In light of recent events within the bitcoin industry, namely the Evolution Marketplace going up in a burst of flames with customer money, it has become clear that cryptocurrency deviates from traditional money in more ways than initially meet the eye.
Bitcoin, among a slate of other cryptocurrencies, violates the principle of fungibility within money - that is, each coin's transaction history differentiates them from every other bitcoin in circulation. With the collapse of the hidden Evolution Marketplace, these coins have now been tainted, and services are wilfully denying their deposit into wallets held by exchange businesses.
Bitcoin fungibility has been called into question and it is becoming glaringly obvious that this poses a threat to the stability and long-term usage of such currency. Exchanges want nothing to do with these stolen funds, and therefore, lessen their value in relation to otherwise identical cryptocurrency units.
“Fungibility is the property of a good or a commodity whose individual units are capable of mutual substitution. That is, it is the property of essences or goods which are capable of being substituted in place of one another."
Cryptocurrencies such as DASH (formerly darkcoin) have come onto the scene with promises of anonymizing transactions by design, something which is not implemented in the core of Bitcoin.
Dash has since seen a dramatic rise in value since the collapse of the Evolution Marketplace and could continue to gain traction as users discover the importance of relatively-untraceable transfers. However, what is becoming more apparent, is that Dash holds a competitive advantage over bitcoin in the very make-up of its monetary characteristic - that of improved fungibility among its coins.
-- Dash has gained momentum following the collapse of Evolution Marketplace
Is bitcoin perhaps too traceable? Does the anonymizing function of Dash and future cryptocurrencies pose a grave threat for the current king of cybermoney?
One could perhaps make the argument that this type of transaction history surveillance will only intensify with bitcoin similarly to how closely watched an individual's social media activity is today. Is it reasonable to believe that, eventually, all transactions will be 'forensically accounted' for?
As we move forward, look for blockchain applications, which map the relationship (and the identities) behind digital money, something where Dash and other cryptocurrencies propose to be the 'Tor' of digital money.
Time will tell all, but it remains self-evident that bitcoin violates the principle of fungibility in a way which is structurally different from any form of money we have seen to date.
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