Particularly, it gives you a perspective on how Wasabi wallet enables coinjoins without gaining access to your bitcoin or collecting and revealing your private financial data.

The “zk” stands for Zero-Knowledge. zkSNACKs is a pun originating from the cryptographic techniques zk-SNARKS (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) and zk-STARKS (Zero-Knowledge Succinct Transparent Argument of Knowledge).

In simplistic terms, zero knowledge refers to cryptographic methods that allow sharing of secrets between two parties without ever revealing the secret.  

Zero-knowledge is the base on which the WabiSabi coinjoin protocol runs. This article highlights the following:

1. How zero knowledge works

2. Other ways Wasabi Wallet implements zero knowledge

3. Why Wasabi and the future of technology rely on zero knowledge

Problem: What To Know vs What Not To Know

The goal of a coinjoin is to achieve privacy. That said, a coinjoin would defeat its practical application if it divulges information about the user to anyone, even to the coordinator.

Yet for the coinjoin transaction to happen, the coordinator would have to:

1. Know the users’ input amounts and addresses from the inbound transactions

2. Know the amount and output addresses to map the coinjoined bitcoin

3. Access the network information of user wallets connecting to the coordinator

But even with the challenges posed, Wasabi Wallet always enables coinjoins while remaining blind to your private transaction details.

So how does the wallet achieve this?

The Magic Behind Zero Knowledge Proofs

The idea behind zero-knowledge proofs is that you don’t have to reveal something if you can prove that you know something. And in the context of the zkSNACKs coordinator, you don’t have to pass your private information if you have proof that the information you’re sending to the coordinator is true.

Wasabi Wallet implements cryptographic proofs to allow you to prove your transactional details such as the amount and output addresses, so you never disclose your information to the zkSNACKs coordinator.

Having these zero-knowledge proofs also means that you never have to send/trust the zkSNACKS coordinator with your bitcoin to coinjoin. In the background, wallets send proofs which are verified by the coordinator to allow your bitcoin to be included in the jointly spent transaction.

Zero Knowledge Doesn’t Stop With Coinjoins, Your Network Privacy Matters

If privacy-enhancing measures ended at the blockchain level, then Wasabi Wallet would still leak your network information and reveal your IP address or location.

This flaw happens to be the chink in the armor for many bitcoin wallets when they access and broadcast transactions over unshielded Internet connections. Transmitting to other peers over the Internet gives away your network information and as a result, your wallet becomes easy to fingerprint for surveillance.

Similarly, connecting to the coordinator for coinjoins over the Internet would reveal your network information. To circumnavigate this privacy flaw, Wasabi Wallet integrates Tor to uphold its zero-knowledge policy.

Tor achieves privacy by passing communications over multiple hops, separating your identity from its original source. Each hop contains no information about the starting or ending point, it only provides information about the next hop on the route. Or put simply, Tor cloaks the communication by adding layers (Onion Layers) on top of your Internet connection when connecting to Wasabi Wallet.

How Tor Is Used To Preserve Zero Knowledge

1. Using Tor during the registration of inputs and outputs to the coordinator

When the inputs and outputs are registered for a coinjoin through one connection, they become linked. The link will tell the coordinator the network identity of the user associated with the inputs and outputs. By using different Tor connections for inputs and outputs, there is no single network identity that is revealed to the coordinator.

Zero-knowledge between inputs and outputs is necessary for the coinjoin to gain any privacy. Wasabi takes this a step further by also using a new Tor identity for registering each individual input or output. For example, since up to 10 inputs and 8 outputs can be registered by a single client in a single round, this uses 18 unique Tor addresses to prevent any two addresses from being matched.

2. Using Tor when making queries to the public ledger

When Wasabi Wallet is querying ledger data from peers, it downloads one block per Tor identity so that peers do not become aware the same user received transactions in multiple blocks. To further prevent linking or building associations with specific peers, queries are made to random peers while including random data that does not necessarily relate to your query.

“False positive” blocks downloaded by your wallet prevent spies from “narrowing down” any transactions recorded by you on the blockchain since the data you download may include blocks you are not interested in at all.

Conveniently, Tor found a perfect use case in Wasabi Wallet. Without it, all your transaction information would remain tied to your network identity, negating the purpose of participating in a coinjoin.

Beyond Zero Knowledge in Wasabi Wallet

What is extraordinary about the application of zero knowledge in Wasabi Wallet is that it effectively adds a thick layer of privacy on top of bitcoin while still remaining a bitcoin wallet.

Ironically, the most groundbreaking applications of zero-knowledge are best suited, and even much more needed outside the realm of bitcoin. In particular, Internet applications collect more data than they could ever use. The application of zero-knowledge would mean that users can use applications without revealing data they would prefer not to share.

Some interesting ways zero knowledge improves applications include;

1.  Creation of digital identities without giving away personal details such as date of birth or phone numbers by using a public/private key pair, such as Nostr.

2.  Data privacy: zero-knowledge could allow you to complete a credit card payment without revealing your credit card number or personal information.

3.  Secure data sharing: data could be shared between two parties without revealing more information about the data itself. For example, drug companies could reveal that their drugs are effective on various test models without revealing the structure of the drug’s proprietary compounds.

Using zero-knowledge software reduces the amount of data collected by companies and therefore, reduces attack vectors in case of a cyber breach. Additionally, the future application of zero-knowledge is what will save Internet privacy from its potential demise.

Wasabi Wallet ensures users achieve zero knowledge for the maximum level of financial privacy without needing extra tools.

Download Wasabi Wallet.

The post What Does the “zk” in zkSNACKs Stand For? appeared first on Wasabi Wallet - Blog.

xPub stands for Extended Public Key while xPrivs stands for Extended Private Key. Simply put, xPubs and xPrivs are the parent keys that can allow a wallet to mathematically produce billions of child keys that work as public keys and private keys within your wallet.

As a Bitcoin user, knowing about xPubs and xPrivs will help you to:

• Discover ways to unlock more out of your Bitcoin experience
• Understand how xPubs and xPrivs affect the security and privacy of your bitcoin
• Know why the best bitcoin wallets use this

xPubs and xPrivs have not always been around since the beginning of Bitcoin wallets, here is why they were introduced.

Bitcoin Before xPubs and xPrivs

The first bitcoin wallet, Bitcoin-Qt, had a key-management problem. It generated private keys at random which were all stored on the computer in a wallet.dat file.

While this worked, there was a flaw in that users could lose their bitcoin when they accidentally deleted the file or fell victim to malware. In the case that you encrypt this file and forget your wallet’s password, there is no way to recover your funds.

For your funds to be safe as a Bitcoin-Qt user, you had to make continual backups of the newer versions of the wallet.dat file every time you made a transaction. Still, there was no solution for losing your password.

To make this less cumbersome, Bitcoin Improvement Proposal 32 (BIP32) was devised to change how private keys are generated. In the proposal, instead of Bitcoin wallets needing to generate private keys at random for every transaction, a wallet can have one master key that can generate other keys from itself in a predefined way.

Having a determined way to generate private keys means that:

• You only need to backup one (master) private key
• You have the convenience of using the private keys across different wallet applications

Here’s how one parent private key can replace multiple private keys:

How xPubs and xPrivs Work

The key-pair concept is inseparable from Bitcoin, where private keys are meant to sign transactions and public keys, derived from private keys, are used to receive transactions.

When it comes to xPubs (Extended Public Keys) and xPrivs (Extended Private Key) they also  serve as public keys and private keys, only in a morphed manner. Their “extendedness” gives them the ability to derive more child private keys and public keys. And just as in normal private keys and public keys, the extended public key is generated from an extended private key.

What’s more, all derived child keys can also derive their own future generations of grandchild keys. But even with continued derivation, all derived keys always carry the unique signature (like DNA) of their parent keys throughout their generation. It’s this family-tree-like derivation process that serves as the origin of a new breed of Bitcoin wallets, hierarchical deterministic wallets.

In hierarchical deterministic wallets (also called HD-wallets), a specific tree-path/branch is selected from which future child keys will be held in. And by having the parent keys, which are the xPub and xPriv, you can traverse through all branches to check for child keys.

The convenience of having a master key to derive all possible keys generated opened a new world in Bitcoin where users no longer have to make the decision between better privacy or easy backups.

xPubs and xPrivs in Action

You Can Have Many Accounts in One Wallet

By having a parent key that can generate many child keys, a wallet can derive child private keys and child public keys that serve as parent keys for new wallets within one main wallet.

As a user, you can find this useful if you wish to have multiple accounts within one wallet. You can use this to separate your financial concerns. For example, you could have an account for personal expenses, business, or even savings without needing to set up multiple bitcoin wallets.

Securing your Keys is Easier

Generating private keys at random meant you had many keys to backup. This is not the case with wallets that implement xPubs and xPrivs.

With parent keys that can deterministically generate child keys for all your wallet transactions, you’ll only have to backup one master key. This master key can be used to derive all other keys you previously generated to transact. Thus, you only need one backup to restore everything.

You Can Share Funds in One Bitcoin wallet

Since an xPriv can sign for transactions from any address generated by it, sharing it can allow other trusted parties to make payments on your behalf. For example, an organization can use the Master xPriv to give child keys to both the procurement and employee payments departments without giving either department the ability to spend each others’ funds.

With this in mind, sharing your xPriv should be done with extreme caution since anyone who holds your private key gains control over all your funds.

More Privacy for your Transactions

An xPub can generate multiple child public keys that can be used to receive funds. This is a simple way to improve privacy for Bitcoin transactions as it prevents linking transaction data together by reusing an address to receive unrelated transactions.

A Multi-Wallet Experience is Possible

xPriv and xPubs are the advancement in Bitcoin that allows users to use more than one wallet software application without creating multiple backups.

Using your wallet’s seed, any wallet application can derive both the xPub and the xPriv and recover coins that you previously received with another wallet.

Despite this, there is always a challenge when wallets use different schemes to derive keys. As a user you can benefit from checking for Bitcoin wallet compatibility before switching vendors.

Payments are Secure With Untrusted Parties

Since private keys have full control of your wallets, storing them on an Internet connected device to accept payments may be sub-optimal. Particularly, if you store your private keys on an unsecure payment processor to generate addresses, any breach can lead to the loss of your funds.

Instead, with an xpub you can generate multiple payment addresses without having to expose your private keys to potential threats.

The post xPubs & xPrivs appeared first on Wasabi Wallet - Blog.

The best way to know how much KYC affects your privacy is to ask: What could happen to your KYC data behind closed doors?

A little digging can reveal that a lot more goes on with your data; some of which you would never willingly consent to. Among other things:

• Your KYC data is shared with other parties
• Your KYC data enables the monitoring of your behavior
• Your KYC data is sometimes leaked in data breaches

Why The Name KYC Is Misleading

Going by definition, the KYC process exists to identify you as a customer. But the name makes it easy to overlook what happens after the customer is known. How?

When it comes to the traditional KYC processes, the following three steps will be involved:

• Identification –  You offer personally identifiable information to the service provider, i.e. name, date of birth, address, or even tax id numbers issued by a government
• Verification – The information is checked for validity
• Monitoring and due diligence – Activity tied to the identity is tracked for any misconduct

Visibly, the name KYC barely hints at the existence of the third step where your activity utilizing the service is tracked alongside your verified identity. It’s the third step that consequently holds the most implications on your privacy in the following ways:

1.  KYC Makes Money The Perfect Surveillance Tool

Before money became all bits, having an identity was a necessary part of enabling banks to function. It was only in this way that money could be accounted for. Without an identity, chances are that money could often end up in the wrong hands. Furthermore, only having a verifiable identity would allow for responsible action in the case of liabilities or misconduct.

Although all money existed in the form of paper and balance books as large physical books, financial institutions could still know financial information about their customers. But unlike before, tracing users’ transactions was greatly limited for one key reason. It was an extremely labor-intensive task. The challenge posed meant that tracking users’ transactions only had to be viable when there were strong motivations to do so.

Fast forward to today and even the weakest motivation to trace and track user activity is backed by computers that can store huge amounts of data and retrieve it quickly. The result is that encroaching on users’ privacy is easier than ever before.

With a mouse click, one person can have an entire list of all your transactions throughout your lifetime, down to a single cent. Even further, your transactions can be tracked as you make them in real-time.

How Much Data Do You Give Away?

Using the data tied to your KYC, a lot more information can be gleaned from your transactions. For example, a coffee charge on your card lets someone know your addictions, or your donation to a cause reveals your political standing.

Furthermore, the use of KYC means that users end up being categorized based on their identities and activities in the real world. These categories are created based on your activities within the service you signed up for or from perceived opinions you may keep.

For example, frequent travel overseas can put you on a travel risk list, or close association with a government faction can make you labeled as a politically exposed person. It is for these reasons that KYC is the easiest way for someone to encroach upon your private life.

2. Your Data Is Shared And Sold

Your KYC information and data generated from it has immense value because it is an extension of your real life. Selling your data often happens because you likely signed away some rights in a complex terms of use that is not read 99% of the time.

When it comes to KYC, the personally identifiable information fetches a higher price, creating a stronger incentive to sell your data for profit.

The data is used in marketing campaigns, promotions, and even more recently, to train commercial AI models. This reinforces the paradigm that data is the new oil and users are the new oil wells.

Additionally, users’ information is shared with other parties to meet compliance mechanisms put in place. For example, data relating to your trading activities is shared with tax authorities, or data from your medical facility is shared with insurance.

The sum result is that the user’s KYC information ends up in more hands than what would be acceptable, compounding to a situation where users’ privacy is habitually out of their control.

3. Your KYC Data is a Hacker’s Dream

The personally identifiable information held in KYC is the most valuable information a hacker could get their hands on.

What aggravates this further is the fact that KYC information is handled by third parties. These third parties act as verifiers and also tend to keep the data for much longer than they are obligated to.

Understandingly, keeping a huge amount of sensitive data puts a target on their back by hackers. What’s more, providing KYC data to multiple services results in your data being exposed across multiple locations. Recent data breaches reveal that even the biggest companies get hacked.

When cyber attacks are successful, hackers get away with valuable user information. The private information collected is the biggest catalyst for identity theft and encourages other cyber threats such as phishing.

And while measures are often put in place to protect user data, often the best solution would have been if such personally revealing information was never collected in the first place.

The KYC Dilemma: Trust or Privacy

The idea behind KYC is that for you to be trusted, you need to reveal as much personally identifiable information as possible. This is the only way you can be accountable as a user.

From a regulatory point of view, tracking and invading the privacy of all is taken as the right way to prevent the misdoings of a few bad actors.

But how much privacy should be traded away for trust to exist?

The solution lies in applying more privacy-focused trust technologies or even yet, switching to trustless systems, like Bitcoin. Trust doesn’t always have to be dependent on vulnerability, especially when the vulnerability predisposes you to manipulation.

The post How KYC Affects Your Privacy appeared first on Wasabi Wallet - Blog.

Most Bitcoin users don’t run a node, which means they are relying on someone else’s. What this means is that someone else’s computer is trusted to propagate their outgoing transactions to miners, validate incoming transactions as legitimate, and store a copy of the blockchain. In this regard, running your own node is incredibly beneficial. You put into practice one of the most important principles of Bitcoin; one that has become a mantra in the Bitcoin community: Don’t trust; verify. Unless you run your own node, you’re relying on third parties to validate transactions, including your own. Running a node enables you – on your computer – to validate transactions on a completely equal level to everyone else on the Bitcoin network.

Transaction validation occurs in two separate instances. Validity is first checked when your node is listening for transactions relayed to its mempool that are not already in a block, and validation is done again after a block is mined to check transactions that your node’s mempool was not already not aware of. Before your node propagates transactions across the Bitcoin network, it checks that they are valid against a long set of criteria. The most important criterion for validity is that the sum of input values must be greater than the sum of outputs. In other words, your computer checks that all Bitcoin transactions are actually requesting to spend money that exists rather than counterfeiting new money. A host of other things are checked by your node when building a mempool including the transaction size, the fee, the locking and unlocking scripts, and much more. The second stage of node validation occurs after a new block has been found by a miner. Only valid blocks are propagated across the network, as each node independently ensures they are valid before forwarding them to their peers. This brings us to an important point: miners are not trusted parties. For example, nodes will reject a block if the Proof of Work is insufficient, or if the miner rewards themselves with a million new bitcoins. By running a full node, you quite literally trust no one. Instead of trusting, you verify.

In addition to benefiting you individually, running a node is a voluntary way to contribute to the entire Bitcoin project. Just by running the Bitcoin software on your computer, you are helping make Bitcoin more robust and decentralised. We said at the beginning that all Bitcoin needs to exist is two nodes – which is true. But when there are more nodes in different geographic locations, it becomes increasingly complex to coordinate a simultaneous physical attack on the Bitcoin network. It is this distribution that makes it possible for there to be rules without rulers. Decentralisation is not only the key philosophy of Bitcoin from an ideological standpoint, but necessary for its survival. Previous forms of electronic money failed because their dependence was concentrated in one physical location. Bitcoin, in contrast, has no single point of failure. Bitcoin can’t be externally stopped because there’s no headquarters to bomb, raid, or shut-down. The more people run nodes, the more this statement holds true.

Thousands of computers running the Bitcoin software produce the blockchain, which is an immutable record of every transaction in Bitcoin’s history. Bitcoin’s immutability is enforced physically since an infeasible amount of Proof of Work would be required to change transaction history. Bitcoin’s immutability is also enforced socially since everyone must agree on the same rules for transactions, not just the order of transactions. Any user who changes the rules in their favor does not derail or destroy the software for everyone else, the cheating node merely creates an invalid fork that no other nodes besides its creator recognize as legitimate. The Bitcoin blockchain is a record of historical truth that cannot be deleted. It is not stored centrally or changed easily. By running your own node, you make the Bitcoin blockchain that much more indestructible.

Thus, Bitcoin’s success has necessitated the collective impact of thousands of volunteers running nodes. This small action makes Bitcoin that much stronger and decentralised. But perhaps more importantly, it means that you are in complete control. You are verifying that everyone else is playing by the rules, that no one cheats in the monetary system you are a part of. You are doing your part creating an “electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party”. Running a Bitcoin node is the wonderful intersection of individualism and altruism. You should give it a try.

The post The Benefits of Running a Full Bitcoin Node appeared first on Wasabi Wallet - Blog.

Ironically, commercial banks actually make the best case for bitcoin. The financial system’s internal lunacy means that any remotely sane alternative is a threat. The lunacy referred to is called fractional reserve banking. As Satoshi Nakamoto highlighted, “banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve”. These credit bubbles are effectively a form of counterfeiting. When you borrow money from the bank, the money is created as digital credit then and there, out of thin air. These banks are spending from their reputation, which is only partially backed by their depositors’ funds. As a result, despite the fact that customers at banks have a legal claim to their property, all of these claims could not possibly be met at once. Indeed, we have seen instances where all customers demanded their money at once. The financial crisis in Greece is a good case in point. Upon these requests, the bank could not return the money because the customers never truly controlled it. 35% of the ATMs ran out of money, and banks were ultimately shut down for a whole week. The inherent trust is why the system collapsed.

Bitcoin is the antidote to this risk of fraud, providing a solution to the banking system. It replaces human trust with mathematical provability so that for the first time in history, humans can take complete self-custody over their digital money. Mathematical proof of ownership, in the form of digital signatures, is what allows for digital self-custody. The only other way to fully self-custody one’s money today is to hold physical cash. However, this prevents remote payments, and also compromises security – if someone broke into your house, the cash could be stolen. Bitcoin does not require you to choose between self-custody and worldwide payments – you get both. Undoubtedly, Bitcoin is a threat to the financial system, which prohibits digital self-custody whilst promoting digital counterfeiting. “You shall not counterfeit” is a Bitcoin commandment, violated by the modern financial system. The greatest offenders are commercial banks – but they are not the only ones.

Central Banks also inflate the money supply in programs commonly referred to as Quantitative Easing. Money is created out of thin air (you may have noticed this recurring theme) and artificially injected into the economy, eroding everyone’s savings. In the developed world, the ramifications of this may not be that swift at first, but a look at Argentina exemplifies this point. The central bank has drastically inflated the money supply, leading to a 98.8% year-on-year inflation rate. This shows how quickly the value of your savings can be drained. Even in the United States, the dollar has lost more than 80% of its purchasing power against gold since 1970. The infinite supply of fiat money makes it difficult, and sometimes impossible, to save for the future. Conversely, Bitcoin has a perfectly scarce supply of 21 million that cannot be inflated, only distributed. Counterfeiting is impossible in the Bitcoin system, as everything is publicly auditable. A record of all transactions ever made is publicly available, making it impossible to create fake money.  As such, it is a savings technology engineered to hold its purchasing power. Bitcoin removes the need to trust the central bank not to debase the currency — a trust which has been breached throughout history. We can send digitally and save permissionlessly with bitcoin. Bitcoin threatens the central bank’s monopoly over the money they control. No one controls Bitcoin, and it cannot be inflated.

Now to our second commandment: “You shall not confiscate”. Bitcoin is money that cannot be taken away from you without your consent. Money protected by mathematics provides incorruptible security compared to the current financial system which is protected by flesh and blood. “Owning” your money in the bank means that you are trusting the bank to return your money upon request. However, owning bitcoin fulfills the true meaning of the word. It requires possession over your private keys – 12 or 24 words that you alone know. Owning your keys is the only way to take possession over bitcoin. Anyone could try and guess the keys, but they’d have to guess one hundred and fifteen quattuorvigintillion (2²⁵⁶) times.

Confiscation and censorship of money within the traditional financial system is something we have seen. Alexei Navalny, a political opponent of Vladimir Putin, had his bank accounts frozen in late 2020. In response, his ally, Leonid Volkov, urged supporters to use bitcoin to receive donations. Money that cannot be confiscated is disrupting a system where confiscation is possible, and sometimes rampant. But, in Jacob Applebaum’s words: “with cryptography(,) no amount of violence will ever solve a math problem.”

Bitcoin is an emerging branch of freedom, growing on the plant that is the Internet. This branch, though still young, poses a significant threat to the financial system. And indeed, as Washington said about Liberty, it is rapidly growing. Beyond the more philosophical benefits that Bitcoin poses, there are practical ones, too. Bitcoin’s decentralisation renders it borderless. To send a million dollars from the US to Japan would take days and would be expensive. You can send $1 million of bitcoin to Japan for a couple of cents and it would be confirmed in 10 minutes. With the increased globalisation of the economy, Bitcoin is simply an easier digital payments system. But it is two profound, ethical bedrocks of Bitcoin that threaten the financial system: the inability to counterfeit and confiscate and; more simply: the inability to steal. Bitcoin has taken root. It is Liberty – the plant that “when it begins to take root, is a plant of rapid growth”. We shall see how this plant blossoms, as it begins to revolutionise humanity’s ancient technology: money.

The post Why Bitcoin is a Threat to Current Financial Systems appeared first on Wasabi Wallet - Blog.

However, not all Bitcoin wallets deliver on this promise. In fact, some wallets purposefully take it away. Nonetheless, getting into Bitcoin will always bring you to make a choice of a wallet.

The two things that you have to be aware of in order to make an informed decision on a Bitcoin wallet are:

• Bitcoin wallets don’t store bitcoin in them, they are stored on the blockchain
• Bitcoin is not private by default, using it leaves publicly available tracks

Having this in mind is what will give you a picture of what you might have traded away in your choice of wallet. Rather than jumping blindly into a choice, the qualities highlighted in this article help you:

• Find a Bitcoin wallet that suits you
• Keep your Bitcoin safe
• Avoid possible mishaps while using Bitcoin since transactions are irreversible once confirmed
• Use Bitcoin privately

1. You Want Your Bitcoin to be Safe.

When it comes to your hard-earned Bitcoin, the worst that can happen is that you lose it all.

Often this is the price you pay for not understanding how Bitcoin wallets work.  

Bitcoin wallets don’t keep any bitcoin in them. Instead, they store the relevant credentials called private keys that allow you to control any bitcoin sent to you. Losing these keys means losing your bitcoin.

The safety of your bitcoin depends on who stores your private keys and how they do it.

Who has Control of Your Private Keys?

You can either keep your private keys or trust someone else to keep them for you.

This creates the two major classes of wallets in terms of control:

• Custodial Wallets – someone else has your private keys and they control access to your funds.
• Non-Custodial Wallets – your private keys are in your possession and only you can control your funds.

This is similar to a bank vault for your assets. You either let the bank store your assets for you or you have a personal vault at home.

Custodial Wallets

You don’t own the vault at the bank, the bank does but they offer a service that will allow you to access your assets. You have trusted them enough to know about your assets and store them for you.

Similarly, in custodial wallets, third parties are entrusted to permit you to transact and to keep your Bitcoin safe. A common example of custodial bitcoin wallets is centralized bitcoin exchanges.

Non-Custodial Wallets

The vault at your home is yours and yours alone. You’re responsible for its safety and only you control who can or cannot access your vault. Likewise, non-custodial wallets give you full responsibility for the security of all of your Bitcoin.

Keeping Your Non-Custodial Wallet’s Seed Phrase Safe

Going the non-custodial route means that you’ll have the wallet’s seed phrase to keep safe.

This mnemonic phrase is what you use to initiate or recover your wallet. It is also the source of your private keys and the public keys you use to receive bitcoin in your wallet.

Understandingly, this seed phrase should be for your eyes only. If any other person has it, they can use it to recreate your wallet and steal your funds.

What is also worth noting about seed phrases is that bitcoin wallets go about them differently.

Depending on your wallet, the length of the word phrase will vary from 12 to 24 words. While more words mean stronger security from a potential brute force, a 12-word seed also does the job.

Which Way to Go, Custodial or Non-Custodial?

Custody is a big deal with bitcoin because Bitcoin’s core intent is to remove any third parties or intermediaries from how people transact. Despite that, the type of custody you choose only matters to the extent that it can keep your bitcoin safe.

With Custodial Wallets, you can lose your bitcoin if the central exchange gets hacked, goes bankrupt or your funds get frozen.

Funds in your non-custodial wallet will always be safe as long as you can keep a secret. However, your funds will be gone if you lose your private keys either by accident or through theft.

How Does Your Bitcoin Wallet Store Your Private Keys?

Your bitcoin wallet can either be Hot or Cold. This depends on whether the private keys are stored on a device connected to the Internet or not.

Bitcoin wallets that run on the web, on desktops and on phones are considered hot. The term hot refers to their extent of connectedness to the Internet to allow for transactions.

Cold wallets use hardware that has no ability to connect to the internet and are considered the safer option between the two.  Examples of such cold wallets are Trezor, Coldcard and Ledger.

The choice between cold and hot wallets is motivated by the length of time and the amount of bitcoin one wishes to store. The common practice involves keeping huge amounts of Bitcoin in cold wallets and intermittently transferring small amounts to hot wallets for transactions.

Watch out for Fake Wallets

Fake Bitcoin wallets and exchanges exist primarily to swindle you of your Bitcoin.

Be vigilant of fake websites. Cybercriminals try to exploit new users by imitating legitimate websites using a different domain extension, and can even pay to promote these scams to the top of search engine results. In the case of application installations, make an effort to verify the authenticity of your downloads using PGP keys.

2. Your Financial Privacy Doesn’t Have to be Sacrificed

Bitcoin wallets are not private by default. When you don’t prepare for this, anyone can access your private financial data.

Your wallet leaks your transactional information when:

• Your wallet needs KYC(Know your Customer) details for you to transact
• Your wallet reuses addresses in transactions
• Your wallet does not incorporate any privacy-enhancing techniques like Tor
• Your wallet accesses the blockchain’s data through a third party instead of directly

So what can wallets do for your privacy?

Bitcoin Wallets can Work With Zero Knowledge(zk)

Bitcoin is a permissionless technology. All wallets can work and let you transact without revealing any personal information to the wallet service. This includes how your wallet accesses the public ledger.

When your wallet needs your personal information in order to use it, you ultimately surrender your privacy. This might be what seems like common practice with exchanges but the personal information collected is meant to be used against you, not used for your protection.

Wallets Should Always Generate A Fresh Address for New Transactions

A wallet that does not allow you to generate new addresses for transactions you receive will hurt your privacy. Since all addresses can be publicly viewed, receiving bitcoin using the same address multiple times will remove any doubts that two transactions were made to the same entity.

Address reuse hurts your privacy as the sender also, so before you spend your Bitcoins, check the address you are paying merchants or exchanges and request a new one if you see it has already received coins before.

There are also other risks associated with address reuse in Bitcoin.

Privacy Tools can be Built Right Into Your Wallet

Since Bitcoin implements a public ledger to keep transactions, privacy consideration cannot come as a second thought when picking a wallet.

For users who are conscious about their privacy, multi-participant transactions like coinjoins and the Lightning Network provide a crowd to hide in. That said, having a wallet with built-in privacy tools will make safeguarding your privacy effortless.

3. Your Bitcoin Wallet Should be Nice to You

A wallet’s user-friendliness is what inevitably makes your Bitcoin experience smooth. It will also be what stops you from making unintended mistakes.

But how exactly can a wallet be nice to you?

Your Wallet Helps You Track Your Transactions

The pseudonymous nature of Bitcoin transactions can quickly throw you into an organizational chaos.

The easiest way a wallet can help you follow the privacy properties of your addresses is by offering you a way to label your deposits and expenses.

Your Wallet Stops You from Sending to Faulty Bitcoin Addresses

If you send your coins to the wrong address, you might never get them back. This means you’ll always have to exercise care when sending bitcoin and your wallet can help you with this. How exactly?

A wallet can detect invalid addresses and help you double-check addresses before confirming transactions.

Your Wallet Saves You from Erroneous Transaction Fees

If you were to pay for a $15 meal with two $20 bills, you would confuse the cashier since you could complete the payment with a single $20 bill.

Bitcoin wallets should avoid this confusion as well. Since transactions with extra input addresses waste an unnecessary amount in mining fees. A wallet should be smart enough to only spend just enough coins to make your payment, without overusing your wallet’s balance.

A Friendly Wallet Offers You A Back-Up Option

Seed phrase backups are a critical feature that will allow you to quickly recover your wallet in case of accidents.

A Simple User-Friendly Interface is the Way to Go

Is the wallet’s design straightforward to use? Only when it makes it easy for you to find your way around it regardless of your level of tech expertise can it be considered easy to use.

There Is Always Room for A Better Experience

Having a wallet that is upgradable means that any experience you currently have can be made better. Moreover, new updates are what inevitably resolve new bugs, improve usability, and fix vulnerabilities.

You’ll Need Technical Support When Things Go Sideways

Whether in the form of documentation, video tutorials, or live customer support, good technical support goes a long way. When it comes to your valuable bitcoins, having a helping hand when you get stuck is a nice thing to have.

Can There Be A Perfect Bitcoin Wallet?

Fatefully for Bitcoin, no single wallet can rule them all. In fact, the nature of Bitcoin is that anyone can make their own wallet if they so wish.

Regardless of this, the best bitcoin wallet will always remain the one that keeps your bitcoin safe, shields your privacy and is friendly to you.

The post Qualities of a Good Bitcoin Wallet appeared first on Wasabi Wallet - Blog.

Compared to the existing fiat-based financial ecosystem, Bitcoin has a lot to offer as a medium of exchange. This article will list some of the reasons why Bitcoin serves as the best currency for everyone.

Global Acceptance

When it comes to money, perhaps the most startling realization is that money itself is not useful, it only serves a purpose within a social contract. Money only has value when there is someone who is ready to accept it as valuable. To explain this, imagine if the richest man was rocketed to another planet alone with billions worth of paper cash.  He would be as poor as someone with nothing here on Earth, because the rich person doesn’t have anyone to accept the money he has in exchange for something on the new planet. This is in contrast to Bitcoin which is a borderless means of exchange. In a financial ecosystem that is largely cashless, there are always people ready to accept Bitcoin for a service or for goods, anywhere in the world.

All of the 5 billion people connected to the Internet around the world can set up a Bitcoin wallet and accept bitcoin and verify their transactions in real time without being inhibited by physical or political boundaries. Unlike most fintech applications that don’t have a presence in every country around the world, Bitcoin transcends all borders. Bitcoin bridges the chasms of national territories, different languages, and the use of different currencies that have been established throughout the world. In addition, international transfer with fiat is largely fragmented, resulting in higher fees and complicated processes to set up payments. Bitcoin simplifies this. In an economy becoming all the more digitized, every business can benefit from integrating Bitcoin and accepting payments and more and more businesses are realizing this. Just as how the wheel made travel easier and the Internet made the globe smaller, Bitcoin as a medium of exchange makes global payments simpler.

True Ownership

Henry Ford, “It is enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning”. As a famous industrialist and one of the wealthiest men in the world, Ford understood a lot about the world and his remarks reflect an informed perspective. Why would he make such remarks that are seemingly outrageous? One would wonder why there hasn’t been a revolution yet. The truth is that much of the information surrounding how fiat-based financial systems work is enshrouded in a mesh of jargon that may make it uninteresting to the person who doesn’t have a deep understanding of economics. Either way, what Ford tried to infer isn’t any secret knowledge someone who’s curious cannot discover for themselves. So what about banks and the monetary system that could lead to a revolution? The covered-up fact is that the monetary system allows banks to create and own all the money in circulation and profit off the work of everyone else through loans; all while creating the illusion that the customers actually own the money. The fancier term for this monetary system is the fractional reserve banking system.

With this system, any money kept at the bank is never yours and is possessed by the banks to be given out as loans. Banks do not have every single dollar given to it by their customers. In fact, if a small percentage of customers would request their deposits, banks will fall into a cash crisis. With this debt-based system, banks lend out customers’ deposits based on the faith that not all customers will at one point in time withdraw all their money. By doing this, they essentially create a pyramid-like system where they can lend and profit from money that isn’t theirs. Since banks make money when they create loans, they become incentivized to create more debt in order to profit even more. This serves to allow banks to increase the amount of capital in the economy by lending out money that is idle. Furthermore, if all the financial decisions made in giving out loans fail to be repaid, the debt-based monetary system obliges the government to bail the banks out using taxpayer money. This creates a system where banks can make money out of thin air while creating an alliance between a small minority of politicians and bankers to profit off the backs of the rest of society in the name of a monetary policy.

The only way the pyramid scheme fails is when the players below the pyramid bail out of the game. Otherwise, the bankers and politicians continue to gain by creating more profit out of thin air. As long as the game continues and the banks are still entrusted with other people’s money, the circle persists in a way that results in banks owning all the money in circulation as deposits or money given out as debt. By buying bitcoin and transacting in bitcoin, you opt out of a fiat system that is built and exists mainly to profit off your hard-earned money. Unlike the fiat system where any deposit you make is equivalent to the bank repossessing that share of the money in supply, any Bitcoin which you own as money is truly yours and only yours. The exception is is you keep your bitcoin on an exchange where it is treated the same way as banks treat your money. When you transact with Bitcoin as your currency, one prevents banks from controlling all the money in supply (and in turn owning you). The revolution Henry Ford foresaw is Bitcoin.

Transactional Freedom

Bitcoin removes limitations existing in fiat-based currencies. As a good medium of exchange, Bitcoin allows you to transact anywhere and anytime. No daily limitations on the maximum amount you can send or receive. As a self-sustaining system that has no intermediaries, you can hold any amount of funds with bitcoin and no one can freeze or limit who you can transact with. Bitcoin is a purely digital asset; so long as you keep your private keys with you, no one can confiscate your Bitcoin. The nature of Bitcoin is that users literally become their own bank. With your wallet seed phrase in your head, one can move about their daily activities and travel anywhere in the world while controlling millions worth of bitcoin. With just an address, you can send or receive bitcoin with no need for approvals permission or 3rd parties charging pointless fees. Furthermore, setting up a Bitcoin wallet does not require anyone’s approval or scrutiny.

Unlike fiat-based money transfer services, no one can impose any terms of service that you don’t understand. As a result, you don’t sign up for liabilities or pick up consequences that you don’t mean to in order to transact. In regards to transactional freedom, Bitcoin is the most inclusive financial system. The human element in finance unavoidably breeds bias. As a decentralized system, no one is in charge and therefore doesn’t have any preference as to who should or shouldn’t use it. By being independent of human bias, Bitcoin spans across all genders, races, ages or sexual orientations, serving all equally.

Deflationary

A harsh reality is that governments intentionally make you poor by printing and devaluing money. Despite the narrative of printing being necessary to stimulate economic activity, it simultaneously results in devaluing all existing money. This makes any money you hold lose its purchasing power. As a result, the same effort required to live will always increase. The resulting inflation hits lower-income earners more. The low-income earners are the ones who pay the heaviest price in an inflationary money system where there’s a sky-high ceiling to the amount of money that can be poured into the economy. The decisions around monetary policy aren’t always sound and when they fail, the results can be disastrous to an economy. An example is in Venezuela where poor monetary policy resulted in a rapid devaluing of their currency to the extent that the weight of notes required to buy a whole chicken weighed more than the chicken itself.

While inflation is disastrous to an economy, money printing also has its winners too. The inflation caused by printing money is famously referred to as a poor person’s tax because those who hold store value in fiat are the ones most hit. With Bitcoin, the amount of Bitcoin in circulation will always remain capped to a certain limit and as a result, the more people use the currency, the more its purchasing power increases.

Privacy and trustlessness

Of interest is the fact that the fiat-based monetary system enables the most sophisticated surveillance system that can be conceived. While the worry around surveillance is mainly focused on the internet and other communication channels, the amount of surveillance made possible by the electronic cashless system is greatly overlooked. Financial services offered by both banks and financial applications collect a lot of personal data about their users. There is no option for anyone to use the existing fiat-based electronic services without revealing a great deal of private information about themselves. This hurts any amount of privacy one might wish to enjoy while transacting. Additionally, financial services generate a lot of financial information relating to all our daily financial affairs. Banks and financial services know who you transact with, what your sources of money are, and what you spend your money on.

Surveillance of their customers is greatly incentivized for both banks and financial services because such information is valuable in allowing businesses to profit more. The financial benefits accrued from surveilling customers supersede the motivation to respect the customer’s privacy.

While using Bitcoin frees one from giving away sensitive personal information in order to transact, the amount of privacy one can enjoy while transacting with Bitcoin is largely dependent on how well one uses the technology. In fact, since Bitcoin utilizes a public ledger to enable transactions, it can equally serve as a great surveillance tool. However, with the right tools when using Bitcoin, one can be free from intrusive surveillance. A good wallet is usually a start but further using conjoins allows one to use it privately. By using bitcoin anyone can reclaim their privacy and at the same time unsubscribe from the fiat-based electronic transfer system, which exposes you to exploitative banking practices.

Bitcoin may have its fair share of challenges in its use as a currency but it offers great features that make it a better alternative to fiat currencies. Everyone is allowed to take advantage of Bitcoin to enable them to transact without “middlemen”, as Satoshi intended.

The post Bitcoin as the Currency for Everyone appeared first on Wasabi Wallet - Blog.

Bitcoin is a key factor in the investment strategies of many institutional and retail investors. Mass awareness of Bitcoin has largely arrived, as the percentage of people who are at least familiar with the idea of Bitcoin is high. However, there are gulfs between those with awareness of Bitcoin, those who own the cryptocurrency and those who use it as the currency it was designed to function as.

Considering the impressive functionality Bitcoin already possesses and the historic highs its value has hit, it can be startling to remember that mass adoption is still underway and will represent massive growth in value and applications.

As is the case with any emerging technology, those who immerse themselves in the landscape prior to mainstream adoption put themselves in a powerful position as cryptocurrency becomes more entrenched in the financial world. Let’s take a look at the path of adoption that Bitcoin is on, the tools that can make Bitcoin even better and what the implications of a hyperbitcoinized world could be.

Degrees of adoption

According to a report from 2022, around forty million Americans have either traded crypto or have expressed interest in doing so. Another report from one year earlier stated that more than a quarter of Americans own bitcoin.

While these numbers are impressive, they don’t refer to a clearly-defined standard of what adoption truly means. For example, those who buy bitcoin simply to hold as an investment strategy are certainly Bitcoin users, but they can’t be said to have embraced the full potential of Bitcoin as the world’s most promising system for value transfer and storage.

As such, the percentage of users who have adopted Bitcoin in a significant way—making it central to both their saving and spending needs—is far lower than the numbers cited above. The fact that so few people are using Bitcoin to its fullest potential is another reason to feel optimistic about the future of Bitcoin adoption, as the room for growth is immense.

Bitcoin as more than an investment strategy

Compared to many other assets, Bitcoin adoption happens on a sliding scale rather than in a binary fashion. For example, when personal computers gained popularity and affordability, computer adoption could be easily measured by whether one had a computer. When someone purchased a computer, they could be said to have fully adopted computer usage.

Bitcoin adoption, however, tends to occur in waves that increase in frequency and size. A user may experiment with trading for $20 worth of bitcoin, and then may begin exchanging more and more of their fiat currency for bitcoin when they become more comfortable and optimistic in the network’s infrastructure and the third-party tools that facilitate its use.

Particularly in the developing world, Bitcoin can empower a staggering number of people who currently do not have access to traditional banking. Across the world, decentralized finance is a pathway towards regaining the privacy that has been eroded by over-intrusive tech giants.

Bitcoin can help usher in a new area of financial liberation by helping users sidestep the issues associated with the traditional online payment ecosystem, including high fees, red tape, long wait times and a lack of control over one’s funds.

Comfort and confidence

One sign that some experts associate with widespread adoption is the ability to utilize cryptocurrencies without a full technical understanding of how they work. This point may seem counterintuitive since users with a high degree of knowledge about Bitcoin are good for the development of the landscape, too.

The reality, however, is that to become attractive to a more substantive portion of the population, Bitcoin needs to be accessible to those without extensive knowledge of the ins and outs of blockchains, peer-to-peer networks or even financial systems.

This can be compared to how smartphone adoption did not rely on users understanding the infrastructure and underlying technology that made these devices possible. It was smartphone usability that propelled these devices into each of our pockets, not a sense of their potential or an abstract belief in what they represented. Tools that help make Bitcoin streamlined and intuitive for users of all backgrounds will have a key role to play on the path toward full-on adoption.

Promising factors regarding bitcoin’s global adoption

Bitcoin is the best hard money asset

Bitcoin is a quickly evolving ecosystem. Developments and trends in the larger cryptocurrency space can be difficult to anticipate; few could have predicted the dramatic rise in popularity of NFTs, for instance, or the surge in awareness and value attributed to memecoins. In El Salvador, Bitcoin has established itself as the country’s legal tender—a degree of adoption that would have been unthinkable a few short years ago.

However, Bitcoin’s growing global adoption is unsurprising, when one keeps in mind that Bitcoin is the most solid and technologically-advanced form of hard money that exists. Though developments, value swings and news stories associated with Bitcoin can be hard to predict, its future is fixed and predictable.

Bitcoin has no elasticity, which means the supply of Bitcoin is not and never will be affected by changes in price. After all, only 21 million Bitcoin will ever be produced. In times of global instability and rapid inflation, Bitcoin’s status as hard money is made even more attractive by how it exists entirely in the digital world, making storage and security solutions ideal.

Bitcoin is always improving

While Bitcoin is often thought of as enabling anonymous transactions, it isn’t fully private by nature. Transactions and address balances are visible on the blockchain to anyone interested in viewing them. While Bitcoin addresses could be thought of as anonymous because they don’t themselves directly link to users’ identity, these addresses can be linked to users indirectly through personal information collected by merchants.

Third-party tools that bolster Bitcoin’s privacy and security represent important developments aiding adoption. coinjoin methods are one way Bitcoin’s privacy can be tightened up. With coinjoin, separation is created between each bitcoin’s past, present and future by pooling and mixing bitcoins to obscure their provenance. Wasabi offers an open-source and easy-to-use Bitcoin wallet that lets users easily utilize customizable coinjoin features.

Factors inhibiting Bitcoin adoption

Government fear and cynicism

Some of the aspects of Bitcoin that make it a powerful and empowering tool are the same aspects that make governments wary of it. Bitcoin cannot be readily regulated and it has the potential to weaken the ability of governments to create monetary policy and influence the economy.

Some forward-thinking governments have utilized Bitcoin to improve circumstances for both the country and its citizens. In particular, 2022 has seen Ukraine benefit enormously by embracing Bitcoin during their hardships. The government has accepted donations and other aid in Bitcoin and citizens have used it to facilitate cross-border transfers, as a hedge against inflation and to mitigate the effects of an unstable national currency.

For the most part, major countries including the United States and China have taken consistent steps to restrict and regulate the use of Bitcoin, as its decentralization poses a risk to their economic control over individuals.

Bitcoin-resistant governments often point to the link between Bitcoin and crime as being at the root of their skepticism. However, many Bitcoin and finance experts have pointed out that the link between Bitcoin and cybercrime is largely overblown.

In 2020, a report from Chainalysis stated that the percentage of cryptocurrency transactions linked to criminal use has been decreasing overall to around a third of one percent of all cryptocurrency transactions today. Meanwhile, the UN estimates that between two and five percent of global GDP can be linked to crime and money laundering—a far higher rate. For this reason, government hand-wringing about Bitcoin’s facilitation of illicit activities can be read as ill-informed at best and deliberately misleading at worst.

In an investigation of how government bodies identify black market transactions, the Wasabi team discovered that governments view anything that was purchased in a “non-compliant” way as a black market transaction, regardless of what was purchased. However, common practices among blockchain analysis firms recognize that black market transactions require more stringent classification.

Technological barriers to entry

There’s an unfortunate trade-off that often happens for new users of Bitcoin wherein monetary sovereignty is traded away in exchange for ease of use. Newcomers to the Bitcoin landscape are often looking for the path of least resistance. These all too often come in the form of heavily-marketed centralized exchanges that can be more closely aligned philosophically with big banks than they are with the modern-day cypherpunk vision.

Users with knowledge of blockchain technology tend to be aware of how to keep their Bitcoin secure, and of the importance of maintaining ownership over their private keys. On the other hand, users who make use of and trust these popular centralized exchanges for storing their bitcoin sacrifice much of the decentralized freedom that Bitcoin represents.

Adoption of Bitcoin in the future can be greatly aided by tools that provide users with a smooth and streamlined experience without leading to increased centralization. Non-custodial wallets like Wasabi that don’t make users give up their private keys are an important development, as they help Bitcoin adoption grow while protecting Bitcoin users from the relentless creep of centralization and regulation.

Wasabi Wallet’s Role in Bitcoin’s Growing Adoption

Beyond the financial benefits of pivoting to Bitcoin, the philosophical implications of a global population that’s vested in increased agency online is a reason to be optimistic for the future. Bitcoin is an inherently idealistic proposition—a decentralized currency that puts users in control of their funds and, by extension, their privacy.

A belief in Bitcoin’s widespread global adoption needs to be rooted in the realities it faces, particularly in terms of security and privacy. After all, Bitcoin’s adoption will only be a success if it retains its ability to be a crypto-anarchist-minded tool that protects users’ secure financial transactions.

The post What the Growing Bitcoin Adoption Means appeared first on Wasabi Wallet - Blog.

Bitcoin is right in the middle of the path to mass adoption. Many still do not understand the disruptive changes in the relationship between the state and the individual that will come with the triumphant advance and expansion of this technology.

Let’s take a look a decade into the future and sketch a likely scenario that could play out:

Western democracies are currently experiencing an economic depression that is exacerbated by a pandemic and geopolitical conflicts. Central banks are flooding the market with an unprecedented amount of freshly printed banknotes to cushion the negative effects on the real economy. The negative long-term implications caused by this are completely ignored or deliberately brushed aside by politicians whose concerns only last as long as the legislative periods for which they were elected.

Continuously increasing inflation rates, rising national debt and the impossibility to accumulate wealth due to ever-increasing tax-rates are only a few worrisome aspects of the much broader concerning status quo.

There’s a diminishing number of new enterprises being formed due to overregulation, increasing time preferences of enterprises & consumers and the corresponding waste of resources from keeping zombie companies alive.

Nevertheless, there is a way out = Bitcoin. This decentralized, censorship-resistant and nonconfiscable store of value with a fixed cap of money supply enables an escape from this broken system. It is not a hidden or unrecognized escape, but more of a traceable escape. Because Bitcoin has a publicly viewable, fully verifiable transaction ledger, it can make individuals transparent and recognizable through once-disclosed personal data being connected to transactions. Certainly this situation will change. By imposing absurd and abusive state regulations, individuals will begin to use privacy-enhancing tools and techniques. The current software for storing and sending Bitcoin will gradually integrate this technology as a fixed component in order to enable the transfer of value to the ever-growing cyber realm – without recognition in terms of traceability of a transaction and assignability to an individual identity.

States can therefore only access the assets of their population with a high degree of difficulty. Prosecution of individuals will be harder with the use of privacy techniques offering legal improvability. There is also no reasonable cost/benefit-ratio from the point of view of the state to further violently enforce their theft of individual wealth. State issued currencies will face harsh competition through Bitcoin. Therefore, in the long run, the behavior and role of the state as a monopoly of coercion dictating many aspects of its people’s lives will change fundamentally.

The individual will be empowered through Bitcoin, forcing the state to offer services for which people are willing to pay lest being abolished. Thus, the state will transform itself into an agency that is comparable to an enterprise serving the individual needs of its customers. The state’s ability to function as an unlawful gangster organization trying to mass-surveil and control everyone’s life will be over.

A deflationary money-system like Bitcoin will let a society emerge in which individuals are incentivized to save, to invest their time in productive activities which are well planned and thought out and punish resource-wasting and rash behavior. Basing on these fundamentals, the economy will flourish and prosperity will grow exponentially.

This is the rough sketch of a future we are heading for with Bitcoin becoming the dominant worldwide standard. A requirement for this playing out is to solve and implement the last part of the puzzle: easy to use privacy in Bitcoin for everyone.

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In the internet’s early days, it was structured more in accordance with anarchist ideals, offering users privacy and a less hierarchical experience. Today, the internet is dominated by government and Big Tech players that have eroded personal autonomy and transparency.

Everyone has a fundamental right to privacy. These days, pushing back against the tide of insidious data collection and online privacy infringements requires the deployment of anarchist-inspired notions of self-determination and privacy as freedom. Wrenching some sovereignty back from overreaching companies, organizations, and government agencies is feasible with the help of privacy-minded tools and strategies. Let’s take a closer look at how digital initiatives that promote greater freedom and autonomy are embracing anarchist principles.

What is Crypto-Anarchy?

The internet is at the root of how many people organize their lives. For this reason, most contemporary discussion of personal freedoms tends to be centered around the right to digital privacy.

The prefix “crypto” is often used negatively to refer to groups who have hidden motives or views. For instance, the term “crypto-fascist” refers to those with fascist views who hide their fascism in order to avoid stigma or consequences. On the other hand, the “crypto” prefix used in the term “crypto-anarchy” refers to strategies for cultivating autonomy that make use of cryptography tools.

As such, while crypto-anarchy is rooted in strategies that foster privacy and anonymity, these goals themselves are not obscured by crypto-anarchists. In fact, many crypto-anarchists are actively involved in promoting the importance and value of digital cryptography tools.

Historically, anarchism itself has been associated with left-wing thought, and anarchy’s aversion to hierarchical structures draws associations to communalism and libertarian socialism. However, crypto-anarchy today has links to anarcho-capitalism, too—a right-libertarian political philosophy centered around ownership of private property absent of centralized control.

Anarcho-capitalism calls for a voluntary society that individuals design themselves with the help of private agencies; in an ideal anarcho-capitalist society, individuals would voluntarily opt into contracts of participation designed to fulfill the will of the people.

Anarchy and Privacy

Anarchist thought is largely centered around skepticism towards coercion from intrusive governing forces. Personal privacy is widely regarded as an inalienable right. For instance, the UN’s Declaration of Human Rights states: “No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence.”

Freedom of thought, freedom of association, freedom of expression, and freedom from discrimination are all rooted in the individual’s right to create boundaries and to choose what to reveal and what to hide from others. Actions as simple and intuitive as putting on clothing or closing the bathroom door are rooted in our implicit understanding that there are aspects of ourselves we prefer not to share with others, for a number of reasons.

As individuals, we make countless decisions about our privacy every day. Insisting that our privacy is not violated without consent is an important way we protect ourselves from abuses of power. However, the ever-increasing role of technology in our lives has blurred our relationship to privacy. While we would naturally feel skeptical of anyone eavesdropping on our conversations, going through our mail, or searching our homes without a warrant, digital surveillance has created a panopticon effect in which it’s nearly impossible to tell who is collecting information about us, and for what purpose.

Crypto-anarchist tools offer users renewed awareness and control over what information they are sharing with external parties, which is an important step in eradicating privacy intrusions.

A History of Bitcoin’s Relationship to Anarchy

The principles that led to the development of Bitcoin are the result of a deep and sustained engagement with anarchist ideals. The original development of this technology can be traced to the Cyperpunks’ mailing list from the early 1990s—a virtual meeting place of early digital privacy enthusiasts.

The Cypherpunks are an example of a digital voluntary society. Many Cypherpunks communicated anonymously by way of aliases, and used cryptographic tools both as a matter of principle—believing in online anonymity as a path towards greater online freedom—and to seize the potential of the power of cryptography as a path towards decentralized and uncoerced economic transactions, for instance.

Challenges Facing Bitcoin’s Role as a Privacy Tool

Bitcoin is a decentralized digital currency. All transactions are permanently recorded and stored on the blockchain without the need for regulatory forces or third-party verification. These are essential aspects of its potential as an empowering and privacy-minded digital currency. However, these characteristics also require additional tools and strategies to ensure its capacity to maximize privacy and personal freedom.

Many newcomers to Bitcoin see it as a short-term investment vehicle, primarily focused on fluctuations in the price of bitcoin rather than the revolutionary potential behind decentralized money. Novice users may leave their bitcoin exchanges, which essentially negates the freedom-related benefits of Bitcoin.

Most popular cryptocurrency exchanges are centralized (CEXs), meaning third parties have control and oversight over users’ funds. The well-known expression “not your keys, not your coins” refers to the fact that those who have access to bitcoin assets’ private keys (CEXs) ultimately have control over the assets.

When users put their private keys in the hands of others, this is an aspect of their privacy (and freedom) that they are giving away in exchange for convenience.

The pitfalls of CEXs go beyond the privacy-related issue of private key ownership, too. Major crypto exchange hacks have occurred in the past, resulting in users losing their bitcoin. Some bitcoin exchanges, including Quadriga, have been outright scams, defrauding users of their money.

One of Bitcoin’s most integral features is how it offers users the ability to have custody of their own assets, without fear of outside interference. An understanding of the fundamental principles of Bitcoin and the history of its development is an important aspect of learning how to use it as a defensive privacy tool.

Defensive Tools to Establish Personal Privacy

Those with limited familiarity with Bitcoin often presume it to be an anonymous currency, but the opposite is true. Bitcoin operates under principles of transparency, which allow all transactions on the blockchain to be publicly viewed and verified.

Users’ public keys can be linked to past transactions, which can be linked to users’ personal identities through Know Your Customer (KYC) policies. KYC requires that merchants collect data about their customers. For instance, if you use Bitcoin to purchase an item from a website, that website may collect your address and other information, creating a link between that information and your Bitcoin address. Users’ IP addresses can also be linked to Bitcoin transactions, leading some users to enlist services that hide their IP addresses.

Anonymizing Strategies

New tools have been emerging that seek to improve Bitcoin’s privacy in order to give users more control over how personal data is shared. Coinjoin is one popular anonymizing strategy for Bitcoin. Coinjoin works by allowing users to temporarily join their funds together, acting as a kind of opaque wall between previous and future transactions.

Additionally, privacy experts tend to recommend privacy-minded internet browsers to make bitcoin-related activity less publicly viewable. Tor’s browser is a well-established anonymizing tool. Its free browser gives users the ability to mask their web activity from outside parties using multi-layered encryption. When it comes to communicating about cryptocurrency transactions, experts recommend end-to-end encrypted messaging services like Signal.

Wasabi Wallet

Privacy-minded digital wallets are an effective way to maintain control over your bitcoin and to address the privacy concerns inherent to Bitcoin. Wasabi Wallet 2.0 is a privacy-focused bitcoin wallet that is user-friendly and offers a shortcut to the privacy-enhancing benefits of Bitcoin as a tool for crypto-anarchists.

Wasabi Wallet is a zero-knowledge tool, which means its developers collect no information about users. Making use of the Tor network, block filtering, and coinjoin technology, Wasabi Wallet 2.0 is trust free. It is also a non-custodial wallet, giving users control over their own private keys, offering the full self-determining potential of Bitcoin.

Wasabi Wallet as a Defensive Technology

Without access to the right tools, protecting oneself from insidious surveillance and data collection can feel overwhelming. Across the internet, privacy and security issues are widespread, and many web-based services are oppressively hierarchical, offering little to no independence and freedom for users.

According to one study from the Pew Research Centre, four in five Americans feel they have little to no control over how their data is viewed and collected online, and around the same number believe the pitfalls of this digital surveillance outweigh any benefits. The same study shows that well over half of Americans are concerned about digital surveillance.

Those interested in preserving their privacy online have rightfully gravitated towards Bitcoin and the crypto sphere, which has a history rooted in strong-willed individualism in the face of intrusion from overbearing institutions. While some people associate the term “anarchy” with the avoidance of rules or consequences, the opposite is true—crypto-anarchist ideals are centered around transparency, equality, and fairness for all. Privacy is a key component of personal freedom, and tools like Wasabi Wallet help users defend their individual online property rights as part of a path toward a more liberated life.

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