Edward Snowden | "The Future of Crypto Is Not What It Seems"
Summary
TLDRThe speaker discusses the privacy issues in Bitcoin and Ethereum, highlighting the challenges of tracking transactions due to their public ledgers. They mention the use of mixing services and Tor for privacy, but acknowledge that average users lack this awareness. The script emphasizes the need for privacy features to be integrated into protocols, like in Monero and Zcash, to protect users effortlessly. It also touches on the importance of movement between blockchains without high costs and the need for users to be able to choose properties that suit their needs, advocating for a mature ecosystem that allows for informed decision-making.
Takeaways
- π Privacy Concerns: The speaker highlights that Bitcoin and Ethereum have significant privacy issues, with Ethereum's account-based model leading to more traceable transaction histories.
- π΅οΈββοΈ NSA Tracking: The speaker, with experience from the NSA, suggests that tracking Bitcoin transactions was straightforward, implying a lack of robust privacy protections in early blockchain technologies.
- π‘οΈ Privacy Measures: The use of Tor, mixing services, and other privacy-enhancing techniques was necessary to protect against sophisticated tracking by entities like the NSA.
- π Transaction Analysis: Chain analysis tools can trace transaction flows and identify patterns, making it easier to de-anonymize users in Bitcoin and Ethereum networks.
- π‘ Technical Solutions: The speaker mentions CoinJoin and mixers as potential solutions to improve privacy but notes that they are too complex for the average user.
- π Network Effects: The success of cryptocurrencies is heavily influenced by network effects, making it difficult for privacy-focused coins to gain traction despite their advantages.
- π Cross-Chain Movement: The speaker advocates for the ability to move assets between different blockchains, emphasizing the importance of user choice and portability.
- π Centralization Risks: The focus on speed and scalability in blockchain development can lead to compromises in decentralization, as seen with Ethereum's recent challenges.
- ποΈ Decentralized Finance (DeFi): The speaker sees potential in DeFi, particularly with decentralized stablecoins like Dai, for their resilience and ability to maintain value.
- π User Autonomy: There is a call for greater user understanding and autonomy in choosing the right blockchain properties for their needs, without being misled by superficial features.
- π§ Immaturity of the Space: The cryptocurrency and blockchain space is still in its early stages, with much of the infrastructure and user education yet to be fully developed.
Q & A
Why is Bitcoin considered to have poor privacy compared to other cryptocurrencies?
-Bitcoin is considered to have poor privacy because it uses an address-based model which allows for a history of transactions to be traced. This creates a 'history cruft' that can be followed by chain explorers, making it easier to analyze and track the flow of funds.
How does Ethereum's accounts-based model affect its privacy?
-Ethereum's accounts-based model can also lead to poor privacy since many users only use one account, making it similar to reusing the same wallet in Bitcoin and leaving a traceable transaction history.
What are some of the tools or methods mentioned that can be used to enhance Bitcoin's privacy?
-The speaker mentions using Tor, mixing services, and CoinJoin transactions as methods to enhance Bitcoin's privacy. These methods can help to obfuscate the transaction trail and buy time against potential tracking.
What is the significance of the network effect in the adoption of privacy coins?
-The network effect plays a significant role in the adoption of privacy coins because it determines their use, acceptance, and traction in the market. Despite being technically superior in terms of privacy, privacy coins struggle to gain adoption due to the established networks of non-private competitors.
Why did the speaker use Bitcoin to rent servers for communicating with journalists?
-The speaker used Bitcoin for renting servers to communicate with journalists because it allowed for anonymous and secure communication. Despite Bitcoin's privacy limitations, the speaker employed additional privacy-enhancing techniques like Tor and mixing services to mitigate the risks.
What is the importance of having privacy features built into the protocol itself?
-Privacy features built into the protocol ensure that privacy protection is a fundamental part of the transaction process, making it effortless for users to maintain their privacy without needing to understand the technical details or take additional steps.
How does the use of Monero and Zcash compare in terms of privacy?
-Monero and Zcash are both privacy-focused cryptocurrencies. Monero is praised for its strong privacy features, while Zcash has made strides in making shielded transactions more accessible through mobile clients, although not all users take advantage of these privacy features.
What is the 'trilemma' referred to in the script, and why is it important for users to understand it?
-The 'trilemma' refers to the trade-offs between decentralization, scalability, and security in blockchain networks. It is important for users to understand these trade-offs so they can make informed decisions about which properties are most valuable to them and choose the cryptocurrencies that best meet their needs.
What is the role of bridges in enabling movement between different blockchain networks?
-Bridges facilitate the transfer of assets between different blockchain networks, allowing for greater interoperability and user choice. They enable users to move their assets to networks that offer the properties they value most, such as privacy, scalability, or security.
What are the challenges faced by Ethereum in terms of privacy and decentralization as mentioned in the script?
-Ethereum faces challenges in maintaining privacy and decentralization, particularly with the introduction of proof-of-stake and the issues surrounding the OFAC compliance. The script mentions the risk of Ethereum's focus on speed, scalability, and efficiency potentially compromising decentralization.
Why is the concept of portability between different blockchain networks important?
-Portability is important because it allows users to move their assets freely between different networks based on their needs at any given time. This freedom supports user choice and the ability to leverage the unique features of different networks without incurring high transaction costs.
Outlines
π Privacy Concerns in Cryptocurrency Transactions
The speaker discusses the privacy issues inherent in Bitcoin and Ethereum transactions. They mention that while Bitcoin's addressed-based model provides some privacy, the reuse of addresses and the lack of contract-based activity make it easier to track transactions compared to Ethereum's account-based model, which leads to a more visible transaction history. The speaker also talks about the use of Tor and mixing services to enhance privacy, and the inadequacy of current privacy solutions for the average user. They advocate for privacy features to be built into the protocol, like in Monero and Zcash, to ensure effortless and inherent privacy in transactions.
π The Importance of Chain Interoperability and Decentralization
This paragraph delves into the importance of interoperability between different blockchains and the risks of prioritizing speed and scalability over decentralization, as seen in Ethereum's recent developments. The speaker expresses concern over the centralizing effects of focusing too much on efficiency and the need for a diverse ecosystem where users can choose coins based on their desired properties. They discuss the concept of 'portability' of assets across chains without significant transaction costs and the current lack of user understanding in making informed decisions about blockchain properties. The speaker also emphasizes the need for a mature infrastructure that supports user autonomy in navigating the blockchain space.
Mindmap
Keywords
π‘Privacy
π‘Ethereum
π‘Accounts-based model
π‘Address-based model
π‘Smart contracts
π‘Chain explorers
π‘Mixing Services
π‘CoinJoin
π‘Monero
π‘Zcash
π‘Network effect
Highlights
Bitcoin and Ethereum are criticized for their lack of privacy due to their transaction tracking features.
Ethereum's accounts-based model versus Bitcoin's address-based model contributes to privacy issues.
The use of a single account in Ethereum leads to a history of transactions that can be easily traced.
Smart contract interactions on Ethereum are visible and can be problematic for privacy.
Bitcoin's privacy issues are less severe due to fewer contract-based activities.
Transaction tracking tools can trace Bitcoin transactions back to KYC gateways.
The speaker used Bitcoin and Tor for secure communication with journalists, employing mixing services to buy time against tracking.
Average Bitcoin users lack awareness of how their transactions can be traced and recorded.
Techniques like CoinJoin transactions are mentioned as potential improvements for Bitcoin privacy.
The importance of having privacy features built into the protocol is emphasized, like HTTPS for web browsing.
Monero and Zcash are praised for their privacy features, despite some community and design flaws.
The need for privacy in transactions to be effortless and protocol-level is highlighted.
The focus on speed and scalability in blockchain development is critiqued for potentially neglecting privacy and decentralization.
Privacy coins are considered superior to non-private coins in many aspects but struggle due to network effects.
Ethereum's interaction and off-chain activities through bridges are noted as significant but also risky for privacy.
The importance of movement between chains for user choice and portability of assets is discussed.
The concept of a trilemma in blockchain, where users must choose between properties like speed, privacy, and decentralization, is introduced.
The immaturity of the blockchain space and the need for infrastructure to support user decisions is pointed out.
The challenges faced by Ethereum with proof of stake and OFAC compliance are mentioned, calling for solutions.
Transcripts
the challenge here is everybody knows
who you know is technically involved in
this that Bitcoin is uh really bad on
privacy I think the only people who do
it worse actually are ethereum
um and that's because they use the
accounts-based model as opposed to the
addressed based model but a lot of
people only use like one account so they
see it's like as if you were using
Bitcoin you were just reusing the same
wallet you get this giant history cruft
that just follows you wherever and you
create all these chain explorers and
then people see you know every smart
contract you've interacted with uh on
ethereum and it's just it's it's
problematic Bitcoin suffers from the
same thing but at least uh largely
because there's not as much
contract-based activity on bitcoin
um they they only see you know uh
address a sends to address B and so on
they follow it out they chart it they
see where it splits on the chain and
then they try to go uh where it goes
back to a common node or they track
spans or they go where it goes through
kyc gateways and you know they find out
it
with the tools that I had at the NSA uh
in like 2013 uh tracking Bitcoin
transactions would have been very very
uh easy and this is why even though I
used Bitcoin
um to rent the servers that I use for
communicating with journalists and
passing you know massive archive files
over the Internet anonymously I was
using Tor I was using uh sort of mixing
Services I was trying to basically do
anything that would buy time it wasn't
that I thought the NSA wouldn't be able
to follow the trade it was that you know
I'd have to go to this guy and then I'd
get crowded over to the office and then
they wait on it because they had other
things to do and it wasn't until there
would be a sustained effort that they
would be able to do this and by then I
would have always already contacted the
journalists so the door would be closed
um normal Bitcoin users don't have that
level of awareness they don't understand
the network flows they don't understand
simply your IP address uh is sending you
know this transaction to this node that
then passes it on all of that leaves a
history that is largely being recorded
there are ways on bitcoin that they can
improve This and like coin join
transactions and the whole joint Market
thing which are great but they're way
too technical for average people we see
some wallet providers who are trying to
like build in their own mixers and like
that that's great it's an improvement
but it's it's really not enough you have
to have this stuff in the protocol it
has to happen on chain and that's where
you see things like yeah Monero is is
great I I use Monero right people think
like a super Monera hater and no it's
they've got a couple super toxic people
in their community and there were some
bad design decisions like a million
years ago and it's not perfect right but
what is zcash has its own flaws too
um and then Z cash you know it's also
great but you know for a lot of people
they're not using the shield of
transactions or at least they weren't
using the shield and transactions now
it's getting easier they've got mobile
clients that will actually you'll do a
transparent transaction that'll roll you
over to a shielded transaction
automatically and these things are great
this is what we need though we need
people to be able to transact on chain
at any time and effortlessly without
their awareness the same way that when
you connect to you know gmail through a
web browser it's using https
you should have levels of privacy
protection baked into the protocol and
this prevents the kind of Tom Foley that
we see the US government beginning to
engage in with things the whole fact and
tornado cash and my reflex here is that
everybody gets excited about sort of
speed and scalability and what is so
remarkable uh
about how Bitcoin succeeded in the way
they're the reason uh that it changed
the world is because that wasn't really
the focus it was a factor it was an
interest but they went let's make this
work uh let's make it powerful let's
make it uh Unstoppable and then we can
worry about the sort of the scaling the
speed and everything else later
um now so she wasn't trying to uh
attract a VC Capital right he wasn't
worried about uh where she wasn't
worried about the competition
but
when we look at it today we have these
networks and we see things like I think
the Privacy coins are a great example of
this uh they are really strictly better
um than uh non-private competitors in a
lot of ways but the network effect
determines so much in terms of use in
terms of adoption in terms of acceptance
that is really difficult for them to get
traction
uh one of the things that is very so
interesting to me about ethereum
um is the fact that it has so much
interaction it has so many frost chain
uh activity through Bridges and whatever
um
Bitcoin we really don't have very much
with that except as the conclusions to
sort of enable everything else because
it wasn't really supportive of the
protocol layer
um we seem more interest in it but I
think the idea that we need to accept
uh and unfortunately ethereum is really
calling this into jeopardy with this
whole of fact thing because it shows uh
the flaw of going well let's focus on
speed scalability efficiency and let's
put sort of decentralization to the
Wayside
um
we need movement between chains right
there's like the Bitcoin maximalist
mindset where it's like one coin to rule
them all uh
and we're going to end up there
if the other chains frankly don't get
their together like with ethereum
uh but that's not the world we want we
want we want people to be able to choose
the properties that are most efficient
and interesting and valuable to them
maybe you store
uh your savings in a coin that's a
strictly good store of value right and
I'm talking about uh like tether or
stable coins I I think the centralized
stable coins are great crap uh I'm very
interested in like the maker Dow Dai
thing not the maker token but the dnai
part of it it's phenomenal the fact that
it still works is remarkable the fact
that it still holds its Peg it's
remarkable uh just so there's some over
collateralized uh algorithm schemes
uh but then when you want to uh sort of
make it more private you move it through
whether it's tornado cash like thing
that's on chain right if that's
supported there but imagine it's able to
freely move to another chain uh we see
something now like the ren bridge that
allows you to move from ethereum into
like renzeca and then you've got your Z
cash there and then maybe later on you
move back into Bitcoin because you want
to spend there or to speculate or or
whatever you just trust this one more to
hold its value there's some feature of
the chain there that's interesting to
you and then you move it somewhere else
there should be a portability here
that's not costing you like two percent
on every transaction where you know we
have all these D5 people that are just
trying to this extract rents from the
ecosystem
uh but we want people to be able to
answer that trilemma for themselves uh
right now very few people are qualified
to do that because they don't understand
the implications of movement between
these changes they don't understand the
values and the properties between it
they just say stupid dog Avatar and a
coin that comes out of Elon musk's
account and then they're like yeah write
me down for that one
um
and that's a problem but as the space
matures as P these uh
sort of networks become more
sophisticated people should be trusted
to make their own decisions on these
kind of things and we should enable that
there should be coins that are better in
certain parts of this uh trilemma than
others and that's okay right maybe we
have a transactional layer where it's
super fast and it's got great scale but
it's got terrible properties for
everything else it's super centralized
but it doesn't really matter because you
never keep anything on that chain you
only basically rinse through it to spend
it could happen transparently nobody's
even where it's there but the
infrastructure has to exist people have
to build it like there has to be space
yeah and that that's where we still see
the great immaturity of the space
everything is an experiment and the
people who are doing really well with
precisely this kind of thing I like the
ethereum guys I I really like again that
they've done this proof of stake thing
uh but it's incomplete we don't have the
end now we're being confronted with the
problems of it and they really need an
answer for this and right now there's
been no response to the ofac compliant
compliance disease that's you know
eating into their blocks and we needed a
solution to that
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