Bitcoin Mixers the Next Target for Regulators?

The draw of Bitcoins for some users of the cryptocurrency is the promise of anonymity in a global marketplace where privacy can come at a premium. Bitcoins, are, in fact not completely anonymous. Every transaction is publicly logged, and if one person is linked to a specific address and identified, the identities of every person who has held possession of that Bitcoin may be compromised.

Looking to improve on transactional privacy, several “Bitcoin laundries” have promised anonymity - for a price. These services mix Bitcoins, allowing the transfer of one Bitcoin for another for a transaction fee. The legality of this practice has come into question, though these mixers never handle currency so they are technically not exchanges. The problem is, Bitcoin owners must trust the service providers to quickly delete user data, and more importantly, trust that their Bitcoins won’t be stolen.

With Bitcoins facing regulatory pressure, developers from John Hopkins University have worked on a new Bitcoin protocol called ZeroCoin that would allow for true anonymity without the need for mixers in the middle, Forbes reports. The success of ZeroCoin requires the consensus adoption by Bitcoin miners after a rewriting of the Bitcoin protocol.

There needs to be a major discussion on the future of Bitcoin and whether complete anonymity is the goal, since such a step would most certainly provoke extreme regulatory actions from major governments across the world that fear money-laundering and the illicit opportunities such anonymity would create. It would certainly seem that harsher regulations would push Bitcoins to become even more decentralized, or encourage a new cryptocurrency with a focus on privacy and anonymous transactions, as was the case with the development of BitTorrent.