At his most recent talk in Toronto, Andreas Antonopoulos pointed out the folly of relying on tradition — particularly that of using identity verification — or what he calls the “means” that’s no longer needed to achieve the end in blockchain transactions.
The End to the Means
On June 20-21, Mastering Bitcoin author Andreas Antonopoulos, gave yet another poignant talk at the Blockchain Training Conference in Toronto. The presentation was centered on the importance of education over speculation in the Bitcoin space. In other words, studying and learning about the new “tool” for exchanging value (i.e. cryptocurrency) will be far more valuable for individuals in the longer term than any short term trading gains.
Meanwhile, governments and law enforcement have been scratching their heads on how to track cryptocurrency users. For now, the band-aid solution is requiring fiat-crypto onramps such as exchanges to comply with Know-your-customer (KYC) regulations.
“If you look at all of the things that exist in all of these industries that have hundreds of years of tradition, it’s important to realize that traditions, the methods, the tools that we use in law and economics, even in computer science, in accounting — it’s not about the tools,” Antonopoulos notes. “This is a point we often miss.”
But as the Department of Homeland Security funds research for managing blockchain-based identities and law enforcement invests in Bitcoin tracking services, we must stop and ask what all of these efforts are for.
Why do we have these processes? Why do we have the tools? What were the goals? Because we’ve become so attached to the means that we forgot what we’re doing them for.
The forgotten goal here is to mitigate risk of fraud or what financial regulators often refer to as ‘protecting consumers.’ At the same time, this protection comes with a huge trade-off in the form of storing customer information — that’s becoming increasingly valuable for cybercriminals.
“The goal is default risk. But we’ve associated that so completely with identity that we can’t even imagine a way of protecting against default risk in any other way than full identity with all of the problems that comes with,” he explains.
In 2009, an alternative was created to achieve this goal without identity verification. But out of habit and tradition, we’re seeing the same means applied by regulators — with disastrous results — to ostensibly ‘protect’ the users of this new “tool,” but really to maintain the “permanence” of the traditional tools themselves “through academia, professional certification, through regulation.”
Bitcoin Doesn’t Care About Your Identity
Bitcoin is an open-access, decentralized, trustless, global network for exchanging value. Introducing identity into the equation would remove one of its greatest strengths: the fact that Bitcoin doesn’t care who uses it. In other words, it will no longer be what Anonopoulos calls the “first ever neutrality-exhibiting financial network.”
“I can’t tell you how many times people tell me that in blockchains we need identity,” he continues.
As if identity was the goal. Identity is a means to an end…you don’t care who someone is. You care whether they will pay you next month. And yet we’ve become so attached to the means we forgot about the goal.
The invention of Bitcoin has made it possible to ‘program’ money. It is now possible to perform a transaction with a pseudonymous party using a multi-signature contract. What’s more is that this new method does not only eliminate default risk, but also the chance of falling victim to identity theft, which is rising at an alarming rate. This is real consumer protection.
[…] Do these technologies allow us to achieve these goals with fewer side-effects, with greater efficiency and with lower cost? And if the answers is yes, feel free drop the five hundred year old tradition if it doesn’t serve you […] Because now we have a new tool, a new set of tools.
You can check out the full talk below:
Do you agree with Andreas on Bitcoin not needing identity? Do you think there are use-cases for blockchain-based identities? Let us know in the comments below!