Economist: people will demand Bitcoin in the future due to its privacy features

29 Aug, 2018
by Matthew Kim
News
Economist: people will demand Bitcoin in the future due to its privacy features

In a research paper recently published by the Federal Reserve Bank of St. Louis, economist Charles Khan argues that there will eventually be a demand for Bitcoin due to its privacy features.

In the paper, Khan argues that Bitcoin could serve as an alternative means of payment because “privacy in payments is desired […] for protection from malfeasance or negligence by counterparties or by the payment system provider itself”. Currently, physical cash system allows for payment privacy, but that could be stripped away when the central banks attempt to replace cash with electronic money. Thus, Khan believes that the “replacement of cash by central bank electronic money is likely to spur demand for alternative means of payments to solve specific privacy problems”.

Khan further stipulates that one of the advantages of Bitcoin is its ability to give users privacy even from the payment ecosystem. Unlike third-party payment providers, such as PayPal, Bitcoin does not require the identification of its users to access the system. With its unique multisignature feature, Bitcoin allows anyone to transact with Bitcoin without the exposure of any personal information.

Khan accepts that there are problems with granting people too much privacy, namely the incapacity to trace illegal activity. But he argues that there are aspects of privacy that make it crucial and necessary for the common folk. Therefore, Khan believes that people will eventually use Bitcoin in search for payment privacy, at least until the “golden age of smart contracts” that he believes is coming.

To read the rest of the paper, visit this page.

Read more about: Bitcoin (BTC)

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