just read this and thought stashers might find it interesting too:
Alright, I'd like to have a discussion regarding bitcoin's fungibility (or lack there of).
I am a bitcoiner and have been for a decent number of years but I would ask that we leave our maxi hats at the door and look at this objectively because in my opinion, it is one of the biggest issues that I see with Bitcoin. And I'm going to talk about the forbidden shitcoin Monero so please if I offend the NGU cult with my shitcoin talk, then stop reading here.
This will be a bit of rambling while I think through this issue.
As we know, on-chain Bitcoin is a public ledger and every transaction is there for all to see. Chainalysis creates risk scores based on each utxo's history and these scores are used by any regulated exchanges that interact with the fiat system.
Now already, there will be people that say "well, just don't interact with the fiat system at all and it won't matter". I mostly agree with this take but it is a non-answer to the problem. For the foreseeable future, 99% of people have to interact with the fiat system in some form or fashion. Even in a future where we are on a "Bitcoin standard", this issue of chainalysis flagging funds used at a business would likely still exist. The transaction would not be stopped from getting to its recipient but the utxos would be flagged like they are today if "tainted" utxos are sent to an exchange. I see the idea or mention of "tainted" Bitcoin as a failure in bitcoin's fungibility. While I reject the framing of "tainted" utxos, it is a real issue for anyone who needs to interact with fiat.
Enter lightning. Lightning does help with the fungibility issue of on-chain Bitcoin. As a sender, you have much better privacy. I have opened lightning channels with coinjoined funds and spent them at a square terminal. This is a great step in the right direction. I haven't tried to send them to strike or cash app or one of these exchanges to see if it gets frozen there.
The issue that I personally have with lightning is that the complexities of it almost force people to use a custodial solution. The idea of my parents or my grandma keeping 12 or 24 words safe and using an on chain wallet is actually doable. Thinking about them opening channels and balancing channels and dealing with some of the headaches of lightning to truly use it self custodially is laughable.
In my opinion, one of the main benefits of Bitcoin for me is being able to custody my money myself. The way that many people (and I'd venture to say most) use lightning is in a custodial fashion or in a quasi custodial fashion with spark where the liquidity provider sees every transaction.
I want to challenge people to think about the trade-offs that we are ushering newcoiners into. Many people learn and slowly upgrade their wallet setups as they learn to improve security and custody setup. However, it usually requires listening to 40HPW of Bitcoin podcasts and watching a bunch of btc sessions videos.
The fungibility issue is improved by using lightning but it's often coming at the expense of custody or privacy (LSP sees all transactions with the exception of maybe Zeus). Bitcoin on chain struggles with fungibility and lightning is generally adopted in a custodial way.
The purpose of me bringing this up is I guess I live in a fantasy land where I'd like to have the simplicity and reliability of on-chain Bitcoin with the fungibility of lightning. I'd like for future bitcoiners to not have to be a sysadmin to be able to use lightning in the most private and secure fashion without giving up custody.
Physical cash is fungible. It doesn't matter if the bill has been in a strippers crack or if it's straight from the money printer, it spends the same. Monero is fungible. It sacrifices the hard supply cap and the simplicity of auditing the supply for privacy/fungibility. If Bitcoin is going to be freedom money, it needs to be fungible.
Ok like I said, this was going to be rambly but hopefully it was enough information for people to be able to discuss what I believe to be the most frustrating aspect of Bitcoin.
Ok, discuss.
The use case for BTC was pwnd in the Canadian Trucker protest imho.
Yeah, COVID was a litmus test for so many things... and people...
https://stasher.news/uploads/708
yeah. that was the demo. fungible money does not snitch.
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Bitcoiners are all just constantly slowly marching towards the discovery that every design decision made by Monero is superior from first principals. They must maintain their cognitive dissonance throughout this process by throwing in things like "the forbidden shitcoin Monero" or "It sacrifices the hard supply cap and the simplicity of auditing the supply for privacy/fungibility". Yes, privacy makes auditing a bit more difficult. Yes, the tail emission is a trade off (I would argue not really related to privacy or fungibility)(I would also argue a worthwhile tradeoff as a means of a more sustainable design). Bitcoin constantly discovers the things that Monero deviated on were actually intelligent and preferable decisions over time. Damned near every other block chain just treats privacy as a bolt on feature, but it's not. Bolt-on privacy is almost always porous and finicky.
I think any Bitcoiner that hasn't converted to subordinating their Bitcoin support to Monero is likely just suffering from a bag bias or sunk cost fallacy (especially since many of them probably ardently went to bat for Bitcoin in the past).
The telling line in the replies is this one: "I might need to ask myself whether you really can have censorship resistance without fungibility. THIS is the question we need to be asking." That is the whole argument. A coin a blacklist can refuse is not the same coin. Cash does not care where the bill was. Bitcoin does. Monero does not.
Also hard not to notice: a lot of the fungibility talk over there is from anons. Either Stacker accounts with a reputation are uncomfortable saying this under their own name, or some of us went over and said the quiet part?
...and the rest of that thread is mostly people circling it without landing lol ))
I bet that did not go down well over there.
The maxi crowd does not seem to enjoy swallowing the bitter pill
Yeah, this is basically why I left.
I started with Bitcoin early, and then I actually got off it and went to Monero, because the fungibility isn't there and the whole thing is completely transparent. People still talk about it like it's private, or like one coin spends the same as any other, and that expectation is the part I have a real problem with. If someone can flag the coins for where they've been, they are not the same money, and telling people to just never touch fiat doesn't fix it, because almost everyone still has to.
The Lightning part is the same problem. It can quiet the sender, and then the version a normal person can run usually means someone else is holding it or seeing the spend, so the custody gets traded away to paper over a public ledger.
I don't think Bitcoin grows into cash, because cash doesn't care where the bill was and Bitcoin does, so I stopped waiting on it. Monero was the one that didn't ask me to pretend.
agree. “just never touch fiat” is not an answer. and if someone can flag the coin for where it has been, it is not the same money. lightning just trades the snitch for a babysitter. that is why monero is the only real crypto-currency.