Avoiding financial surveillance on-chain isn’t just a paranoid pursuit. For many, it’s a matter of life and death.

The early adherents of Bitcoin were drawn to the technology because it offered a digitally native monetary alternative that was decentralized, pseudonymous, and a represented a borderless value network.

With that came radical on-chain transparency, a major feature of the blockchain technology that has inspired countless forks, altcoins, and the entire cryptocurrency ecosystem that power them.

Now that Bitcoin is a roughly trillion dollar asset with boundless liquidity used by millions, a cottage industry of chain analysis firms, security consultants, and police forensic accountants have clung to Satoshi’s innovation to weaponize – and profit from – on-chain transparency to de-anonymize Bitcoin transactions. For good and bad.

As Bitcoin achieves adoption beyond the cypherpunks, techno libertarians, and financial gurus to reach ordinary people as a form of money, especially in the developing world, it remains vital to advocate for the tools and techniques of Bitcoin privacy.

But championing privacy in today’s more consumer-focused Bitcoin world is a difficult task. Usually, the cheapest and quickest methods of acquiring and using Bitcoin involve KYC exchanges, wallets, and services tied to our identifies. Peer-to-peer markets and apps are growing, but don’t offer the same liquidity and flexibility hosted by regulated exchanges.

More than the practicalities, many people don’t see a need to apply hygiene to their Bitcoin habits. If I’m not doing anything wrong, they claim, why should I worry? I’ve got nothing to hide!

While that may be true for the vast majority of users, at this moment, this can easily turn on a dime.

We only need to think back to the Canadian Freedom Convoy, when truckers and political activists who received Bitcoin donations became the subject of a draconian emergency law by Trudeau’s government. Those who cashed out BTC at an exchange, where their identifies were known, had their accounts and assets frozen.

In 2022, Coinbase received over 12,000 information requests from law enforcement – most of them from police agencies outside the United States.

Much worse has happened in autocratic governments such as Russia, China, and across the Middle East, where political opposition figures and human rights advocates are routinely criminalized. Information on people who used Bitcoin to donate to the various campaigns of Russian political dissident Alexei Navalny was reportedly divulged by Binance to the Russian government – and we can only guess what happened next.

While most requests from government agencies refer to criminal investigations, there is also every reason to believe that many innocent people are being caught up in the Bitcoin tracing dragnet.

Roman Sterlingov, a Russian-Swedish citizen, is currently on trial in the US for his alleged involvement in the mixing service Bitcoin Fog, a criminal complaint sourced by data from chain analysis firms. The evidence against Sterlingov as a mixing mastermind is incredibly flimsy, and the gatekeeping of the evidence by the prosecution (unlocked only by proprietary software unavailable to the defense) reveals how difficult these cases will be in the future.

While many criminals, attackers, and fraudsters will be rightfully nailed by chain analysis (I see you, SBF), many more innocents end up as collateral damage. “Tainted” coins will become an ordinary consideration, and Bitcoin stacks will increasingly become subjects of interest to judges, prosecutors, and censors working in government bureaus.

These issues and more are precisely why Bitcoin privacy matters for you and those you love.

You may not be a gay rights activist in Iran, a rebellious filmmaker in Turkmenistan, or a democracy advocate in China, but you may frequent political protests, or support charities that people in power want to pursue. Plus, you trade UTXOs with people around the world. We never know where coins will end up, but we know it is intended to be fungible and free as a monetary system.

Using Bitcoin privacy tools such as collaborative transactions, self-custodied wallets with freshly generated addresses with each transaction, payment codes, and even the lightning network will make your Bitcoin experience much safer and more private.

Projects like Whirlpool and BTCPay Server, powered by talented open-source developers, are empowering Bitcoin users and giving us a good blanket of security.

I wrote a guide earlier on this Substack with more practical tips and tricks, and I hope you check it out.

Do you know of any other examples of why Bitcoin privacy matters? Comment below and we’ll discuss on the next episode of the Fix The Money podcast.

Yours,

Yaël

Published on Fix The Money.