If Amazon ever accepts bitcoin, you're effectively allowing Amazon to track all of your non-Amazon bitcoin spending too (via the public ledger) since they'll know your address and/or name. You'd have to go through a third party to obfuscate the bitcoin's source wallet, which I suspect most people won't do (if mass adoption of bitcoin occurs).
The moment a physical address / name are associated with a wallet, any spending from that wallet can be tracked back to you forever. If a substantial number of people are using bitcoin on Amazon, then effectively Amazon will be able to track what and where all of those people are spending their money.
Multiply this across all retailers, paycheck services, government institutions (e.g. the IRS), etc... and bitcoin effectively allows many corporations and governments to track any of your spending and (perhaps more importantly) wealth associated with bitcoin. This, I suspect, will ultimately limit bitcoin's adoption.
Who says you are limited to having a single wallet anyway ? As far as I know nothing prevents you from having 10 of them. It's not different from having separate credit cards, which is something people already do nowadays.
As for the tracking of your spending, it's already happening when you have a credit card. I don't know if Amazon know about your spending outside of their marketplace, but Mastercard, Visa and others certainly do, and I'm not sure whether they keep that data entirely private or not - Nothing would stop the government to ask them directly for your data, for example.
For sure, you could have multiple wallets. My point is, the second you spend from one wallet, that wallet may be forever "tainted".
Admittedly, governments can already request credit card data, under court supervision (ideally... unfortunately, it seems with an exception for the NSA), but with bitcoin you are voluntarily placing this information on public record.
If you ever want to buy something with bitcoin, the retailer can immediately look up how much money you're worth (or at least that particular wallet) when you give them your wallet address. They can also immediately check if you've spent any money (and how much) with their competitors' known public wallets.
There will likely be aggregation services that will associate multiple wallets that are connected with a common address (just like modern day data collection agencies) and sell this data to retailers. Advertisers will know exactly (or at least a lower bound) of how much you're worth and where you like to spend your money.
If bitcoin gets traction, it will effectively ruin any financial privacy we have remaining. It's one thing for a government to have access to this, it's a whole other world of problems when everyone from my neighbor to my cable company has access to it.
My point is, the second you spend from one wallet, that wallet may be forever "tainted".
A wallet usually had multiple addresses, and there's no reliable way to tell if two addresses are from the same person or not. So if you have funds on your public address A, and you transfer some to new address B, and later you pay with B, there's no reliable for Amazon to tell if A belongs to you or not.
They can also immediately check if you've spent any money (and how much) with their competitors' known public wallets.
That's not how it works. Companies can't just tell people to send money to their public addresses, because it'd be very hard to tell payments apart. They generate random addresses for each client, which they then transfer back to their main addresses.
But since most sites use payment processors like Coinbase, what really happens is that the processor generates their address, which the user send money to, and then they use internal accounting to send a single transfer to the retailer.
So all Amazon would know is that you spent your money with someone who uses Coinbase, but only Coinbase would know who.
My knowledge of the blockchain is quite limited but wouldn't seeing who sent the equivalent amount (plus/minus transaction fee by processor) to the processor that subsequently goes to amazon be quite trivial? That leaves you with the original wallet, and although it is not hard proof that all wallets are yours, wouldn't transferring between your wallets be visible too, tainting all wallets over time?
Let me try to unpack the problems. sgk284 described two situations:
- One is that Amazon can identify your wallet when you pay them for something.
My objection is that if you have multiple addresses, it's not easy at all for Amazon to know if they all belong to you or not. Of course, it doesn't work if you just create an address, transfer the payment amount to it, and then immediately transfer it to Amazon.
But if you keep a savings address and few payments wallets and maybe a web wallet (which is not really a "wallet", since it mixes your bitcoins with everyone else's), it becomes increasingly hard to tell apart.
- The second problem is that Amazon, having identified your wallet, can then see what other retailers have you bought from.
But this doesn't work, because other retailers will use payment processors, and that kind of tracking (correlating in → out) doesn't work, because payment processors don't do that. Instead, they pool all the payments and send you (the retailer) a single transfer at the end of the day/week/etc.
The moment a physical address / name are associated with a wallet, any spending from that wallet can be tracked back to you forever. If a substantial number of people are using bitcoin on Amazon, then effectively Amazon will be able to track what and where all of those people are spending their money.
Multiply this across all retailers, paycheck services, government institutions (e.g. the IRS), etc... and bitcoin effectively allows many corporations and governments to track any of your spending and (perhaps more importantly) wealth associated with bitcoin. This, I suspect, will ultimately limit bitcoin's adoption.