Few Words on Decentralization and Anonymous Payments

Something is centralized and something else is decentralized. Such binary thinking is prevalent in the Bitcoin community. Here I’d like to present a scale that describes reality in a better way. Our contenders are: Legacy Banking System, Chaumian E-Cash, Wasabi Wallet, JoinMarket, Bitcoin, and Bitcoin-as-envisaged.

I recall an article that brainstormed on a decentralization scale in the context of payment systems. I am intending to do the same in the context of anonymous payment systems. The article can be summarized with the following depiction:

Chaumian E-Cash

Wasabi Wallet

JoinMarket

Bitcoin vs Bitcoin-as-envisaged

Nuances

In this article I showed you why calling things centralized and decentralized is more often a rhetoric rather than an argument and presented you a more accurate model: a scale of decentralization. In this section I’m going to hopefully convince you that even this scale of decentralization is a wrong model that suffers from a number of nuances that I conveniently skipped through.

  • Could one make a case that data mining payment information from the Bitcoin blockchain is easier than figuring out anything about Chaumian e-cash payments, thus the latter has a more decentralized way of handling payment information? “Chaumian E-Cash Analysis Companies” will never emerge, but “Blockchain Analysis Companies” do have a role to play.
  • The peer discovery of Bitcoin is another rabbit hole I didn’t want to go into.
  • Where would you put on the scale, services like Blockchain.info’s SharedCoin and Samourai Wallet where a central entity learns everything? The payment information is centralized there, so they would have a place behind Wasabi, however in ecash the payment information isn’t centralized, so would you put them behind ecash, too? Or you’d prefer the security aspect of centralization, as in these schemes the security is decentralized compared to ecash.
  • Where would you put Traditional Bitcoin Mixers? They’d obviously be between ecash and legacy banking, because not only the payment information is centralized, but also the security aspect. But do they win the decentralization game against traditional banks?
  • How about Bitcoin exchanges or Bitcoin casinos? Is there any difference between them and Traditional Bitcoin Mixers? Is the fact that the latter does not intend to store bitcoins only tunnel them through their system makes it more decentralized?
  • There’s also a rabbit hole on the information asymmetry of JoinMarket. There the taker of the CoinJoin learns the mapping so in this regard is it less decentralized than Wasabi and ecash? Oh, wait this gets more complex, the takers of JoinMarket are decentralized in the first place, so does learning the mapping even matter?

Conclusion

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