Intrusive surveillance is someone's full time job.
A short article that highlights the growing divide between custodial "bitcoin" and self-custody bitcoin. Capturing your information by selling the idea of Bitcoin without delivering the financial freedom or censorship resistance.
For every person building privacy solutions in Bitcoin there is at least one person, likely ten people building anti-privacy problems. Privacy invasion is a growing industry and now that more companies like PayPal are jumping on the boot-licking, pro-censorship, compliance bandwagon; the demand for "push-button" privacy-invading solutions is real and so is the competition to uncover every little detail of your life that can be captured by the devices, networks, and systems you interact with.
Let's dispense with the pleasantries here, look around you, take a good long look around you at the Bitcoin industry, the services you have within your reach, the projects being spun up, the patents getting filed, the "influencers", the people behind the biggest companies in the ecosystem. They're wolves, every single one of them. The CoinBases, Abras, CashApps, and PayPals, they are all wolves. And you are literally a piece of fresh meat being waved in front of their slobbering jowls. Behind the wolves lie bigger, hungrier wolves, laying in wait for the opportune moment to consume the smaller wolves. These bigger wolves are the Wells Fargo's, JP Morgan's, & BarClay's of the world. The only thing holding the slaughter back is the Federal government's regulations. It is taking the Federal government some time to dial everything in and comb through the details, to set the stage as it were, but the slaughter is coming.
FinCEN, FATF, all their counterparts, and the central banks around the world have the big wolves wrapped around their little finger. They all know there is an ocean of money to be made and the governing agencies will let the corporations drink their fill, they just want to be sure that not a single person has the slightest bit of privacy once they open the flood gates. The governing agencies want to have insight into every single cent that ever changes hands. They will work on eradicating the cash, meanwhile the corporations are tripping over themselves to develop the patents, figure out the best KYC algorithms, and dial in the surveillance systems.
You and your privacy are being sold at a meat market right now, you are nothing more than a fresh steak getting thrown to the wolves. Take yourself off the menu, stop using KYC services.
The governing regulators will open the flood gates for the corporations to take full advantage of the Bitcoin ecosystem, they just want to be sure the corporations are providing all of your personal details in return and using "bitcoin" in a "safe" way. The corporations are totally fine with this agreement because of all they have to gain. These companies have put the government's best interests first and they don't give a flying fuck about your best interest. They want to know exactly who you are so they can give your private information to the regulators and law enforcement, they want to make the KYC process as frictionless as possible so more people are funneled into the walled gardens. They will sell you the idea of financial freedom, they will take your money, and they will leave you with nothing more than an entry on their centralized spreadsheet. The companies providing bitcoin on-ramps are funding the chain analysis companies to create two direct paths: one to your identification for the law enforcement agencies and the other path, to your bank account for the corporations. Several chain surveillance companies are currently operating and well funded, SS8, ChainAnalysis, Elliptic, CipherTrace, & TRM Labs just to name a few.
SS8 for example, has been in the spy business for 20 years. In the patent below, SS8 establishes a method to extract IP address information from devices sending and receiving Bitcoin transactions. To be quite honest, the majority of the language used in this patent is over my head, however, what is clear is that SS8 developed this system to support law enforcement. Later, the patent was transferred to Pacific Western Bank in North Carolina. This should help one realize that a real demand exists from regulators and law enforcement agencies for "push-button" solutions and that this is a competitive market becoming less niche everyday.
The interesting thing about the blockchain spy company, Elliptic for example, is that one of their shareholders is the Digital Currency Group, inc. You may recognize them by their more common name, Grayscale (GBTC). That's right, the largest bitcoin trust has a vested interest in the success of de-anonymizing tools. Grayscale alone owns nearly half a million bitcoin. They are carving out a nice slice of the market for themselves and judging by their actions in funding Elliptic, one could reasonably assume that those half a million bitcoins will always remain tied to someone's identity and under the control of a company that puts the government's best interest first.
The images above can be found in the public business filings here: https://find-and-update.company-information.service.gov.uk/company/08458210/filing-history
Another interesting thing about Elliptic found in the public business filings... Ever head of Bitxchange? Me neither. But this was previously the blockchain spy company, Elliptic. Apparently, Elliptic also operates a ForEx & digital gold exchange.
Take TRM Labs for example, they were recently injected with a $4.2M USD stake from PayPal. TRM then hired former FinCEN advisor, Ari Redbord, to help guide their government affairs. As PayPal does not allow users to withdraw bitcoin to their own, self-custody wallet, it is clear that companies want to sell the hype of "Bitcoin" to the masses with out delivering the actual censorship-resistant, financial freedom part of it. And sadly, many people are ok with this, suggesting that the exposure is good for the industry. I think those who believe this narrative, lack the foresight to see that the more companies that can make a profit selling the idea of Bitcoin without actually delivering bitcoin, are fueling a division between separate "clean" and "dirty" bitcoin markets.
If there isn't enough bitcoin held in self-custody by censorship-resistant loving individuals then it becomes difficult to imagine a future without two separate Bitcoin markets: a "clean" KYC market in a walled garden, neutered and caged, held hostage by the oppressors, where transacting in "bitcoin" is merely asking permission to have your balance updated on a private and centralized spreadsheet that you hope you still have access to. And the "dirty" market, for all the crazy "criminals" out there, the ones that loved freedom and censorship resistance so much that they were willing to stand up against the oppressor's impending 6102 order and defiantly hold on to their private keys against all odds.
It will be much easier to maintain control over your bitcoin if you don't KYC. You will have a much better chance at maintaining unrestricted access to your bitcoin if don't KYC. Don't fool yourself for one second, there will be an event in the near future that scares the industry into "temporarily suspending" bitcoin withdrawals across the board, once that happens withdrawals will never be permitted again from these pro-compliance companies and exchanges.
Check out this thread by @jchervinsky he explains the current situation really well here.
"But my exchange mixes on my behalf", you say? That's some bullshit privacy theater. Think about it, your funds have been "mixed"; does that erase the KYC event of you buying bitcoin? No it doesn't. Say the government wanted to exercise a 6102 order or unrealized capital gains tax on you. They have access to your KYC'd bitcoin buying events via the exchange you went in on. This means they have undeniable proof that you bought bitcoin and when. Maybe, if the mix actually worked the way it's supposed to, then the government would not be able to technically prove that you still own that bitcoin. Would they really need to? Because in that case, you could not technically prove that you didn't own that bitcoin either. So how much is proof-of-ownership going to be the issue when the government already has proof-of-event? I think that it's more likely a government would launch a full forensic accounting investigation on you to provide cryptographic proof of the flow of funds after the mix, think of it as being audited 2.0. A KYC-collecting exchange that "mixes" on your behalf doesn't have your best interests in mind, they are compliance bros and they will comply.
The other prong of the KYC threat is if there is a data breach at the exchange that files your information. In this scenario, hackers would steal your information and start distributing it to the open market. Very similar to the Ledger data breach, but with an exchange data breach your name, photo, physical address, phone number, bank statements, government issued identification, email, and more are linked to your bitcoin purchases; how much bitcoin you bought, when you bought it, what addresses it went to. Maybe the "mixing" will deter their kidnapping/ransom efforts if they try following your trail and it leads to a CoinJoin, but if your holdings are significant enough then this will likely not be a deterrent.
People have been so financially crushed for so long that they are willing to do anything for an opportunity to get out of their paralyzing situations. The idea of un-confiscatable, censorship-resistant, hard money that is not controlled by a debasing centralized authority and that can be transferred anywhere on the globe instantly is very appealing to a lot of people. Corporations know this and they want to sell that idea to people. Government's know this but they don't want to enable the freedom. Strict KYC regulations are being drafted so that the corporations can make the money and the governments can take the privacy. This is an agreement being made about you, to capitalize on your desire to live free. Don't let them sell you the idea without delivering the key to your freedom. As the saying goes, not your keys, not your coins. Non-KYC bitcoin is your best assurance against living in a world where your financial livelihood can be flipped off with a switch at the first sign of civil disobedience. Central Bank Digital Currencies will enable exactly that, and once cash is eradicated there will be no alternative to fall back on unless you keep your bitcoin KYC free and self-custody it.
For those interested in preserving privacy, @BitcoinQ_A wrote a great article to help get started.
Here is another resource for keeping Bitcoin private. @J9Roem writes a monthly newsletter:
https://bisq.network/ is a great place to get started with non-KYC bitcoin.
If you're interested in following some Twitter accounts that put an emphasis on Bitcoin privacy, I highly recommend: @6102bitcoin, @OxoUtx, & @Tru3_N0rth.
Thanks for reading! I hope you found this thought provoking and consider how your desires may be used to manipulate you. I hope it got you thinking about what you can do to maintain full, unrestricted control over your bitcoin and the dangers of KYC.
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This article originally started as a Twitter thread here.