Read on Twitter
1/17
There are some folks who are of the opinion that BTC reaching full global money is a foregone conclusion and that credible competition from other cryptocurrencies is non existent.
There are some folks who are of the opinion that BTC reaching full global money is a foregone conclusion and that credible competition from other cryptocurrencies is non existent.
2/17 However I believe without privacy on the base layer BTC will ultimately fall short which creates a credible opening for discussion around competing assets.
3/17 I will refer to this piece written by @danheld on Bitcoin Privacy which I think is a good representation of this flawed viewpoint. https://danheld.substack.com/p/bitcoin-privacy?utm_campaign=post&utm_medium=web&utm_source=copy
4/17 Firstly he remarks, “the standard for financial privacy is cash”. For sure, hard cold cash is the most fungible form of money we have had up untill now.
5/17 However I don’t agree with the sentiment that this should be an upper limit. If that would be the case then gold would be the standard for scarcity and we would not be trying to meme BTC into a multi trillion dollar asset for being even more scarce. We should beat cash.
6/17 Further to this, he mentions the limitations that cash has with regards to its fungibility. That each dollar bill has a serial number that gets recorded when they are confiscated from criminals and can be tracked. However, Bitcoin is much much worse.
7/17 With bitcoin EVERY satoshi has its full transaction history attached. This means that not only can Bitcoins be worth differing amounts due to being “dirty”. They can also change in value due to a sort of “halo effect”.
8/17 You think you would know if you were in possession of a dollar bill that satoshi touched? No
Guess what, you would know if you touched satoshis bitcoin. And they are worth a lot more than your bitcoin. 1 BTC is not equal to 1 BTC. Some Bitcoins can have celebrity status.
Guess what, you would know if you touched satoshis bitcoin. And they are worth a lot more than your bitcoin. 1 BTC is not equal to 1 BTC. Some Bitcoins can have celebrity status.
9/17 He also mentions the lack of privacy with services that we currently use on the web. Again, I think this is a case of comparing new technologies to an old standard that we are trying to surpass. As recent events have shown we should be striving for greater privacy on the web
10/17 He also states that privacy coins aren’t seeing as much adoption as BTC and sees this as invalidating the idea there is demand for greater privacy. But I see this much more as symptomatic of where we are with the adoption of cryptos along their journey to full global money.
11/17 At this stage a small % of people store their wealth in BTC or use it as money. We are still early. When you do the thinking from first principles it is clear that we will need private transactions and value storage if this whole thing is going to work at scale.
12/17 He finally remarks that Bitcoin is already private enough. The Bitcoin blockchain is radically transparent in a way that has never been seen before in traditional finance and is a wet dream for those in favour of financial surveillance.
13/17 The most popular method for privacy on bitcoin is coinjoins. Such methods are built around adding noise to make it difficult to decipher the publicly available data. As opposed to ZK snarks which utilise encryption and never make the data public in the first place.
14/17 To change gears he does make a good point about auditability. With strong privacy you can’t optically verify the monetary supply. In the case of $ZEC it requires market faith in ZK snarks. This is something I think will come with time.
15/17 With Bitcoin it has taken a long time for people to have faith in the integrity of the double spend mechanics. Initially this was a big gripe that people had with BTC. I believe the same thing will happen with ZK snark tech.
16/17 Ultimately if BTC or any cryptocurrency had an inflation bug at scale it would be catastrophic. Faith around the non- likelihood of an inflation bug is something that grows with time in the market.
17/17 All in all, there are many flawed assumptions in circulation around BTC and privacy and I believe time will force this conversation into the limelight. At some point die hard bitcoiners may have to asked the question, is BTC another first movers loser?
