Renowned Bitcoin evangelist Andreas Antonopoulos has expressed concerns over Bitcoin’s fungibility — or lack thereof.
In an interview hosted on the sidelines of the Deconomy Conference in South Korea, Antonopoulos said that privacy and fungibility are among some of the largest factors that could potentially derail the future development of Bitcoin (BTC).
Antonopoulos has been one of the most prominent and earliest supporters of Bitcoin and digital currencies. According to him, Bitcoin’s fungibility is threatened by exchanges, companies, and other entities blacklisting a specific set of coins. Once a particular token has been blacklisted, its value could be severely diminished as these tokens will not be accepted by merchants or cryptocurrency exchanges.
Leading cryptocurrency analysis firm Chainalysis has secured multiple contracts by both governmental and non-governmental agencies to trail bitcoins which may have been used for illegal activities in the past. However, honest users may also be affected by this process. Simply receiving a few blacklisted coins could cause their wallets to also be flagged for suspicious activities.
Addressing this issue, Chainalysis Chief Economist Philip Gradwell has said that whenever an account undergoes KYC (know your customer) and AML (anti-money laundering) verification, their holdings are labeled as safe. He mentioned that it is the account that is either blacklisted or whitelisted and not the coins.
However, there are several other third-party data analytics companies which are using the public blockchain to track coins as well. They may flag coins rather than the account holding them.
Past events have shown how political rifts in the Bitcoin community affected the development of the digital currency. While Blockstream has released and proposed open source code for improving the privacy features of Bitcoin, its stable implementation could take a few years or more depending on the support it receives from the community.
Enthusiasts, meanwhile, have suggested coin mixing and coin shuffling as measures to improve the privacy of Bitcoin. A coin mixer or a coin shuffler mixes coins from various sources. Several altcoins also use this feature to improve fungibility.
Do you think Bitcoin will ever have solid privacy and fungibility features? Let us know in the comments below!