In a world under constant surveillance, privacy coins may offer a way out

Big business is watching.
Big business is watching.
Image: Reuters/Jose Luis Gonzalez
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Ten years ago, there was a $5,000 bounty on the head of Evan Ratliff. Ratliff, then a journalist for Wired, had accepted a challenge: to vanish and reinvent himself under a pseudonym over the course of a month. (The exact dates were Aug. 15 to Sept. 15, 2009.) Ratliff’s editor was left with his social media profiles and banking information. Clues from these were gradually released so anybody could try their luck at tracking down the writer and winning the prize money.

The account of the decade-old, nationwide manhunt is worth revisiting, and inspires readers to muse about how they would carry out their own vanishing acts. To avoid detection, Ratliff changed his appearance and covertly traveled from city to city, but one of the most illuminating aspects of his experience was just how vulnerable he was made by his ordinary financial transactions. To conceal his location, Ratliff abandoned his regular credit or debit cards, which would’ve instantly tipped off his whereabouts, and instead relied on a combination of gift cards and cash.

We are never more connected to the information grid than we engage in digital commerce and it is alarming to realize just how easy it is to be followed, and how much information we expose, through our day-to-day purchases. Our routines are predictable and revealing, and they make us pawns for targeted advertising.

Although cash and gift cards allow a person to get by at a bare minimum, they’re obviously dangerous to carry in large quantities. They also restrict the types of transactions that a person can conduct to business done in person or with merchants who rely on certain credit card networks. The tools for protecting—or hiding—one’s identity in financial transactions have evolved, but maybe not as much as we might hope.

In a world where data breaches have become the norm, and Facebook, Google, Amazon, and Apple track our every transaction and interaction, it’s fair to wonder whether we have any privacy at all. Financial privacy—the ability to buy and sell in anonymity—is particularly difficult to achieve. But just because privacy is difficult to maintain, that doesn’t mean we should give up on it—or hand it over so readily. That’s where cryptocurrencies come in.

One of the most compelling uses of cryptocurrencies today is for preserving financial privacy online. I’m not talking about bitcoin, though. One of the great ironies of bitcoin being called a “cryptocurrency” is that while the name implies secrecy, it’s not actually private. Indeed, every transaction is broadcast to, and recorded by, the entire bitcoin network by design. (The term cryptocurrency simply derives from the encryption technique used to secure bitcoin transactions). In November, at the ethereum developers conference in Prague, Ian Miers, a co-founder of Zcash, laughingly compared bitcoin to “Twitter for your bank account.”

Instead of bitcoin, a subset of cryptocurrencies called “privacy coins” have drawn attention from potential users—and authorities—because they facilitate online transactions that try to keep senders, recipients, and even the amounts swapped private. Privacy coins, though, have flown under the radar (perhaps appropriately) because the majority of attention from mainstream media has focused on cryptocurrencies as speculative investments, with bitcoin leading the charge.

While skeptics rightfully question the value of most cryptocurrencies, privacy coins are one of the few categories of crypto that has a clear purpose—even though their safeguards must be made more robust to fully guarantee anonymity. The day-to-day price movements of these coins—which include Monero, Grin, and Zcash—don’t matter as much as their purpose: They are designed for people who must (for whatever reason) keep their financial activities secret. This isn’t necessarily about criminal activity. It’s also for people who are marginalized by the conventional financial system and people who live in politically dangerous zones. Sometimes, in developed societies, we forget that not everyone has the same luxuries or political freedoms.

Privacy is a haven that can enable self-expression, experimentation, and honesty. But today we’ve become so numb to surveillance capitalism that we regard those who seek privacy with suspicion rather than recognizing its value.

And while not everyone is confident that cryptocurrencies will become a significant portion of the future financial system, it’s probably still wise to design them with that possibility—and privacy—in mind. At a minimum, they might present an alternative to the continued abuse wrought by various corporations. Privacy-enhancing technologies might also reduce the frequency of catastrophic hacks, like those that happened to Target and Equifax.

“At least one of these [cryptocurrencies] is going to be the future of payments,” Miers declared. “It’s going to take a while, but at some point, when this happens, we’re going to realize that it’s a major privacy problem. If we wait until then to actually address it, it will be far too late.”

So whether you’re a casual observer of the cryptocurrency ecosystem or a privacy-conscious citizen, don’t lose faith. The troves of information kept by financial giants and retailers could give way to tighter identity protections for digital cash flows. It may take decades for that change to occur, especially in countries that lack strong data protection standards. But until digital money—government-backed or not—respects consumer privacy, consumers will start looking for alternatives that prioritize their interests.