Privacy

One of the supposed advantages of blockchains is that they can be run anonymously. However, if this anonymity is ever broken, the immutable ledger means that every transaction throughout time can now be traced perfectly. Maintaining perfect anonymity is extremely hard, and even if one person is successful, if the people they do business with are not also anonymous as well, then statistical techniques can be used to narrow down the possibilities of their identity considerably.

While many people think about anonymity in terms of avoiding law enforcement or taxation, it is not only governments that might be interested in this information. For instance, plenty of criminal organizations would love to be able to identify wealthy but unassuming people. An organization could trace large holdings or transactions of cryptoassets to a specific person and use that as a targeting method for kidnapping or extortion. Add the immutability of cryptotransactions and this could make such attacks very...