From the Particl Project: In this day and age, is Bitcoin really the end-all-be-all solution to financial tyranny and spying? We explore a nuanced approach!
Often considered the most important technological breakthrough since the internet, Bitcoin gave us the ability to gain full control over our money and financial transactions, across all borders and with no need for third-parties or centralized authorities. It promised us, the people, a level of financial and economic freedom truly never seen before.
But is Bitcoin really enough, and can it survive the onslaught of government regulations and control coming its way? The answer is nuanced and more complex than most like to admit.
The Worrying Reality of Financial Spying
As we've seen in previous Particl stories (1, 2, 3), the web is undergoing a worrying trend of centralization and data consumption abuse. Every day, online services that you use collect more and more data about yourself so that they can be used, shared, and monetized by corporations - generally without your informed consent. That data is disseminated to all sorts of interested parties, going from corporations to governments, all the way to politically motivated groups who would like to use it against you or for their own motives.
It is now common knowledge that governments around the world track our financial life. With collaboration from the banks and payment service companies, many governments can, at any time, request any level of financial information about you. And while a lot of us may not have anything particularly nefarious to hide, it still impacts and involves us in very concrete ways! Let's look at a very recent example illustrating perfectly the risks associated with traceable financial data.
Be Careful How You Partake in Politics - Or You'll Get the Stick
You've probably heard of the "trucker protests" that unfolded earlier this year; started in Canada, these anti-mandate, anti-lockdown protests subsequently inspired other similar convoys in other countries. This protest turned into a big political arm-wrestling match, with both sides of the political spectrum framing them either as a prime example of peaceful demonstration or as an irresponsible demonstration of carelessness sometimes nearing terrorism.
And as any major political and partisan event these days unfolds, the internet lit up and both sides mobilized to try and ridicule or destroy the other side.
Mobilizing many individuals for such an extended period of time takes funds, and those funds typically come in the form of donations. Thousands of people all around the world donated to the trucker movement, only for GoFundMe to block the fundraising and threaten to redirect the funds to charities of their choosing (which, under pressure, they opted against in favor of reimbursing people). In response, pro-convoy members of the public started using a little known yet more open donation service: GiveSendGo.
GiveSendGo advertised itself as a free (as in freedom) donation service that would support the movement and not interfere with the donations. But it wasn’t to be: a few days after donations started to flock in, the website was exploited and hacked, which led to the "doxing" of thousands of donors. Their names, email addresses, ZIP codes, and IP addresses were made public. The horror! And in such a politically charged climate, one can imagine the potential impact such a leak could have on the private lives of people who donated to the trucker convoy.
No matter one's political opinion on this two-fold example, truth is that the issue it highlights is relevant to almost any heated topic, be it political or not. Financial privacy is of utmost importance in a day and age where data can be weaponized.
This tells us is that the web sorely needs to improve on two things when it comes to digital payments. One, there is a need for payments to go truly digital and trustless so that they can't be frozen, reversed, or blocked. And two, there is a clear and broad need for some payments to be accomplished anonymously to protect the personal and financial data of those making transactions.
And then came Bitcoin
Bitcoin, the father of cryptocurrencies, offered us half of the solution: a revolutionary method of payment that could not be seized, frozen, reversed, or blocked.
Unfortunately, we’ve seen some very concerning events unfold in just the past few weeks – from Ethereum service provider Infura and Metamask freezing crypto accounts, to the so-called decentralized marketplace OpenSea blocking off users from their assets on the basis on their Russian nationality. This all boils down to cryptocurrency users too often depending on centralized entities.
Bitcoin and cryptocurrencies are still providing all the freedom they set out to provide; but if you use third-party services, you in effect forfeit true ownership of your coins and go back to the old patterns of not owning your money. Pro-tip: Always use non-custodial wallets and be very careful which service you send your coins to!
A question however remains: how did these companies know the identity and nationality of the owners of certain crypto addresses in the first place?
Bitcoin: Often Anything but Anonymous
In a day and age where financial data is worth gold, Bitcoin suffers from a terrible Achille's heel: all transactions are transparent and publicly displayed on an open ledger, and all the financial data of its holders in effect become available information. And that's becoming increasingly worrying as blockchain tracing firms and crypto service providers are now in possession of very invasive and effective technology to trace Bitcoin payments.
To illustrate the sad reality of today's Bitcoin, see it this way. How would you feel walking down the street, with a picture of your bank account and credit card(s) balances stamped on your forehead? Anyone that walks past you and that is curious enough to look up would see exactly how much you own and in which account. They would also be able to see exactly with who you’ve transacted since you opened your accounts. They could see exactly what you bought, what you invested in, how much you donated to whom, a full and precise picture of your revenue and savings, and so on. Clearly, no one in their right mind would do this.
In many cases, this is precisely what Bitcoin does to your financial information now. With all the tracing tech around, combined with the need to KYC yourself to use almost any exchange or service provider, anyone curious enough can simply query the publicly available information, draft a provably accurate and very precise picture of your finances, and know exactly who's financial profile that is.
The array of people that can now know this information extends from governments and banks, to almost any corporation or private individual. A notable "step down" from the traditional financial system when it comes to financial privacy.
A Good Crypto is a Private Crypto
As great as Bitcoin sounds, it is having a hard time realizing its initial vision - even after 14 years of existence - precisely because of those privacy issues. Luckily, it's not the only digital currency around.
We've seen a few cryptocurrencies focus solely on this issue of privacy, making them very good candidates to be considered as true alternatives to cash and as great settlement layers for the web of today and tomorrow.
Amongst them there is Monero, which uses the very solid RingCT privacy protocol, or Firo with its more exotic privacy setup. We also have Zcash, a very well-known privacy coin - and many others. Each of them presents a different twist to the angle of privacy and comes with different codebases, strengths, and limitations.
But privacy generally comes with concessions in flexibility. While the examples mentioned above are great alternatives to Bitcoin because of the privacy they provide, their use-case is pretty much limited to person-to-person currency transactions. And although they accomplish their purpose well, a lot of potentials is left unexploited, especially as we've seen, in recent years, the advent of "dapps" (distributed applications) and of Web3, a new "take" on the web that promises data ownership and to do away with centralized parties.
Because of the limitations of privacy coins, they, unfortunately, cannot be used in any Dapp or be an important part of Web3. And in reality, all the promises of Web3 are more or less moot if its settlement layer is not private. They will fall prey to the same issues mentioned earlier in this article - whether it is Web2 or Web3.
A Modern Privacy Coin Fills That Gap
That is what motivated us to build PART. It is a modern privacy coin that uses the most battle-tested codebase, Bitcoin, and the most battle-tested privacy protocol, RingCT (the same privacy protocol used by Monero). But unlike other privacy coins, PART is built with flexibility in mind, so that it can be used in Dapps and on Web3. Case in point: PART is currently the default settlement layer of Particl Marketplace, a decentralized and private eBay-like marketplace, where one can buy and sell anything without fees, middlemen, or restrictions.
By leveraging the flexible Bitcoin codebase and adding to it solid privacy technologies, PART succeeds in fixing Bitcoin's biggest problem of financial spying, all the while being available for use as settlement for this new wave of Web3 applications. It’s basically getting the cake and eating it too.
And to add more merit to it, we've designed it in a way to be fully compatible with the Lightning Network - meaning any scalability or high fee concern that one might have with privacy coins is completely a thing of the past. PART is indeed completely private, almost infinitely scalable, and near-free to transact.
With PART, we intend to give you full absolute control over your money in a way that's safe and future-proof. We are excited to move forward and keep on innovating within the Web3 space with tech that keeps you and your information safe from prying eyes.