Anonymity in broadband and cryptocurrency

The U.S. Supreme Court issued an opinion in Timothy Carter v. United States (No. 16-4012) on the question of whether there was a reasonable expectation of privacy where cellphone information stored by a wireless carrier is shared with the government without a warrant issued on the basis of probable cause. The court ruled last Friday that using third-party cell storage location information to track the physical movements of a citizen requires a warrant less the Fourth Amendment of the U.S. Constitution be violated. The Fourth Amendment provides the following:

“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by the oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.”

This opinion is pretty narrow and by that, I mean that the court’s holding in this case may not hold when the issue does not involve seizing information documenting an individual’s movement over a long period of time or the involuntary sharing of such information with a third party.

I admit that on the surface, this case may have nothing to do with the transmission of digital information in the form of currency given its narrow meaning. Cryptocurrency is still in its infant stage. Unlike a cellphone that generates continuous cell site location information, I doubt at this stage of crypto growth that you will have a consumer making 127 straight days of transactions such that miners are continuously verifying a consumer’s transaction blocks. It may be another matter for vendors that accept cryptocurrencies that are accepting crypto every day.

What cryptocurrency does have in common with the case is the threat to anonymity. While the general description of cryptocurrency includes anonymity, anonymity is, like the information transmitted by a cellphone, not guaranteed.  In a piece for CoinDesk.com, writer Adam Ludwin describes how cryptocurrency transactions can be “deanonymized.”  While anonymous, Bitcoin transactions, for example, are not private. Transactions are recorded in a distributed ledger called a blockchain. Anonymity is more a function of the Bitcoin protocol, but during a user loses anonymity when their identities are linked to their initial Bitcoin currency purchases, whether done via a digital wallet or via an exchange.

Mr. Ludwin describes how anonymity can be gained by buying Bitcoin from a private holder or buying from an exchange.  But just like a mobile broadband communications network can betray a subscriber’s identity, so to can a cryptocurrency network, whether via the public nature of Bitcoin’s transactions ledger or via the IP addresses of the computers originating Bitcoin transactions.

 

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