Sociological Consequence Of a Public Ledger: Why Monero Matters
Non-Fungible Assets Nullifies A Monetary Pillar Of Sound Economics
One of the integral pillars of a sound economic foundation of a currency is its fungibility aspect. Why is fungibility important for a currency? Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type.
Monero Is The Solution to Bitcoin's Problem
I have a been a moderate advocate for bitcoin since its early days and I further went down the maximalist mindset more towards 2017 during the rise of the ICO era. One other asset I was also heavily leaning for was Monero's XMR. In fact during that same time, I had acquired my first monero. So the following material produced in this article is going to address a single problem rooted at the integrity of bitcoin, and I produce it with a sentiment of helplessness and sorrow because btc created for the first time, a real world solution to the millennium long civilization-making project of empire known as centrally planned banking.
Moreover, I produce the following read with the advantage of having hope for bitcoin and wanting this grass roots project to succeed, so I do not come from an angle of adversarial objective against bitcoin. In essence, I will be more or less speaking from the basis of a liberty-centric maximalist perspective more-so than making a particular coin as the savior of humanity that usually clouds the perspective of maximalists of a particular cryptocurrency.
Privacy Weaknesses Endemic to Bitcoin
The remainder of this read will be dedicated to this very special topic. Of all the attack vectors that bitcoin essentially nullified, there is only one attack vector which time itself is making much more manifest to people that is elevating into a vulnerability. Some may even hold the view that this vulnerability has been understood as a vulnerability with the rise and development of chain analyzing tools and research for some years now. Because of the nature of this vulnerability which is intrinsic to the bitcoin protocol, even the most secure newly built solutions like whirlpool, which are newer iterations to anonymizing identities to the owners of bitcoin are not showing absolute promise.
The problem with the whirlpool protocol, which is bitcoin's most advanced form of adding anonymity, or I would ironically identify as "pseudonymity", back into bitcoin transactions that was the original standard for bitcoin as it once was prior to governmental intelligence communities thwarting the pseudonymous nature of bitcoin with chain analysis tools and techniques, are all the loops people have to jump through in order to initiate an extremely digitally fragile attempt to mitigate the de-anonymizing techniques of threat actors against coin holders.
Anyone can peruse the Samourai wallet documentation, specifically the very section dedicated to privacy considerations, and the entire section reeks of how fragile the infrastructure is to ensure a form of privacy that can break so easily. I'll quote virtually the entire privacy section and the reader reading the information can easily determine how fragile this process is, and how one can easily loose the anonymity layers built into the process with one trivial move. This does not even count all the other limitations involved like insuring the other individual has the same samourai wallet, and that they themselves don't make a mistake as it will also unravel the opsec of other users that dealt directly with that particular user. Lets have a look at the relevant section pertaining to this topic. The entire link is found here
"Toxic Change
Toxic change is just as its name implies, it is toxic to your privacy! The change created during a Tx0 or from post mix spends will be toxic, using this change can link back to those previous UTXOs. Many people have different ways to handle this change, but since it is such a nuanced topic DYOR!
Whirlpool has been designed with extensive privacy enhancing strategies that help make sure you do not undo the privacy gains of Whirlpool when you go to spend your UTXOs.
It is advised that you keep your funds within Whirlpool and directly spend using your Samourai Wallet on an as needed basis. This will allow you to take advantage of our superior coin selection and post mix spending tools, making it very hard to accidentally undo the privacy gains of Whirlpool.
Common Scenario: I want to send my cycled UTXOs to another wallet/cold storage device
If you must transfer your UTXOs to another wallet/device then please follow the guidelines below:
DO NOT:
Spend the entire balance in Whirlpool Postmix to a single address on your wallet/cold storage device. This is known as merging inputs and completely undoes the privacy gains provided by Whirlpool.
DO:
Send less than half of your Whirlpool Postmix balance to your wallet/cold storage device. This is usually enough to trigger a STONEWALL which will provide a strong amount of entropy within the transaction.
If you need to transfer the entire balance then you should do so on a UTXO by UTXO basis. Using the Address Calculator in your Samourai Wallet generate the private keys for each of the PostMix UTXOs that you want to transfer and sweep them with your other wallet/device or using Sentinel. You should ideally sweep each UTXO spaced apart by a random interval of time to avoid time correlation de-anonymization.
Common Scenario: I want to spend my coins at a third party service. Navigate to the PostMix Send Screen in your Samourai Wallet and create a transaction as you normally would. If it is possible your wallet will enable STONEWALL automatically - this will provide you with additional entropy and is considered the minimum requirement for sending from your PostMix balance with minimal privacy loss.
If a STONEWALL cannot be created your wallet will warn you before sending. Please follow the guidelines below if you are unable to activate STONEWALL.
DO NOT:
Ignore the warning. If STONEWALL cannot be activated, it means you are going to degrade your privacy and the privacy of your counterparts involved in the cycle.
DO:
Spend a smaller amount. STONEWALL activates when spending less than half of your available balance. Add more UTXOs to your Whirlpool wallet so that the amount you need to spend is less than half of your available balance. Enlist the help of a friend to create a STONEWALLx2 transaction. This is very much like a normal STONEWALL but you are using a trusted friends UTXOs in addition to your own. This has the added benefit of additional mixing within the spend transaction and you can spend more than half of your available balance.
Common Scenario: I want to spend my coins to another Samourai Wallet user
Sending to another Samourai Wallet user is the same as sending to any bitcoin address and the same privacy rules apply. However, some additional Post Mix spending tools are available only between Samourai Wallet users. An example of this is Stowaway, which is a CoinJoin with a trusted friend that doesn't look like a CoinJoin and masks the true amount spent on the blockchain."
The only positive thing here is that the protocol ensures that it makes it hard for the user to not perform a transaction that would virtually nullify the entire effort performed to anonymize the individual and to de-toxify the coins they have. But to observe such rules to ensure not to break any anonymity, one is severely limited in how they transact. One has to govern the amount, who they send it to, how it is sent,
UTXO's for the unaware is an acronym for "Unspent Transaction Output". The best explanation that was outlined was through a medium post by Rajarshi Maitra which was excellently outlined here
Mind you, this is the Bitcoin community's top privacy solution. Another platform called the wasabi wallet tried to privatize owners of btc holders I believe prior to Samourai wallet, and it simply does not work. Hackers who were able to accrue 1197 btc in total from both stealing of btc and exchanging other coins for btc. The hack happened on the Liquid Exchange, a Japan based cryptocurrency exchange, which was hacked on August 18th. The efforts of blockchain analytics and chain analysis tools, researchers were able to trace where the stolen currency is traveling, even WITH the usage of wasabi's coinjoin's mixing protocol. Of the 1197 bitcoin, 437 btc worth more than 20 million were laundered using the wasabi wallet addresses.
The key takeaway here is that although Wasabi is a non-custodial wallet that doesn’t store users’ funds, it generates addresses for CoinJoin transactions that blockchain analytics tools have learned to identify.
Why is Anonymity Vital to Economic integrity? The Bitfinex Hack
The current "catching" by Federal authorities of the two bitfinex hackers who were able to siphon off 120,000 bitcoin in 2016, which is now currently worth 4.5 billion dollars was the greatest asset retrieval federal authorities ever performed in the entire history of US law enforcement. The actual official documentation can be found here
I won't be getting into the details of this saga. A lot of this was uncovered by a twitter account that was created after the hack under the name of "bitfinex(xed) back in early 2017, which is currently a suspended account. This saga was definitely a major event in the bitcoin realm several years ago. What matters here for this current discussion is HOW they were caught.
Simply put, they were caught because the entire blockchain is a traceable construct. To add insult to injury, because of its traceability, even putting aside the totalitarian construct of KYC policies onto the bitcoin-sphere, authorities have the ability to declare coins as "toxic".
The Ability to Declare a Currency "Toxic" Nullifies Sound Economics
When the Bitfinex hack occurred, authorities were able to taint all 120 thousand bitcoin stolen as "toxic". What this essentially means is that the wallet address that acquired those bitcoin were declared as toxic and any coins being transferred out of that bitcoin wallet and onto other bitcoin wallets are also toxic. What does this mean for fungibility? It means that if someone transacted with those who had these bitcoin in some meaningful legitimate way, like for example, selling a car, then the car seller that would accept their bitcoin in his/her own personal bitcoin address would mean that he/she is likewise doomed with toxic assets, while not even knowing it. The moment he/she sells it for fiat, authorities would seize the individual and the assets.
Mind you, these two that were caught were sufficient developers/hackers that had a considerable knowledge base of hardening their opsec. Well, imho I found major flaws in their opsec that I would have personally done much better. They conducted an elaborate scheme of transactions to such an extent as a means to avoid chain analysis of the blockchain to determine an identity to the stolen bitcoin. They even entered into coinjoin schemes to mask their transactions in order to try to get away scott free, and it failed miserably.
In short, what all of this means is that this particular set of bitcoin is tainted. Toxic in such a way that those particular bitcoin becomes non-fungible. A currency that cannot be used, is essentially useless.
Toxic is connotative to "blacklisted". Thus exchanges can essentially blacklist a person's btc if its historical transactions is tied, in anyway, to the toxic liquid of questionable source, like a hack for instance. In fact, many of the crypto exchanges have declared as toxic, any btc monetary gains if ever acquired by a coinjoin mixer. Let me spell it out in plain english. Let's say you are a business owner owning a coffee shop. You accept bitcoin. Let's say some of these hackers come to your coffee shop to buy your coffee using bitcoin. Well, now your bitcoin address is now forever interlinked with bitcoin associated with coinjoins. Now you become a target and it is quite a task to defend yourself against authorities for why you have questionable bitcoin in your bitcoin wallet.
Let's turn it around on the hackers. If they are smart enough, they know they are hamstrung to spend their btc in your store, for that would be quite simply a stupid transaction to make, as it would mean annihilating their entire opsec without first trying to completely launder their way out of the spotlight to make their bitcoin "untoxic" i.e. fungible i.e. able to spend like a normal person can. I doubt they could pull it off even if they used a more viable option like samourai wallet.
Satoshi's motives were right and sound, but it suffered one flaw. It retained one aspect of the old world. He/she/them (referring to Nakamoto) did either did not have the foresight to anticipate the panopticon of a totalitarian surveillance police state, or simnply failed to actualize the extent of it.
The Bitcoin protocol formatting the protocol to have a "public readable ledger" with the coat of pseudonymity means nothing if blockchain analytics can be deployed as a means to de-pseudonymize the owners of btc thereby putting an identify to the wallet address.
The Sociological Connotations of a Public Ledger
Case in point, the connotation of having a public ledger is that the powers that be, or any centralizing authority, can have the power to declare a particular set of assets as "toxic", which thereby makes it blasklisted and unable to be monetized, hence its non-fungible attribute.
Let us shift away from "hacking" and "stealing". The point of this read is not to defend what may be questionably wrong, it is how can this be used against people using btc in a genuine method? That is thee ultimate question. There is no governing factor that disables the powers that be to stretch how they can implement policies that can blacklist btc or any other crypto asset.
Currently, the depraved Canadian government, the same institution that lead the world in viral weaponization since the WWII, has put a stranglehold on btc and tried to interlink btc users with terrorists. Many other countries globally are following suit. The Canadian government is cracking down currently on the trucker opposition protests happening against the policies politically contrived due to the "opportunity" that covid-19 gave to these tyrants globally. In other words, the politically disabled of the world who were empowered for the first time from the global banking cartel structure have been synonymized with "terrorists".
In one portion of this issue, it is ironic that a banking account is more secure and legally acknowledged as a privacy concern for security, than bitcoin. A 2007 Supreme Court Ruling declared and acknowledged that personal bank records are private. One can read about it here
I'd suggest one reads the entire article which is extremely concise and to the point. It is ironic that a banking account is more secure in terms of privacy from unwarranted operators than bitcoin in which your entire transaction history, the amount you hold, and other metadata divulges everything about your own bitcoin account to anyone in the world.
Mind you, all of these issues discussed above are all outside the boundaries of the absurdity of KYC standards implemented by platforms adopting cryptocurrencies which erode the very basis of what crypto is.
The Fundamental attribute bitcoin came to facilitate to the world was the separation of money from the dominant minority of centralized powers.It came to fix the fraudulent banking system as it currently operates today. If the banking cartel can easily finance the authorities to alter bitcoin into a non-fungible state via the power of blockchain analytics, then this move presents itself as almost a checkmate moment for the future of Bitcoin.
The greatest thing about Monero is that it retains all of the fundamental features of bitcoin and its sound principled philosophical stake towards economic theory, but it does one more thing that bitcoin did not cover. In essence, Monero is the patch to Bitcoin's vulnerability which is "the public ledger".
Bitfinex Aftermath
The "justice" department has created a new "digital currency unit" which can be found here
I get frustrated of people referencing normative survivalist thinking as akin to "tinfoiled-hat" perspectives. This type of behavior assumes that the powers that be operate normally on an altruistic spectrum which is ironic considering every leak of exposure about the operations of these powers are used in a weaponized and exploitative manner. Its as if people are incapable of putting 2 and 2 together.
It is NOT far fetched that much darker corners of the intelligence community may themselves be the ones responsible for these hacks in order to then lend credence for the "official" face of governments to then begin "crackdowns" of cryptocurrency hodlers. Is there proof of this? No. Is this a conspiracy theory? Possibly! Is it far-fetched though? NO. It is absolutely plausible. What is the proof of this plausibility? The very openly revealed history of governments publicly available for consumption to inform themselves thereof. To be fair, this is not proof thereof, but mere indication of it. But again, this requires a mind that is able to put two and two together.
Chain Analysis Can Essentially Break Crypto
Anything that can de-anonymize/de-pseudonymize a user essentially nullifies the attribute of cryptography. Please refer to my previous article here
The key takeaway here applied to this subject is that
Cryptography is the practice and study of techniques for secure communication in the presence of adversarial behavior. More generally, cryptography is about constructing and analyzing protocols that prevent third/unintended parties or the public from reading private messages; various aspects in information security such as data confidentiality, data integrity, authentication, and non-repudiation are central to modern cryptography. What made Bitcoin a “crypto”, “the first crypto” was how it applied the execution of this scientific method towards the world of economics, in a paradigm of the increased massive all-pervasive surveillance state and the all-pervasive dominant minority dictating how money is to be obtained, influenced its interests, value, and even cap on how much people can own of it.
Thus, cryptography applied to currency economics now means that people have an alternative, to freely transact, become enriched, without the scrutiny and governance of MITM (man-in-the-middle) attacks by authorities of any kind that seek to hamper or profit from that transaction (in the way that western union, paypal, or other banking cartel type endeavors always do).
The point being here is, if unintended parties can identify the owner to an address, the cryptography has been broken which puts into question whether a currency can truly be described as a "crypto"!