The necessity of privacy in currency

Relay Foundation
Sep 3, 2018 · 3 min read

The Relay Stablecoin System token sale public round has begun! Be a part of the private stablecoin for everyday use.

Who has your financial information? Probably more entities than is ideal, but it’s not exactly public knowledge. The specifics change depending on jurisdiction, but as a general rule your finances are known only to those with a valid reason for it, such as banks. This is as it should be — after all, why show anyone who asks how much (or how little) money you have and how you spend it?

Imagine if not only the contents of your financial accounts, but also every transaction detail such as who you transacted with, were entirely public. Further, but every unit of currency ever minted was marked with a very obvious identifier, such that anybody could easily know every single transaction those funds had ever been involved in.

Not all bills are marked, but all Bitcoins are.

Unfortunately, that’s exactly how most cryptocurrencies function. Putting aside the ‘currency’ application for a moment, the underlying innovation of decentralized ledgers is that all members of a network use the same public, decentralized record. While it is possible to hide information, the vast majority of cryptos on the market today, including those used as currencies / mediums of exchange, make this decentralized record fully public.

In the early days of cryptocurrencies, Bitcoin was thought to be anonymous. This was misleading, as Bitcoin and similar cryptos are pseudonymous; that is, records are tied to a separate public identity. When Bitcoin was merely a curiosity used by darknet markets and bleeding-edge tech adopters, this pseudonymity was sufficient because the use cases for Bitcoin transactions almost never intersected with one’s personal identity, nor were there many entities trying to tie a Bitcoin address to a real person.

Hardly anonymous.

Today, money flows in and out of cryptocurrency are managed by regulated fiat gateways with strict KYC/AML rules requiring all transactions to be tied to a real identity. As a result, regulators can trace the cryptocurrency transactions of any user of a non-private network. Were some of your BTC previously used in a fraudulent transaction that the government or financial institutions have just tracked down? With a freeze order to vendors and institutions, that money can no longer be used to pay bills or buy necessities, and any attempt to transfer them out elsewhere will be tracked.

As adoption increases, the intersections between a crypto transaction and personally identifiable information will grow. For example, should a retailer such as Amazon integrate cryptocurrency payments, the trove of data they already have on customers could easily be combined with a cryptocurrency address to build a profile of the user’s activities. As crypto comes to commerce, it is easy to envision any firm with an interest in consumer data (all of them, that is) enhancing their consumer profiling with financial information now available on the blockchain.

Blockchains are a database, and databases are searcahble.

That’s not all. Because no special permissions are needed to access a public ledger, this information is available to anyone who cares to seek it. Blockchain search engines are already under development in which entering a keyword could pull up a list of all associated addresses and transactions. With a public blockchain, Google searches in a few years for a person could pull up their full financial history.

Reliance of public blockchains has severe ramifications for consumer privacy as crypto adoption grows. The need for privacy in cryptocurrency is not mere paranoia— it is a necessity to protect consumers from having closely held data become public domain.

About Relay:

The Relay Stablecoin System is a private cryptocurrency with stable value pegged to the US dollar, secured by a public collateral token. Public round of up to 2000 ETH / 75% of total supply begins September 15.

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The Relay Stablecoin System is a private cryptocurrency with stable value pegged to the US dollar, secured by a public collateral token.

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