Unpaid transaction output distorts BTC liquidity – Litecoin founder

Litecoin (LTC) founder Charlie Lee appeared at this year's Proof of Work Summit in Frankfurt, Germany, comparing Litecoin's privacy-enhancing features to the unimpeachable transparency of the Bitcoin (BTC) network.

Lee explained that the unused transaction tokens (UTXOs) that form the basis of Bitcoin's ledger contain a history of how the transactions were used – potentially compromising the functionality of the digital asset. Lee told the audience:

“Because of the history associated with each Bitcoin that is spent, not every Bitcoin is equal to every other Bitcoin – something that I think is important for money.”

A hypothetical example of this is the onchain analytics company linking accounts to Bitcoin addresses believed to be associated with illegal activities. The account could prevent investors or traders from receiving the BTC associated with the address – reducing the market value of those coins and coins.

Additionally, if the Bitcoin in question passes through centralized exchanges or other institutions known to control your client, the assets may be frozen or seized by order of government authorities such as the United States Office of Foreign Assets Control (OFAC).

RELATED: Tornado Cash to face trial after Roman Hurricanes judge denies dismissal.

The fight for privacy comes into sharp focus

Privacy on the Bitcoin network is very difficult, but not impossible. On September 20, a secretive team of developers announced a fork of the privacy-preserving Samurai wallet.

Ashigaru's open-source project uses CoinJoin and other mechanisms to cover Bitcoin transactions, and builds on the work of the original Samurai team — although the new Ashigaru team denies any ties to the previous developers.

Paul Brodie, global blockchain leader at EY, recently told Cointelegraph at Token2049 that lack of privacy is becoming a barrier to blockchain adoption. The executive explained privacy issues, especially for large institutions that need to keep certain information confidential.

Businesses are “very happy to tell us how many tonnes of carbon they're saving,” Brody said. “You don't want to be able to see that from week to week or day to day.”

Magazine: Did Telegram's Pavel Durov commit a crime? Crypto advocates weigh in.