[tds_menu_login inline="yes" guest_tdicon="td-icon-profile" logout_tdicon="td-icon-log-out" tdc_css="eyJwaG9uZSI6eyJtYXJnaW4tYm90dG9tIjoiMCIsIm1hcmdpbi1sZWZ0IjoiYXV0byIsImRpc3BsYXkiOiIifSwicGhvbmVfbWF4X3dpZHRoIjo3Njd9" toggle_hide="eyJwaG9uZSI6InllcyJ9" ia_space="eyJwaG9uZSI6IjAifQ==" avatar_size="eyJwaG9uZSI6IjIwIn0=" show_menu="yes" menu_horiz_align="eyJhbGwiOiJjb250ZW50LWhvcml6LWxlZnQiLCJwaG9uZSI6ImNvbnRlbnQtaG9yaXotcmlnaHQifQ==" menu_offset_top="eyJwaG9uZSI6IjIxIn0=" menu_arrow_color="#333237" menu_bg="#333237" menu_shadow_shadow_size="eyJwaG9uZSI6IjAifQ==" menu_uh_color="#adadad" menu_uh_border_color="rgba(255,255,255,0.05)" menu_ul_link_color="#adadad" menu_ul_link_color_h="#10bf6b" menu_ul_sep_color="rgba(255,255,255,0.05)" menu_uf_txt_color="#adadad" menu_uf_txt_color_h="#10bf6b" menu_uf_border_color="rgba(255,255,255,0.05)" f_uh_font_family="eyJwaG9uZSI6IjQyMCJ9" f_uh_font_size="eyJwaG9uZSI6IjEyIn0=" f_uh_font_line_height="eyJwaG9uZSI6IjEuNCJ9" f_links_font_size="eyJwaG9uZSI6IjEyIn0=" f_links_font_line_height="eyJwaG9uZSI6IjEuNCJ9" f_uf_font_size="eyJwaG9uZSI6IjEyIn0=" f_uf_font_line_height="eyJwaG9uZSI6IjEuNCJ9" menu_gh_color="#adadad" menu_gh_border_color="rgba(255,255,255,0.05)" menu_gc_btn1_bg_color="#10bf6b" menu_gc_btn1_bg_color_h="#000000" menu_gc_btn2_color="#ffffff" menu_gc_btn2_color_h="#10bf6b" f_gh_font_family="eyJwaG9uZSI6IjQyMCJ9" f_gh_font_size="eyJwaG9uZSI6IjEyIn0=" f_gh_font_line_height="eyJwaG9uZSI6IjEuNCJ9" f_btn1_font_size="eyJwaG9uZSI6IjEwIn0=" f_btn1_font_line_height="eyJwaG9uZSI6IjEifQ==" f_btn2_font_size="eyJwaG9uZSI6IjEwIn0=" f_btn1_font_family="eyJwaG9uZSI6IjQyMCJ9" f_btn2_font_family="eyJwaG9uZSI6IjQyMCJ9" menu_uh_padd="eyJwaG9uZSI6IjlweCAxOHB4In0=" menu_ul_padd="eyJwaG9uZSI6IjhweCAxOHB4In0=" menu_ulo_padd="eyJwaG9uZSI6IjlweCAxOHB4In0=" menu_ul_space="eyJwaG9uZSI6IjgifQ==" menu_gh_padd="eyJwaG9uZSI6IjlweCAxOHB4In0=" menu_gc_padd="eyJwaG9uZSI6IjEzcHggMThweCJ9" logout_size="eyJhbGwiOjE0LCJwaG9uZSI6IjExIn0=" show_version="guest" icon_color="#999999" icon_color_h="#10bf6b" icon_size="eyJhbGwiOjI0LCJwaG9uZSI6IjE5In0="]

    A Bitcoin transaction may be impossible to trace. 

    Bitcoin’s true believers ride out the price fluctuations because they place a high value on the cryptocurrency’s “uncensorability,” or the fact that no government or corporation can prevent one party from sending value to another regardless of the reason for the transaction. 

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

    Gladstein thinks bitcoin could be a game-changer for people living in repressive regimes worldwide. Human rights defenders, dissidents, and activists frequently face persecution from repressive governments due to their funding abroad. 

    “They need a method of receiving funds from overseas that is difficult to track. That’s impossible through traditional banking channels, but we’ve seen it happen with bitcoin “Gladstein asserts. 

    In Canada, attempts to suppress Bitcoin met with little success. After truckers blocked a border bridge outside the nation’s capital in protest of government vaccine mandates and other COVID-19 restrictions, Prime Minister Justin Trudeau declared a state of emergency. 

    His administration froze funding to the truckers by ordering banks to do so. Bitcoin to hundreds of thousands of dollars still made it through. 

    In March, a bitcoin activist who helped organise the drive told Reason: “Compared to [officially sanctioned currencies], bitcoin has these advantages: Take your time, Fiat; you can seize first. When dealing with bitcoin, confiscating funds requires a series of steps that must be taken before any money can be taken. Due to the imbalance, you are in a superior defensive position.”

    For privacy reasons, we’ll refer to him as “Caribou,” he helped organise a bitcoin-based fundraiser called Honk Honk HODL that raised over $1 million USD worth of bitcoin on behalf of the truckers, of which about two-thirds made it to them. 

    According to Gladstein, “[Bitcoin] actually makes the law have to work first before action is taken” because the Canadian government froze funds raised by more conventional crowdfunding sites. 

    “All it took was a quick phone call or the push of a button, and it was instantly frozen… 

    However, this is impossible with bitcoin. That’s why they have to take legal action and issue an injunction. As a result, they have to rely on law enforcement. They’re tasked with making house calls, “Gladstein asserts. The government is compelled to act, which is a huge benefit. 

    Although Bitcoin is difficult to trace and seize, it has one major drawback that makes it significantly less useful to political dissidents than cash: It is relatively simple to learn who sent or received bitcoins after the fact. 

    The blockchain is a public distributed ledger that keeps track of all Bitcoin transactions ever made. At first glance, the only information the blockchain appears to reveal is the transfer of funds between individual bitcoin accounts, also known as wallet addresses. While governments were once unable to identify individuals behind fake email addresses, they have since become experts at doing so. 

    U.S. authorities have used a technique known as “chain analysis” to identify drug dealers who used bitcoin to transact business, and Florida police recently arrested a man who was offering rideshare and streaming service credentials for sale in exchange for bitcoin. 

    After the fundraisers transferred hundreds of thousands of dollars in bitcoin to a local nonprofit under surveillance, the Canadian government froze the funds and police raided the home of the campaign’s lead fundraiser to seize his computer.

    Many of these issues, however, are said to be temporary, and many privacy tools that would safeguard bitcoin users are already available, according to proponents. The only thing missing is widespread use of them. 

    Gladstein claims that the Canadian fundraiser could have used a BTC Pay server, which creates a unique virtual address on the blockchain for each bitcoin transaction. 

    “Once [control over] money is in the hands of the government, they have shown with 100% certainty that that monetary control will be abused,” says Craig Raw, the software developer and entrepreneur who developed Sparrow Wallet, a privacy-oriented bitcoin wallet. Bitcoin wallets are programmes that store the private keys used to send and receive bitcoins. If the Honk Honk HODL organiser had his time over, he would use Sparrow Wallet instead of what he ended up using. 

    Raw believes that the truckers’ strike has “woken people up to the idea that maybe we need to have some funds, at least, that the government can’t just freeze, that we have access to regardless of what.” 

    PayNym, another tool for generating unique payment addresses for each transaction, is built into Sparrow Wallet and can be used to throw off investigators. 

    To what extent are these methods of protecting one’s anonymity forbidden? If there is no involvement of a third-party service, then in most cases they are not. By linking his online profile to an address previously listed to receive shipments, the FBI was able to seize bitcoins worth $34 million from a South Florida man in April. The man was suspected of selling stolen passwords. 

    The suspect was accused of money laundering because he allegedly used a “mixing service,” which allows users to swap one cryptocurrency for another to confuse investigators. 

    However, according to Gladstein, a “CoinJoin,” a decentralised alternative, would be much harder to define as “money laundering” under current U.S. law.

    The law protects [CoinJoins] as free speech and open source software, according to Gladstein. 

    “They’re just their source code that anyone can use. Your bitcoins will not be stolen or frozen by any third party. It’s a group purchase. The law in this country permits that.” 

    In order to make it more difficult to trace the origin of a transaction, Sparrow Wallet includes a feature called CoinJoins, which joins together a large number of bitcoin and then splits them up again. 

    The creator of the Samourai Wallet, who wished to be known only as “Samourai,” told Reason that “smelting gold” was the best analogy for what his team was doing. Paynyms and the Whirlpool coinjoin protocol were both developed in-house by the company. 

    “You’ll have an ounce of gold and can refine it into finer dust. A gold ounce is still going to be worth an ounce of gold. This is exactly what CoinJoin does for bitcoin “claims Samourai. 

    The Lightning Network is a decentralised payment network for Bitcoin that is at the forefront of the bitcoin-privacy arms race. As every transaction must be recorded on the blockchain, the network as a whole will never grow to the size of Visa or Mastercard. If there were too much data stored on this public ledger, it would become too cumbersome for users all over the world to maintain a constantly updated copy, negating the very feature that makes the network decentralised and thus highly resistant to government control. 

    Bitcoin’s storage capacity can be theoretically increased without limit thanks to the Lightning Network. Like a bar tab, all of the night’s little purchases add up to one big one at the night’s end. In addition, it improves privacy in the same way that a CoinJoin does, making it more difficult for chain analysis firms to decipher which transactions were included in the bundle. 

    “The government may know that you are receiving money through a service like Cash App or Coinbase. However, with a Lightning Network withdrawal, you

    maintain the same level of anonymity as a Lightning Network deposit, “according to Gladstein. 

    Raw and Samourai have focused on bitcoin because of its widespread use, extensive network, and decentralized nature, even though cryptocurrencies like ZCash and Monero are designed to anonymize transactions by employing “zero-knowledge proof” encryption. 

    According to Raw, “store value, I think, is going to become the driving reason people turn to bitcoin in the coming years.” Monero is intriguing from a privacy perspective but less so from a store of value perspective. 

    These privacy-protecting tools have the same flaw: they expect users to be technically savvy enough to keep their bitcoin in cold storage. When you use a service like Coinbase to keep your bitcoins safe, you’ll need to comply with a federal anti-money-laundering regulation known as “Know Your Customer,” or KYC, which requires you to provide a photo of your driver’s license. Potential adoption is severely stunted because neither Samourai nor Sparrow Wallet is compatible with iPhones. 

    Samourai argues that while it may be more challenging to use bitcoin anonymously, doing so is central to the technology, which originates in the privacy-focused cypherpunk movement of the 1990s. 

    According to Samourai, “that [cypherpunk] message has diluted over the years.” “In reality, however, [bitcoin is] a cypherpunk tool for evading the state. And that’s the only way it will serve any purpose.” 

    According to Raw, having CoinJoins as the default would be the biggest privacy boon for bitcoin. A protocol change built into the network itself that combines transactions automatically would be even better. 

    “It’s something that many people in the bitcoin privacy community are anticipating. Because of this, that is my top wish for the future, “Raw argues. 

    Gladstein argues that privacy and uncensorability provided by bitcoin are more important than ever in a world where entire countries like Russia are being cut off

    from the global financial system and that privacy-preserving tools can make bitcoin more like cash. 

    Gladstein explains this because “it gives people the option to have freedom money.” “The government will have complete visibility into all incoming and outgoing funds, but they won’t be privy to your discretionary spending decisions. And that means we can protect the anonymity of cash transactions, something I believe is crucial in a democratic society.” 

    Being a bitcoin HODLer isn’t easy. From its all-time high of around USD 69,000, the most widely held cryptocurrency in the world has lost roughly 70% of its value in the past year. 

    The true believers, however, argue that we are still in the beginning stages and that the market will eventually reflect the enormous value that censorship-free, fixed-supply, and ultimately private money brings to the world. 

    Raw questions about why the government should be privy to all of our financial dealings. “The ease with which one can obtain such items is reminiscent of 1984… In other words, all I’m trying to do is disseminate the means whereby people can conduct business discreetly online.” 


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