This push toward tainting and increased control is entirely predictable. It is one of the driving forces behind my wishing to have one layer of abstraction sliced horizontally vs. vertically (sidechains vs. treechains.)
A PoliceStateCoin sidechain could have all of the identity and tracking stuff that big brother wants. I would use it day in and day out just as I do Visa, PayPal, etc today. The big difference is that if it could possibly maintain a peg to a free backing store (such as Bitcoin if it remained free) I could have some hope of swaping out of it as needed.
Of course it is true that a totalitarian regime such as the one Mike Hearn and Peter's friend in the mainstream financial system long for, sidecoins could be outlawed on simply the basis of being backed by a free reserve. It would, however, be one more hurdle for the fascists to jump through both legally and operationally. It would also make chain analysis to the individual level highly impractical.
From a system design point of view, a solution involving subordinate chains which can come and go creates a 'whack-a-mole' problem that can evolve quickly to take advantage of niches and adapt readily to threats. The one thing that needs serious focus is keeping the backing store itself as well defended as possible. Even then there is are some significant advantages:
- If the backing store came under attack and was damaged for periods of time, the subordinate chain systems would keep right on functioning in probably a degraded capability form to serve daily needs (depending on implementation.)
- If the backing store completely failed it is likely that it would be replaced by something else with something less than a full loss realized by the subordinate chain users.
Freezing a number of bitcoins and using that freeze to activate a set number of coins on an alternate blockchain isn't enough to solve this problem. Any governing body that passes a tracking and identification law is going to make it broad enough to encompass any and all types of crypto transaction ledgers. Nothing using a blockchain type ledger will be legislation proof.
I think it fair to say that in a totalitarian environment nothing is legislation-proof period. For that reason, and since I feel a significant risk that we'll see such an environment at some point, my favored course at this point is to work toward a system which is as cumbersome to regulate as possible and plan on a (hopefully limited) period of time when various cracks and fissures are able to be exploited in order to remain viable.
To say the truth, one of the biggest hopes I have for distributed crypto-currencies is to provide a tool to help escape from a more global and totalitarian environment that has not yet occurred but which very well could under a range of plausible scenarios. A sober analysis of the world indicates that there is a lot of effort and money working being put toward a scenario that many people visualize as a utopia but I suspect will quickly become a total nightmare for most of us.