Before I get started I would like to say I am an advocate of a virtual, peer to peer currency and bitcoins to an extent. I think some of the worst aspects of capitalism as well as huge amounts of power have manifested themselves in the finance sector and it would take something as radical as bitcoin to take the power back.

I am interested in why anonymity is important in bitcoins. Some of the other "worst aspects of capitalism" are the tax dodging multinationals that lie and cheat and as a result prevent the fair distribution of wealth amongst the population. Surely if bitcoin was adopted widely as a currency this would only worsen matters as there could be no means of taxation and thus projects like public health, education and law would break down.

What is the problem with making transactions traceable. Would this not make a virtual peer to peer currency more likely to succeed?

  • Bitcoin is private by default, but one of the Bitcoin devs maintains a noprivacy version. – Nick ODell Apr 12 '13 at 16:45
  • > "as a result prevent the fair distribution of wealth amongst the population". That's something other than free market capitalism, incidentally. – Stephen Gornick Apr 13 '13 at 4:58
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    @StephenGornick who said anything about free market capitalism? – rogermushroom Apr 15 '13 at 17:43
  • @zode64 fyi, this question is getting votes to close not because people disagree with your position (though I'm sure some do) but because it's hard to give a clear factual answer to this rather than an opinion, and stack exchanges are designed to serve as reference material rather than as a forum. Perhaps you'd have more luck on bitcointalk.org or in the chat? – eMansipater Apr 16 '13 at 5:09
  • @eMansipater thanks for clarifying, I am familiar with how the SE sites work and totally understand. I do however think this question creates a bit of a paradox in this case because if there were a clear answer then it could be provided but the fact that there isn't answers the question quite definitively but also results in it getting closed. – rogermushroom Apr 16 '13 at 16:20

Anonymity is part of the Bitcoin culture. It was created to circumvent the powers at be, and anonymity plays into that idea quite well.

However the nature of the block chain is that every transaction is totally traceable. You can look at the block chain and determine where every bitcoin has ever been. This seems to contradice most peoples conception of bitcoin as being an anonymous currency.

In some ways it is. If you mine your own bitcoins and generate your own wallet then, even if I can see every transaction, that particular bitcoin or wallet made, I can not know who is responsible for making it.

But in the new age of bitcoin, where the average user does not know anything about encryption, and contracts third party services such as mt. gox to manage their bitcoins for them, anonymity is lost.

  • I guess the argument would be that this culture might be it's down fall. Especially if it serves no purpose other than just to be anonymous. – rogermushroom Apr 12 '13 at 16:52
  • This answer leads me to a question I been meaning to ask: if I deposit fiat currency to an exchange, such as Mt. Gox, then buy BTC with it, and then send those to an offline wallet I created, will there be any mention of my fiat bank account, or other personal information, in the blockchain? Eventhough Mt. Gox may have a record of me depositing fiat currency to buy BTC, surely this is not broadcasted for all bitcoin-users to see, is it? – Decent Dabbler Apr 12 '13 at 16:53
  • @fireeyedboy I am almost certain that this information isn't available in the block chain. – rogermushroom Apr 12 '13 at 17:00
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    Not everyone in the Bitcoin community cares much about anonymity. However the general rule for cryptographic tools is that they shouldn't force you to reveal information you don't want to. We can all think of cases where there would be a legitimate use of pseudonymity or increased privacy(oppressive regimes, paying confidential informants, and so on), so since the problem exists technology might as well have a crack at solving it. As Loourr notes Bitcoin itself doesn't really provide anonymity. However Zerocoin, a recently proposed inclusion in the protocol, might. – eMansipater Apr 12 '13 at 18:35

I guess one of the problems with traceability is the creation of wallets and addresses. To trace transactions by entities you would need to verify the wallet owners and this would require some central authority to decide whether the entity was indeed real or just someone who has created a second wallet for the purpose of funneling money into a second non-taxed account.

It could be possible to put inplace some lame non-central verification system but buy declaring anonymity it doesn't give the illusion of something that could be regulated.

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