It has been said numerous times that Bitcoin is not truly anonymous. Almost everyone (except maybe some law enforcers) considers this to be a drawback.
I won’t argue for or against anonymization in terms of privacy in this post. I want to analyze the effect of public transaction history in the bootstrapping of the coin. First I want to point out that total anonymization has been studied and achieved in many other e-cash protocols. The first of them used a cryptographic scheme called blind signatures.
Total anonymization can be summarized as:
- Private transaction source / destination accounts (untraceable bills).
- Private account balances.
- Private transaction amounts.
I found that adding total anonymization to Bitcoin is in fact quite simple (I will elaborate this in another post). But wonder if total anonymization would help bootstrapping a new decentralized coin or prevent it.
Private account balances means that new users joining a coin network may distrust the coin creators, because they cannot be immediately sure if the coin creators have accumulated big amounts of money without going through the mining process. In Bitcoin, transactions are public so every user can easily judge for himself. Also in a total anonymous coin network, users should have to be a lot more careful and validate the underlying cryptography scheme. A hack on the scheme could allow a malicious user to generate coins from thin ear, and go completely unnoticed for years. This is exactly what Bitcoin tries to prevent by design.
Maybe Bitcoin “pseudonymous” should not be regarded as a drawback but a necessary condition to allow a seamless coin bootstrap, and the establishment of a rapid network effect.
I find that Bitcoin is much more a innovative peer-to-peer cash system than a cryptographic currency, because is has no inherent cryptographic innovation regarding anonymization.