Key Takeaways:
- Saifedean Ammous questions the critical importance of privacy in money, favoring hard money resistant to debasement.
- Ammous criticizes Zcash for its reliance on a trusted setup and doubts the auditability of shielded transactions.
- Diverse reactions from crypto industry figures, including Barry Silbert and Zooko Wilcox, regarding the importance of privacy in Bitcoin and cryptocurrencies in general.
- Focus on the trade-off between privacy and auditability, considering regulatory challenges and transaction tracking.
The Controversy Unfolds:
Bitcoin advocate Saifedean Ammous ignited a lively debate between Bitcoiners and privacy advocates after he questioned the perceived importance of privacy as a key characteristic of money. In an exclusive interview, Ammous stated, "This is the question. How much demand is there for money that does not get debased versus how much demand is there for money that allows you to maintain your privacy?"
Ammous's Critique of Zcash:
Ammous, the author of "The Bitcoin Standard," described Zcash as a "shitcoin" and raised concerns about the initial launch of the project, which involved a trusted setup ceremony in 2016 to generate the cryptographic parameters for its privacy features. "The whole thing is built on a trusted setup, where you have to trust a bunch of people who started the whole thing. I’m not in any mood to get into these kind of stupid games," Ammous elaborated.
Privacy vs. Hard Money:
While admitting that he did not have in-depth knowledge of Zcash’s protocol, Ammous also questioned whether the privacy features of Zcash would limit the ability of people to trust the total supply of ZEC tokens: "As I understand, the anonymity benefits come at the expense of the auditability benefits."
Zcash features the ability to use shielded and unshielded ZEC to make transactions. Shielded ZEC is used in transactions that are encrypted and private, hiding the sender, receiver, and amount from the public blockchain. This privacy is achieved using zero-knowledge proofs, which allow the network to verify transactions as valid without revealing sensitive details. Despite Ammous’s concerns, shielded and unshielded Zcash pools are publicly verifiable on several blockchain explorers.
Industry Perspectives:
Several key figures from the cryptocurrency industry weighed in on the debate. Helius co-founder Mert Mumtaz described Ammous’s question about monetary debasement versus privacy as a "false dichotomy: You should have money that is not debased and is private. That’s Zcash. Further, you just can’t have money that’s free from the state unless it’s private. If it can be seen, it can be seized."
Digital Currency Group founder and CEO Barry Silbert stated that privacy still remains a core concern for Bitcoin supporters: "I’m old enough to remember when all hardcore Bitcoiners cared about privacy. Fortunately, many still do."
The Future of Privacy on the Blockchain:
Zcash co-founder Zooko Wilcox also commented on the thread, highlighting the fact that the Canadian government had managed to track down Bitcoin addresses linked to striking truckers due to the transparent nature of Bitcoin’s blockchain. X users continued to comment and debate over the merits of privacy in money and the fundamental differences between Zcash and Bitcoin. Ammous conceded that privacy in blockchains is an evolving phenomenon. When it comes to Bitcoin, the professor believes that some of the privacy features that BTC users might want can be entrusted to layer-2 protocols and platforms. "On the issue of privacy, it’s interesting how it’ll evolve. One unpopular opinion I have is that onchain privacy is very difficult and continues to get more difficult. That’s not necessarily a bad thing because people can get the privacy they want on second layers and I don’t think it compromises it."
Conclusion:
Ultimately, Ammous’s academic background remains rooted in the belief that hard money is essential for prosperity and economic growth. He added, "I think people would rather have hard money that is not private, over easy money that is private. The narrative that people want privacy in their money, I think is massively overblown in order to produce marketing for shitcoins." Ammous added that money, "by its nature, is an anti-private technology," given that any exchange typically leaves breadcrumbs of information, especially in a digital world. He concluded, "So it’s very difficult to make money into something that is private and onchain, it’s always going to be difficult. But what people really want is resistance to debasement. That’s the thing that actually has a $300 trillion total addressable market."
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