Understanding Crypto (Part 1) - Is cash still the best anonymous currency!? Bitcoin privacy issues

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Digital currencies have changed the world since the Bitcoin boom began in 2017 - 2018. Despite criticisms and concerns - “How long with they last?” - new innovations are appearing every day in the cryptocurrency and blockchain world.

SIJIHIVE has received many requests for translation and content creation projects related to digital currencies, and in this article, we will share some information regarding cryptocurrencies.

Currently, the best known virtual currency is Bitcoin (BTC), where all transactions are recorded on the blockchain and are protected from tampering.

One of the best things about Bitcoin is the ability to trace and verify the transaction details after the fact.

On the other hand, a real problem with Bitcoin may be privacy.

For anyone who has conducted a bitcoin transaction at least once, your information will no longer be private. All the parties involved will know all the details of the transaction history, including the bitcoin balance.

How to protect Bitcoin transaction privacy (1)

To protect the privacy of a Bitcoin transaction, one method is to turn it into an “anonymous currency” (anonymous cryptocurrency) which will make the transaction anonymous.

Well-known anonymous currencies include DASH, Monero, and Zcash.

However, there are people and organizations that use anonymous currencies to hide illegal activities such as drugs, weapons, tax evasion, and money laundering, all beyond the scope of a need for privacy.

Therefore, the use of anonymous currencies is currently not allowed on the Japanese digital currency exchanges under the guidance of the Financial Services Agency.

How to protect Bitcoin transaction privacy (2)

Another option is a service called Bitcoin Mixer.

This service anonymizes transactions by pooling Bitcoins in one place and mixing the collected coins.

With this service, you can protect your transaction privacy; however, there is a risk that the Bitcoins will be stolen by the mixing company.

Is cash the best anonymous currency?

Cash has almost zero traceability.

As it is impossible to track unless you have recorded its serial numbers, cash is often considered the best anonymous currency.

However, when dealing with large amounts of money, carrying or transporting that much cash can be difficult.

The function of money

Let us consider how money works.

Money has two functions: 1) a means of payment and 2) a means of storing value.

Cash is best for privacy protection at the time of payment but has major drawbacks for value storage because it is vulnerable to inflation and a weaker local currency.

Given the current monetary policy of Japan, which was originally aimed at controlling inflation, and the sharp decline in Japan’s national economy, it is highly likely that the Japanese yen will depreciate sharply in the future.

It is quite possible, looking at historical trends, that a 10,000-yen bill stored in a safe will become nothing but paper waste.

Another disadvantage of cash is that it is difficult to use older bills after new ones have been issued. If you try to use a large amount of old bills that have been stored in a safe for a long time, the police may come knocking on your door.

A third option

A common rival of cash and cryptocurrencies is gold.

It is normally not used in stores, but it is easy to convert into money.

There are often no transaction records.

Gold does not become obsolete like some paper currencies.

For many people (and myself too), gold is the best anonymous currency. An indication of this are the many overseas Chinese people keep their wealth in gold.

Optimize your portfolio

Cash, cryptocurrencies, and gold each have their own strengths and weaknesses.

One suggestion is to hold some of all three in a well-balanced manner which provides:

✅Daily convenience

✅Privacy protection

✅Long-term storage value

This is the secret to meeting your money needs at the same time.

Next time, we will discuss how to determine the optimal portfolio.

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Author Profile

Takayoshi Kimoto

Born in 1973. Graduated from Keio University, Faculty of Commerce, and Nagoya University of Commerce Graduate School of Management (MBA). Kimoto operates a consulting company supporting overseas expansion in Thailand. Currently invested in Bitcoin, Kimoto has experience with Altcoins and is also skilled at Forex.