Why is financial privacy important? Unfortunately, currencies like Bitcoin

Question

Why is financial privacy important? Unfortunately, currencies like Bitcoin

do not have privacy embedded in their protocol. All transactions and amounts traded between all parties are publicly visible. This prevents Bitcoin from being fungible and leads to fundamental problems with Bitcoin's viability as a global monetary base. Imagine the following scenario: Bitcoin has become the only currency used in the world. What would be some of the implications of a lack of privacy? 1. Physical security. You are traveling through parts of a country with a medium to high violent crime rate. You need to use of your bitcoin to pay something. If every person you transact with knows exactly how much money you have, this is a threat to your personal physical security. 2. The trade secret. You are a business making a payment to a supplier. That supplier will be able to see how much money your business has, and therefore can guess how price sensitive you are in future negotiations. They can see all the other payments you have received to that Bitcoin address and thus determine what other providers you are dealing with and how much you are paying those providers. They may be able to roughly determine how many clients you have and how much they charge their clients. This is commercially sensitive information that damages your trading position enough to cause you a financial loss. (B) 3. Price discrimination. You are a private citizen paying for goods and services online. You are aware that it is common practice for companies to attempt to use "price discrimination" algorithms to attempt to determine the highest prices at which they can offer future services to you, and you would prefer that others not have the information advantage of knowing How much do you spend and where do you spend it? 4. Contaminated funds. You sell cupcakes and receive bitcoin as payment. Turns out someone who owned that bitcoin before he was involved in criminal activity. You are now concerned that you have become a suspect in a criminal case, because the movement of funds to you is a matter of public record. He is also concerned that certain bitcoins he thought he had will be considered "tainted" and that others will refuse to accept them as payment. How does Monero (XMR) solve this? Monero solves these privacy issues by automatically applying privacy techniques to every transaction. You can be confident that it is not possible to own "tainted" Monero. This is a concept in economics known as "fungibility" and is historically considered an important characteristic for any currency.

#cryptocurrency #english #xmr

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28.01.2022

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yasukuni · Accepted Answer

yasukuni

great explanation!

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28.01.2022

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Why is financial privacy important? Unfortunately, currencies like Bitcoin

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