Bitcoin’s biggest flaw

Bitcoin’s biggest flaw

I love Bitcoin and there’s no denying that its arrival has changed everything, but I’d be lying to you if I said it’s perfect.  It has some flaws, in this article I’m going to illustrate for you what I consider its main flaw: by default all completed Bitcoin transactions, from the very first one up until the present, are publicly available information since its blockchain is a public “ledger.”

If you read my earlier article you might recall that I had said Bitcoin was private, which is true but only to a certain point.  Once you have someone’s public/receive address for their Bitcoin wallet you can use the blockchain explorer (https://blockexplorer.com) to see the total amount of Bitcoin ever sent to that address, as well as the current available Bitcoin balance, if there is any.

Here’s a real world example of the problem I’m describing.  Currently thepiratebay.org has published this Bitcoin address on their main page so people can send them donations in Bitcoin: 129TQVAroeehD9fZpzK51NdZGQT4TqifbG

Now if you search for that address on https://blockexplorer.com it’ll take you to this page: https://blockexplorer.com/address/129TQVAroeehD9fZpzK51NdZGQT4TqifbG

Now you can see every deposit ever made to that address, its date and time, and same for every withdrawal as well.  So at this moment thepiratebay.org has just over a quarter of a BTC sitting in their donation wallet while just under an even dozen BTC total has been donated to their address.

That’s a pretty obnoxious amount of info to have, isn’t it?  The address itself is nameless, just a bunch of random alpha numeric, but once you know who or what an address belongs to then the public blockchain offers too much information in my opinion. I know I wouldn’t want everyone I send Bitcoin to or receive Bitcoin from (especially as adoption increases and those who you give to and recieve from are from IRL instead of from online) to be able to access any personal financial data with that much accuracy and depth.

Of course being Bitcoin means it (hopefully) isn’t the full story as far as our complete finances go, but it’s still more information than you’d want out there if you’re using Bitcoin on a daily basis.

If you’re aware of the coming of a possible Bitcoin hard-fork and wondering why this article isn’t about that, it’s because even after the hard-fork is over and done with this will still be a significant problem for Bitcoin.

 

If buying a hotdog at a ballgame means the vendor can see your account balance, Bitcoin isn’t going to work for everyone.

Marcus
Marcus has worked for the better part of the past two decades as an IT Systems Administrator. Throughout his life he's been fascinated by finance and hopes the creation of cryptocurrency heralds a new era where banks, governments and centralized institutions lose their strangle-hold upon the citizenry's financial health and welfare.

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