PIVX and the importance of privacy

Costly compromises in privacy always start innocently

Some years ago, the government of the country in which I reside passed a law requiring residents to declare their financial accounts located in foreign countries. Ostensibly, the purpose of this law was to support a new “wealth tax”—a small tax levied on one’s worldwide assets.

Although the wealth tax was economically trivial, failure to accurately report on such accounts would result in draconian fines, as well as potential criminal proceedings. Residents were assured by the government that their knowledge of these accounts would not be used for other purposes, but the imbalance between benefit of purpose and consequence of non-compliance felt ominous.

Later, as a resident with financial activities in other countries, I was subjected to a tax audit, which concluded in the revenue service making a claim against me that was contrary to international law, and the only way I could defend myself would be through appeal to international court. Not only would that path be expensive and complex, but if I chose to pursue it, the law required first paying the claimed amount, and then trying to have it returned through a reversal in court.

The revenue service pointed out that I shouldn’t bother even trying to argue that I don’t have the funds to pay, because they have access to the information I’d previously reported regarding foreign accounts.

Costly compromises in privacy always start innocently.

Governments love cryptocurrency

Having knowledge of a resident’s foreign financial accounts is useful to governments, but it’s not, in their perspective, ideal—because they don’t yet have systems in place to monitor the activities of these accounts, and information exchange between western countries is not yet complete.

For those reasons, governments still have to rely on their residents to accurately update their records periodically. Where I live, these records have to be updated annually, and reported changes of balance can be investigated.

While your first instinct might be that governments would fear a situation in which its residents begin shifting wealth from traditional financial institutions into crypto currency, they actually love the idea. Why? Because if they know the addresses on which you hold crypto wealth, they can perfectly monitor incoming and outgoing movements themselves on the blockchain.

And for that very reason, the country where I reside is discussing new laws requiring its residents to declare all addresses on which they hold crypto currency. And failure to provide those addresses, on an ongoing and complete basis, is subject to the same draconian fees and potential criminal proceedings as those covering the current foreign accounts reporting requirements.

PIVX and privacy

The fundamental currency of the PIVX network is the PIV, which is as transparent on its blockchain as bitcoin. The PIVX project, however, was born out of the importance of privacy, and implemented something called the “zerocoin protocol” that allows PIVX users to convert their publicly traceable PIV to and from a currency called zPIV, within their PIVX wallets.

The zPIV holdings of a PIVX user are anonymous. They are not associated with any addresses on a blockchain, and therefore can’t be viewed or monitored. Nobody other than the PIVX user themselves have visibility into their zPIV holdings.

And with this week’s release of PIVX version 3.1, the project further promoted privacy, by incentivizing users to convert their holdings to zPIV, as those anonymously held funds now earn an attractive rate of (anonymous) interest—upwards of 6% per year!

This capability has tremendous benefit for someone like myself. Specifically, if I hold wealth in zPIV, I can—without perjuring myself and becoming a criminal—refuse to provide any government with blockchain access to monitor that wealth—on the basis that it’s not technically possible. That is pretty profound.

Today, the community of people in the developed world directly affected by loss of privacy may be relatively small. But the world is changing, societies continue to cede privacy in the name of other values such as security, and the unexpected consequences of these sacrifices usually become apparent only once its too late.

For that reason, I’m thankful for projects like PIVX that work to provide individuals with the tools and technologies that support self-sovereignty and individual freedom.