what valid reasons are there for preserving the users identity?
I'll have a go with an example:
Bob hears about Bitcoin from a man in a bar, who sells him ten dollars worth.
Later that day, Bob decides to gamble his Bitcoin on Satoshi Dice and wins big time!
The next day he's in the same bar, and that man sidles up to him, angling for a handout from his big win.
Bob is really creeped out by this - how did this man even know he'd been gambling?
He loses interest in Bitcoin and advises his friends to stay away from it.
You could provide this privacy with a centralised mixer like the one at blockchain.info, and they can store logs to keep the feds happy. But if you don't want to sacrifice decentralization, you end up aiming at full anonymity.
Is anybody else starting to feel the anonymity of the *coin clients will ultimately be the demise of them? ...I used to advocate the use of bitcoin due to it's anonymity and lack of control by a overall authority however after the most recent case with Liberty Reserve I can no longer in my right conscious recommend it.
This is a good point, and it's certainly what the politicians will be thinking. I think what we'll see are coin tainting and government mandated blacklist checking. It's just so easy to implement with a public ledger it's inevitable. On
the conference security panel, Peter Vessenes talks like Bitcoin tainting is here already.
When blacklists are commonplace, you can still have your anonymity, you just use a "clean coins only" mixer.