The Heart of Darkness

“Arguing that you don’t care about the right to privacy because you have nothing to hide is no different than saying you don’t care about free speech because you have nothing to say,” – Edward Snowden

Financial privacy is one of the key value propositions of Bitcoin. The use of Bitcoin by darknet markets such as the Silk Road accelerated the price and adoption in the early years. Regardless of one’s moral view of items sold on these markets, the darknet and digital currency symbiosis cannot be denied.

Contrary to popular belief, Bitcoin transactions are extremely transparent. The public blockchain can be viewed by all. While the real-world identity of the sender and receiver is not known, sophisticated blockchain analysis can produce the provenance of funds with unsettling accuracy. This is a growing business – already, some exchanges & services refuse to process transactions that originate from sources they deem undesirable (online gaming, coin mixers, stolen Bitcoin etc.).

Financial privacy is not just for criminals, nor should it be. Money, like speech, must flow freely, without governments watching or interfering. A growing subset of digital currencies are aiming to make cryptographic currency transactions completely anonymous. Monero is one contender.

Recently a major darknet market, AlphaBay, began accepting Monero as a form of payment between vendors and customers. This provided the catalyst for a 290% price pump in the last week. Monero trading volumes exploded higher on Poloniex. At a $121 million market cap, Monero is now the fifth largest digital currency.

Last week, BitMEX listed the world’s first Monero / Bitcoin (XMR/XBT) futures contract, XMR7D. XMR7D has quickly become the most heavily traded altcoin on BitMEX.

Product Highlights:

  • Each XMR7D contract is worth 1 XMR.
  • XMR7D expires each Friday 12:00 UTC on the Poloniex XMR/XBT exchange rate.
  • Margin, profit, and loss are denominated in Bitcoin.
  • Go long or short XMR7D using only Bitcoin. There is no need to ever touch XMR.
  • Trade XMR7D with leverage of up to 10x.

If the Monero technology can live up to its promises, expect further price appreciation. Users and traders are quickly realising that Bitcoin is not a form of censorship-free money. Bitcoin is still a better store of value than Monero, but cannot match its utility for transactions requiring privacy.

Another anonymous digital currency we are watching closely is Zcash:

“Zcash offers total payment confidentiality, while still maintaining a decentralized network using a public blockchain. Unlike Bitcoin, Zcash transactions automatically hide the sender, recipient, and value of all transactions on the blockchain. Only those with the correct view key can see the contents. Users have complete control and can opt-in to provide others with their view key at their discretion.” []

Our team is excited about the possibilities of zk-SNARKs in digital currencies. A zk-SNARK (zero-knowledge Succinct Non-interactive ARgument of Knowledge) is not just a funny acronym – it could be a revolution in online privacy. As such, BitMEX is preparing for the October 28, 2016 launch. As soon as trading is available, you can expect a Zcash / Bitcoin derivative.