The Role of Bitcoin In A Digital Cash Society

Whenever consumers and enterprises think about digital cash, the discussion will ultimately turn to Bitcoin. More and more people are starting to realize the limitations of Bitcoin anonymity, which makes it more appealing as a replacement for cash and traditional payment methods.

Anonymity: Bitcoin Vs. Banks

When it comes to Bitcoin anonymity, there are far more limitations than most people take into account. Generating a Bitcoin address will not require personal information, unlike opening a bank account. But that is only as far as the anonymity goes, as every transaction on the network is publicly available for everyone to see.

Granted, the data itself is still completely anonymous, as there is no personal information broadcasted when making or receiving a payment. This may give the cryptocurrency an entirely anonymous appeal, but that is not the case. In fact, there is an actual blockchain analytics task force as part of Homeland Security, which looks at Bitcoin transactions to find any suspicious activity.

Comparing this to the traditional financial sector, using a bank is more anonymous than Bitcoin is in its current state. Users can only see their own transactions whereas the involved banks can see the full history of every single client. Although a bank transfer includes information of both sender and recipient, there is little to no transparency in this system of centralized digital cash solutions.

But there is another mental drawback to Bitcoin, as the individual user is in full control of their funds at all times. Although this is the major selling point for diehard Bitcoin aficionados, everyday consumers are disconcerted by the fact that losing the private key associated with their address results in a loss of funds. If someone loses their bank card, it can be replaced quite easily. Online banking passwords can be reset, as well as plastic card pin codes.

There is a particular tradeoff to be made between full financial control and little anonymity, compared to hand-holding and no transparency whatsoever. For some unknown reason, most of the consumers seem to prefer the latter, despite them trusting banks a lot less in recent years. Mental barriers are a valid excuse, but there will be a point where consumers have to make a choice and deal with the consequences.

Source: Positive Money

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