Bob, who has a tax file number, buys crypto currency under his government registered identity, from a government registered and regulated corporation, as if buying shares. This generates a record, accessible to the state, that his wallet controls a bunch of public keys, which control transaction outputs representing ones, twos, fives, tens, hundreds, two hundreds, five hundreds, and so forth.
Subsequently Bob wants to pay Edward. His wallet advertises for other wallets to perform a coinjoin. Ann, Bob, and Carol put various amounts into the transaction, and the outputs are controlled by new public keys – and it is hard for an outsider to know who controls the new keys of the new outputs. Some of those outputs are controlled by Edward some by Bob, but from the blockchain, outsiders cannot tell which of the participants controls which of the outputs, and probably cannot identify most of the participants.
While the outputs Bob initially received were likely linked to his government registered identity, the outputs he subsequently participates in generating probably have no very strong link to any one identity.
Subsequently an output winds up under the control of Dave, who might be Bob’s identity in another country, or someone connected to Bob in another country. Dave wants to sell the crypto currency for a bag full of Filipino pesos, Philippine government issued fiat money. Government regulation in the Philippines tends to be unreliable and unpredictable, except when Duterte throws a few of the more corrupt bureaucrats and fanatical social justice warriors out of his helicopter, whereupon it improves for a while.
Fred is in the business of buying and selling cryptocurrency for Filipino pesos, and has a human readable name registered in the blockchain, and a public key associated to that name. Dave performs a transaction where one of the outputs is controlled, not by a random freshly created public key, but to that registered and well known public key, that is associated with Fred and Fred’s well known and widely advertised business. The amount is not a round amount, a not a one or a two or a five or a ten, but the specific and exact amount. This creates a record that anyone can see that Fred received the money. And if Fred cheats Dave, Dave can issue a review of Fred, and create a record in the blockchain that anyone can see proving that the person who controlled the money that Fred received endorsed this review about Fred’s services. Thus the blockchain can provide reputational enforcement of non anonymous transactions. But the chain of transactions that started with Bob and ended with Fred may well be untraceable. The blockchain will not provide information linking the transactions. The money starts out in government enforcement of a public transaction, passes through anonymous and private transactions, and ends in blockchain enforcement of a public transaction that may well not be registered with or recorded by the government.
This plan reflects our intent to replace government mediated trust and cooperation, with blockchain mediated trust and cooperation, because government mediated trust and cooperation is conspicuously failing.
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