Bitcoin's lack of complete privacy protection has helped people.

Destroying illegal websites

U.S. law enforcement indicted a 23-year-old South Korean citizen in October 2019 and smashed the "Welcome To Video" website. According to the Justice Department, watching the site's videos requires bitcoin payments. The US Department of Justice further revealed that dozens of abused underage victims were later rescued.

Special agents can “track Bitcoin transactions” to determine the location of the dark web server, identify the administrator of the website, and finally track the specific location of the website server in South Korea. The well-known blockchain analysis company Chainalysis also assisted investigators in analyzing the website's cryptocurrency transactions, which ultimately contributed to the arrest.

Recently, a federal grand jury in the District of Columbia sued Michael Rahim Mohammed, a 32-year-old Dutchman, for operating an illegal website, Dark Scandle. Through the analysis of the blockchain, law enforcement tracked the payment of Bitcoin and Ethereum on the website, and found and destroyed the website.

Former Microsoft employee convicted of 18 federal felonies

A 25-year-old former Microsoft employee was convicted of 18 federal felonies by the Seattle District Court for fraudulently stealing $ 10 million from Microsoft. The defendant used the accounts and passwords of other employees to steal digital currency. The Ukrainian citizen used a hybrid Bitcoin service to try to hide evidence that could track fraud and online sales.

Everything has two sides

Financial privacy and personal freedom are two very important factors. Although traditional financial institutions, companies, and payment providers have facilitated our lives, they retain the full history of our previous transactions and the ability to review payments.

The best-known cases involve Bank of America, PayPal, MasterCard, and Visa, all of which restrict users from making payments to WikiLeaks. In April of this year, following the arrest of Wikileaks co-founder Julian Assange, a large amount of money began to donate to WikiLeaks' original Bitcoin address, highlighting the risks of centralized financial entities and their role in a fully digital Power in the fiat currency economy.

However, we also need to consider the two sides of things. Although the above case does highlight the benefits of Bitcoin's lack of privacy, it also shows that Bitcoin transactions may not be completely unmonitored. As Spectrecoin's project manager said, the argument that Bitcoin is monitoring money makes sense. The growth of the blockchain forensics business and the Bitcoin mixer over the past few years does seem to support this view.