With all of the recent talk about a cashless society, the question inevitably turns to the role of Bitcoin and other digital currencies. Some people would like to see more anonymity in Bitcoin, especially when considering how going cashless would give banks and governments a complete overview of how consumers spend their funds.
Going Cashless Means No Financial Privacy
Although some people might be in favor of going cashless – who likes those coins and paper bills anyway? – there are a lot of downsides to this concept as well. First and foremost, consumers would completely rely on banks to access their money, which could lead to financial institutions charging fees for even the most basic of tasks.
Secondly, putting banks in full control of our society’s money is the last thing anyone should want. Banks already hold a lot of control over our funds, and they are the very reason the recent financial crisis took place to begin with. If all of our funds is in their control at all times, who will stop them from limiting consumers to spend X amount of money per day? Just look at what happened in Greece, and it becomes clear capital control is not something to look forward to.
But what is perhaps the biggest issue is how financial institutions – and indirectly, the government – would see the pattern of consumer behavior. Cash payments are not registered anywhere in some ledger or database, and banks nor governments have any insights as to what type of products we buy with cash. If these entities would see every expense we make, there is no telling what they could do with that treasure trove of information.
Unfortunately, there are very few options for additional privacy or anonymity for the average consumer. Most of us do not have access to offshore accounts, and we cannot open bank accounts or credit cards on a company name that may or may not exist. Bitcoin seems to offer a valuable alternative, to a cashless society, but it lacks privacy and anonymity traits.
This brings us back to the question of whether or not Bitcoin developers need to come up with more privacy-centric solutions. Transparency of all transactions on the network in real-time is a positive aspect of Bitcoin, but it also scares away potential users of the digital currency. Even though one can’t just point at a wallet address and link an identity to it, that is exactly how Bitcoin works in the mind of everyday consumers.
If we are to evolve into a cashless society, privacy-centric features in Bitcoin are a necessity. Not just for the people who have been using this digital currency for quite some time now, but especially for those who haven’t yet. Bitcoin has no centralized authority – such as a bank or government – to harvest data, but that does not mean users should not have the right to make certain information private.
Source: The Atlantic
Header image courtesy of Shutterstock