The Anon Paradox: Anonymity Big & Small

Do you want your transactions and financial holdings to be anonymous? The answer most likely depends on the dollar amount.

If it’s the cash in your wallet, or a morning coffee purchase at the local Starbucks, most likely you’d prefer this to be anonymous.

If it’s your savings account, or the purchase of your car or home, then most likely you want this to be in your name — the very opposite of anonymous.

This observation has important implications about how we should think about information privacy.

People value privacy to keep their information safe from three kinds of actors: legal, illegal, and state.

Legal actors include one’s friends, family, associates, neighbors, marketers, and businesses. These are actors who seek your privacy out of curiosity or to profit from it e.g. to sell you things, or to gossip about your activities, or to make a judgement about your character. One typically keeps things private from legal actors because they don’t want to give people a particular impression about themselves (which may be out of context and wrong for instance). This sentiment is captured when one says, “it’s none of your business”.

Illegal actors include criminals in every form who seek to steal your money. Here it’s important to point out that protection from criminals is usually indirect: you don’t want to divulge something to a vendor not because you think they are criminals, but rather you don’t trust them to keep your information safe from criminals.

State actors are the police who work within the bounds of a political system in order to obtain your private data. Keeping your information private from these actors is done in order to escape the reach of the law within whatever dominion one finds oneself in. In mostly free western-style democracies, this typically means what we would call “criminals” e.g. those hiding proceeds from criminal activity, or those seeking to evade their taxes.

So when someone asks, “do you want to keep your stuff private?”, the answer must be prefaced with, “what kind of ‘private’ do you mean?”. There is “private” from legal actors and criminals, and then there’s “private” from your government. Those are two very different things.

Most people don’t have any use for second kind of “privacy”: most people are not criminals or tax evaders. (This is not to make a moral judgement here by using the word, “criminal” because a “criminal” living under a corrupt government is not necessarily immoral). And morality aside, most people don’t want to get on the wrong side of their government for practical reasons e.g. their own personal safety.

With that in mind, we can talk about people’s desire for anonymity for “big” and “small” amounts of money.

For one’s “life savings” (i.e. “big” amounts), most people desire this holding to be kept as safe as possible, and, most importantly, safer than they themselves could possibly keep it e.g. stored by an entity that specializes in storing wealth as a service, such as a bank or financial institution.

Further, when one purchases a “large” item like a house or a car, then people want that purchase to be non-anonymous because they wish for the ownership of that item to be based on their indelible identity and not simply their physical possession of the item, which can be easily lost or stolen. One buys such a major purchase, “in your name” so to speak.

For “small” purchases, most people want the opposite: they would prefer to use an anonymous means of transacting to maintain the “privacy” from legal and illegal actors.

In both of the above cases, there is an exception for criminals who wish to keep their privacy for illegal reasons (again, the caveat above as to what constitutes “illegal” applies).

What This Means for Cryptocurrencies and Digital Currency

Within the context of a mostly-free, mostly-just government, anonymity is desirable for “small” purchases and holdings, and undesirable for “large” purchases and holdings.

Hence, what the world needs is an anonymous means of value exchange and holding for small amounts, whereas that need, paradoxically, reverses itself when the amount becomes larger.

In that context, today’s cryptocurrencies, in terms of their fit for the marketplace, have it exactly backwards: the (decentralized) blockchain architecture necessarily incurs a high cost in terms of time and money, making it unsuitable for small transactions — which is why it is rarely used for such transactions. On the other hand, for “life savings” level holdings, cryptocurrency’s anonymity is usually undesirable and this can be seen in the fact that most investors of cryptocurrencies do so with the use of a centralized institution e.g. a brokerage or app, and they keep their holdings “in their name” instead of by physically holding a private key.

What is needed, therefore, is a digital currency that is suitable for very small transactions and yet keeps these small transactions completely anonymous. This currency does not need to evade government actors and therefore can be centralized, but it does need to evade all other actors unlike a traditional credit card transaction.

This is what we sought to do with the Haypenny system, which is the simplest and most anonymous form of numerically-delineated value transfer ever invented — as long as one defines “anonymous” as keeping one’s privacy safe from legal and illegal actors and not government actors.

Haypenny joins businesses like DuckDuckGo and NordVPN who base our whole business around our promise to keep people’s information private — and in the case of Haypenny, we’re so dedicated to personal privacy that we don’t even use cookies with our product. Our product can be used with complete anonymity, so we can’t share information we simply don’t collect.

Most average consumers want privacy for the small things and identity for the big things. That’s the anonymity paradox.