Ever since the first banknotes were printed cash has played a critical role in the way society functions, and the evolution of money has reflected the ever-accelerating growth in technology.
It took centuries for the world to stop carrying chunks of metal in favour of little pieces of paper, and it might take decades for cryptocurrency to become commonplace, but when it does – the changes will be massive; altering the fabric of the society which created it.
What do privacy coins mean for the future?
As the fulcrum of a capitalist society, cash is central to our culture, and is all tied up in our notions of safety, privacy, and personal rights.
The right to privacy is central to our own sense of who we are – back in the day the Americans even consecrated it into the fourth amendment!
A free country allows people to flex their own personal power to determine what they want to share; whether they want to delete all social media and hide away in their basement, or expose themselves completely to the world .
As the saying goes, knowledge is power, and protecting your data keeps the power on your side. But… there is a trade off between privacy and the safety of society as a whole.
Privacy coins hit right at the heart of this debate, so let’s take a look at the way privacy coins are being used now and how they might be used in the future.
What’s the need for a privacy coin?
For the average joe who doesn’t want to share every transaction with the world, privacy coins are a fantastic way to regain personal power.
Recent outrage at the spilled data from Facebook shows how much power our information can give people, and how it needs to be carefully controlled to prevent misuse.
Privacy is central to the crypto ethos. Pseudonymity was an important aspect of Satoshi’s original vision, and for some it is the main appeal of cryptocurrency.
But Bitcoin is limited in this, and the recent exposure of NSA tracking the public ledger shows that while it is anonymous, when matched with other data then all the personal details of a transaction can be revealed.
The pseudonymity of Bitcoin is superseded by the anonymity of currencies like Monero, that offer a truly private and untraceable transaction; one that strikes fear in to cold hearts of governments and institutions everywhere!
But for those concerned about privacy, this is fantastic news – and being able to conceal the details of private transactions could potentially prevent you being from hacked, tracked, or even cryptojacked!
With the public blockchain, all balances are viewable, so the only way to prevent malicious actors from accessing your data is through privacy coins.
So what do the governments have to say?
He speaks to the concern of regulatory agencies and governments all over the world that point to privacy coins as potentially enabling criminal activity, tax evasion and money laundering – not that banks have ever done this of course…
Since anonymous currencies cannot be tracked, it makes keeping a record of payments for tax purposes quite difficult.
While this might be a problem, it is not impossible to overcome, with some currencies like Dash featuring ‘shielded payments’, that would allow authority figures with a ‘secret key’ to peep into the details of otherwise private transactions.
The Bitcoin torch-bearer Andreas Antonopoulos has suggested that as cryptocurrency gains traction, it will make necessary a new method of taxation: The first step to a world that builds itself around a currency without sovereignty. You might even think that this has already started to happen; with even a small Texas town proposing its own cryptocurrency!
Aside from taxation, the anonymous environment that private coins provide could easily become a fertile ground for abuse.
The chosen coin of many a darknet transaction, Monero has been termed the ‘Swiss Bank Account 2.0,’ Except instead of needing hundreds of thousands of dollars, anyone with a little know-how can squirrel away secret funds.
A true financial freedom?
In some ways privacy coins are more like physical cash than other cryptocurrencies like Bitcoin.
Hand-to-hand cash transfers are far more anonymous than Bitcoin transactions, easier to execute by most people, and don’t leave a digital trail. That’s why briefcases full of dollar bills are so popular with gangsters!
One thing we can expect, is that privacy coins will bring some of these advantages to the mainstream crypto world.
Whether they are a tool for financial freedom or the enabler of atrocities, as crypto develops and the infrastructure becomes more user-friendly, we can expect increased contention around these coins.