Let's take a look at some general challenges regarding privacy in blockchain and the solutions to overcome those challenges. Eric Hughes, cofounder of the Cyberpunk Movement, UC Berkeley, and a well-known mathematician, said in 1993 that privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary system. An anonymous system empowers individuals to reveal their identity when desired, and only when desired. But, is this the case with Bitcoin and public blockchain? There is a popular delusion that Bitcoin is anonymous and untraceable. It's an understandable mistake, given Bitcoin's popular use case, which was the infamous Silk Road we covered in earlier chapters.

The FBI was able to trace and expose people involved in this case with the help of immutability in the Bitcoin blockchain. However, we must not ignore that they were able to trace the flow of currency and single out the exact person they sought. The truth is that Bitcoin is indeed pseudonymous and traceable. Every transaction in Bitcoin maps the inputs to the outputs, allowing anyone to follow the money in a very trivial manner. Satoshi Nakamoto in his white paper defined Bitcoin as a history of its custody. In 2009, he stated the following: