Unspent transaction outputs distort BTC fungibility — Litecoin founder

Charlie Lee, the founder of Litecoin (LTC), made an look at this 12 months’s Proof of Work Summit in Frankfurt, Germany, to distinction Litecoin’s privacy-enhancing options with the practically inescapable transparency of the Bitcoin (BTC) community.

Lee defined that the unspent transaction outputs (UTXOs), which underpin the Bitcoin ledger, carry a historical past of how the transactions had been spent — probably ruining the fungibility of the digital asset. Lee advised the viewers:

“Because of the history attached to every Bitcoin that is spent, each Bitcoin is not equal to another Bitcoin — which is something that I think is important for money.”

A hypothetical instance of this could be an onchain analytics firm attaching labels to a Bitcoin deal with believed to be related to illicit actions. The label could dissuade traders or merchants from accepting BTC related to the deal with — reducing the market value of these specific cash and sats.

Moreover, if the Bitcoin in query passes by way of centralized exchanges or different establishments with Know Your Customer controls, the belongings could possibly be frozen or seized on the behest of presidency authorities such because the United States Office of Foreign Assets Control (OFAC).

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The combat for privateness comes into sharper focus

Privacy on the Bitcoin community is notoriously tough, however not unimaginable. On Sept. 20, a mysterious group of builders introduced a fork of the privacy-preserving Samourai Wallet. 

The Ashigaru Open Source Project makes use of CoinJoin and different mechanisms to masks Bitcoin transactions and builds on the work of the unique Samourai group — although the brand new Ashigaru group has denied any connection to the earlier builders.

Paul Brody, the worldwide blockchain chief at EY, lately advised Cointelegraph at Token2049 {that a} lack of privateness was hindering blockchain adoption. The government defined that privateness issues, particularly for giant establishments that should maintain sure info non-public.

Businesses “Are very happy to tell you how many tons of carbon they save,” Brody said. “They just don’t want you to be able to see that on a week-to-week or a day-to-day basis.”

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