Re: Will blockchain survive the crackdown on mixers and anonymization?
It would appear, based on the news this week, that major world governments like the US and others are cracking down on the notion of "government-proof privacy", and prosecuting companies and individuals who facilitate money transfer that cannot be potentially traced by a government. They are going after mixers and brokers who do not adequately engage in KYC.
In short, it would seem that governments are trying eliminate the very thing that Bitcoin--and blockchain generally--was originally designed to accomplish.
What does this mean for the long term prospects for cryptocurrencies? Will blockchain survive losing it's original purpose?
My own answer is: "yes", in the short term, and "maybe" for the longer term.
I have written before about different kinds of "privacy" that people might want, and most want privacy from other citizens, from companies, and from criminals: privacy from a targeted investigation from the government is a level that, in my estimation, a "nice to have" for most people, but not a dealbreaker.
Hence in the short term, cryptos missing their original purpose is not something most consumers care about. Most holders of Bitcoin these days do so in a centralized way, e.g. with an app or a broker that keeps their account under their name, in a centralized database.
As for the longer term, this brings up an important question: why use blockchain at all?
Blockchain is slow and expensive to transact in on purpose because of proof-of-work and decentralization. No cryptocurrency will ever come even close to scaling to the billions of transactions each day by people worldwide.
But a digital currency that is not blockchain-based can accomplish this and provide the same mechanism for speculation and value store that blockchain-based currencies provide. In my opinion, the long-term future of the actual blockchain architecture behind today's cryptocurrencies is... unclear.
In short, it would seem that governments are trying eliminate the very thing that Bitcoin--and blockchain generally--was originally designed to accomplish.
What does this mean for the long term prospects for cryptocurrencies? Will blockchain survive losing it's original purpose?
My own answer is: "yes", in the short term, and "maybe" for the longer term.
I have written before about different kinds of "privacy" that people might want, and most want privacy from other citizens, from companies, and from criminals: privacy from a targeted investigation from the government is a level that, in my estimation, a "nice to have" for most people, but not a dealbreaker.
Hence in the short term, cryptos missing their original purpose is not something most consumers care about. Most holders of Bitcoin these days do so in a centralized way, e.g. with an app or a broker that keeps their account under their name, in a centralized database.
As for the longer term, this brings up an important question: why use blockchain at all?
Blockchain is slow and expensive to transact in on purpose because of proof-of-work and decentralization. No cryptocurrency will ever come even close to scaling to the billions of transactions each day by people worldwide.
But a digital currency that is not blockchain-based can accomplish this and provide the same mechanism for speculation and value store that blockchain-based currencies provide. In my opinion, the long-term future of the actual blockchain architecture behind today's cryptocurrencies is... unclear.
Blockchains will survive. But only if they remain decentralized and censorship-resistant. Mixers and privacy/anonymization techniques are completely different things. Governments have only been able to shut down centralized mixers, but they'll never be able to stop decentralized ones. Consider how Tornado.Cash survived despite being sanctioned by the US. These actions are not surprising to me, especially when governments don't want people to achieve true financial freedom and privacy.
It will be a long war between crypto (especially Bitcoin) and mainstream governments. I'd say there's nothing to be worried about. Hopefully, crypto will live alongside Fiat for generations.
