Charlie Lee, founder of Litecoin (LTC), appeared at this year’s Proof of Work Summit in Frankfurt, Germany, contrasting Litecoin’s privacy-enhancing features with the almost unavoidable transparency of the Bitcoin (BTC) network.
Lee explained that the unspent transaction outputs (UTXOs) that underpin the Bitcoin ledger contain a record of how transactions were used, potentially ruining the digital asset’s fungibility. Mr. Lee told the audience:
“Because of the history attached to every Bitcoin spent, each Bitcoin is not the same as another Bitcoin. I think that’s important when it comes to money.”
A hypothetical example of this would be an on-chain analytics company that labels Bitcoin addresses believed to be associated with illegal activity. Labels can dissuade investors or traders from accepting BTC associated with that address, lowering the market price of certain coins and SATs.
Moreover, if the Bitcoin in question passes through a centralized exchange or other entity with know-your-customer controls, the assets may be frozen or confiscated upon request by government authorities such as the U.S. Office of Foreign Assets Control (OFAC).
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The fight for privacy has become more vivid.
Privacy on the Bitcoin network is notoriously difficult, but not impossible. On September 20th, a mysterious group of developers announced a privacy-preserving fork of Samourai Wallet.
The Ashigaru open source project uses CoinJoin and other mechanisms to hide Bitcoin transactions and builds on the work of the original Samourai team. However, the new Ashigaru team denied any connection to the previous developer.
Paul Brody, global blockchain leader at EY, recently told Cointelegraph at Token2049 that lack of privacy is hindering blockchain adoption. The executive explained that privacy is important, especially for large organizations that need to keep certain information private.
“We’re excited to tell you how much carbon we can save,” Brody said. “They just don’t want you to be able to see it every week or every day.”
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