A quest lay before you
“It’s a dangerous business, Frodo, going out your door. you step onto the road, and if you don’t keep your feet, there’s no knowing where you might be swept off to.”
Greetings adventurer! I am a guide of sorts, a harbinger if you will. You have arrived at an important crossroads, and if you’re here, I assume you understand or are at least curious about, the value of Bitcoin. I don’t mean “value” measured in some country’s fiat currency, but its value in being used as freedom money; censorship-resistant, peer to peer, digital cash. So I’m not going to explain to you why you should acquire and use Bitcoin, but stand here as a warning to you about how you acquire Bitcoin. This will be the first piece in a series on acquiring NoKYC Bitcoin, or as I call it Ethically Sourced BitcoinTM
There are a number of ways to acquire Bitcoin and we will not discuss them all here, but you need to understand that, as with most things in life, Bitcoin acquisition methods range on a scale where privacy is inversely proportional to convenience. Said another way, the most convenient ways of getting Bitcoin in terms of time and UI are usually the worst for your privacy.
Most of this has to do with the convenient methods being brought to you by regulated businesses that comply with KYC/AML laws. You’ve probably heard the terms KYC vs NoKYC Bitcoin. But what does that actually mean?
The All-Seeing Eye
“Concealed within his fortress, the lord of Mordor sees all. His gaze pierces cloud, shadow, earth, and flesh. You know of what I speak, Gandalf: a great Eye, lidless, wreathed in flame.”
KYC stands for “Know Your Customer” and AML stands for “Anti Money Laundering”. These are rules that governments place on banks that require surveillance, tracking and reporting of what these governmental institutions deem “suspicious activity” in order to help stop financial crimes and use financial information to track criminals. Of course there’s no way they could monitor and report “suspicious activity” on a global scale in real time, so they just record everything and save it to go back over later. At least that’s the reason they state. Though there are many sordid tales of Deutsche Bank and HSBC being involved in repeated money laundering schemes, but that’s not for common folk like you or me to worry about, right adventurer?
The Wide Road
“Give Gondor the weapon of the enemy. Let us use it against him!”
The most convenient method of accumulating Bitcoin is by far the use of a centralized exchange (CEX). Most have mobile apps available, with intuitive UX, and are available 24/7. While there were some arguments to be made during the fork wars about CEXs being politically motivated to profit from other coins, there are several options now that offer Bitcoin-only automated purchases, if that is the kind of thing that sways your mind. And large volumes at CEXs mean lower fees for purchases and transactions.
So what’s the tradeoff? Just all your personal, financial information, Adventurer! And the government probably has all that anyway right? Firstly remember that Bitcoin on the exchange is only an IOU of Bitcoin. Until you withdraw it, you do not possess it. Secondly, there are many who believe that consistently stacking sats on the exchange and then withdrawing gives them a weapon against the powers of darkness that oppress our lands, but if Bitcoin is truly used against them, do you think they will not come for those on record as buying that weapon Adventurer? Nay. They will first confiscate these Bitcoin IOUs, and then chase after those who they can prove purchased Bitcoin but moved it elsewhere. And while this will likely end in long, drawn out legal battles in some countries, it is best to have someone else fight that battle, knowing you are not on that list.
The Narrow Path
“Travel only by day, and stay off the road.”
There are ways of acquiring Bitcoin without submitting your information to the all-seeing Eye. The simplest options are to purchase directly from another person, or to mine bitcoin with specialized hardware. You can also earn bitcoin for your work or purchase it in a sovereign fashion, such as through a Bitcoin-ATM or from a decentralized exchange (DEX) like Bisq or Robosats. That being said, each has it’s own set of inconveniences or extra steps that need to be taken for the sake of maintaining your privacy. We will talk about these later in this series, but know this, the systems in place are designed to make you feel like a criminal for this choice. Steel yourself and have courage, Adventurer, for this is actually the path of the hero.
KYC is a danger to all
While many are willing to give up their personal information because they believe they “have done nothing wrong so they have nothing to hide”, the notion of criminal is dependent on your local legal frameworks. Many places no longer recognize the right to defend yourself or to speak freely about your government or others.
JStark was a pioneer and activist in the home gunsmithing community. He was one of the architects for the FGC-9, the first fully functioning gun that was able to be assembled with non-gun parts by anyone with a 3d printer. Unfortunately because of where Stark lived, this was illegal. A British financial institution (working with a CEX) alerted his local government that he might possibly be purchasing and distributing 3d firearms, which led to a raid on his residence. While he was not home at the time (at least according to local law enforcement) he was found dead a few days later. Some will say that they killed him, some that the stress was too much for a man with a known heart condition. Either way, his death is linked to KYC enforcement.
We saw similar problems arise in the Canadian Trucker Convoy in January and February of 2022. Seeing the opportunity to help via Bitcoin, a campaign named HonkHonk Hodl was set up on the Bitcoin crowdfunding platform TallyCoin to receive Bitcoin donations to help with the protest. It gained publicity over the next few weeks as a similar campaign on GoFundMe was shut down and other fiat crowdfunding attempts were stopped or bank accounts frozen. Later in February, Canada’s FINTRAC sanctioned a number of bitcoin addresses associated with the HonkHonk Hodl campaign, and labelled anyone interacting with those as terrorists. They could not stop the process, but they could watch the transparent blockchain. In terms of censorship resistance, using Bitcoin was a massive success. In terms of privacy however, HonkHonk Hodl really missed the execution. Prioritizing transparency to donors rather than privacy and effectiveness with recipients, the campaign did not do a great job of helping the truckers spend or convert privately, despite TallyCoin having the option to use Paynyms. Many tried to withdraw to centralized, KYC-enforcing exchanges which ultimately ended in frozen funds or time in jail.
But let’s say you obey all the laws of your local land and have no plans to ever travel to a place where your current ideals may one day run afoul of law enforcers. Is KYC still an issue? Adventurer! Have you not heard the tale of Binance the Large? Binance the Large requested their customers send selfies with their identification in order to comply with KYC requirements, only to have that information copied and sold in darknet markets after Binance was hacked. This information is often used to open subsequent accounts at other exchanges. So yes, KYC is bad for everyone, even if you do everything in your powers to follow the law.
Keep it secret, Keep it safe
“There is one other who knew that Bilbo had the Ring. I looked everywhere for the creature Gollum, but the enemy found him first. I don’t know how long they tortured him, but amidst the endless screams and inane babble, they discerned two words: Shire, Baggins.”
The Lord of the Rings might have been a very different tale, if Sauron’s forces had not found out about Bilbo having the One Ring by torturing the creature Gollum. Likewise, every time Frodo used the Ring, a direct connection was made to Sauron and his Nazgul. Think of your Bitcoin privacy in the same way. While forward-looking privacy is also important so you don’t stab yourself in the foot, the record of KYC purchases lasts forever and is a critical starting point for anyone- law enforcement, hacker, stalker, whomever -to begin hunting you. There is NO WAY to undo the record of KYC. Imagine it as walking through wet cement, so that you leave lasting footprints for others to follow. Using techniques like atomic swaps, coinjoin, etc might obfuscate where your footprints went from there, but there is no denying that you were present, so the best move is not to ever go down this road.
The road goes ever on
In the next installment we will discuss the avenues to ethically source your Bitcoin, that is, we will go into more detail about acquiring Bitcoin without KYC.
Many thanks to The Sovereign Bitcoiner for sharing their article