As the Bitcoin community flexes its maximalism, noting how absurd it would be to undo the recent Bitfinex hack via a hard fork or by bribing miners, it is saying that the fungibility of Bitcoin must be protected:
If the attacker can't spend their stolen coins we have a serious problem. #fungibility https://t.co/eLs39vMZSp
Peter Todd (@petertoddbtc) August 2, 2016
After having been kicked off of Coinbase for using their exchange too much, and off of Circle for selling them Bitcoins that came from somewhere they didn't like, I really started to think more about Bitcoin's fungibility.
Is it reasonable to claim that Bitcoin can have a public ledger, immutability, and fungibility at the same time? No, it really isn't. Every last satoshi has a permanent and transparent history, thus no two satoshis are alike. Public ledgers and fungibility are not compatible.
The transparency and immutability of Bitcoin's ledger provides each user with the assurance that the ledger is balanced and auditable.
If we were to introduce confidential transactions on the main network, or introduce anonymity somehow, would every user be able to audit its authenticity?
If we were to introduce confidential transactions on the main network, would government agencies and regulators humor cryptocurrencies and blockchains with the same tolerance as they do now? Would they see anonymity as the final straw?
Some things to think about...
UPDATE: I just want to clarify that this post is mostly just meant to get people thinking. I don't actually want Bitcoin to fork or for Bitcoin to have no privacy.