NXT, the finance 2.0 blockchain platform, has voted unanimously to implement CoinShuffle, a coin mixing anonymity technique to NXTcoin and other 'Monetary System' tokens. Implementation is expected on the next major release.

Landslide vote

A vote was posed to the community this July 18 on whether the coin mixing implementation would apply just to MonetarySystem (MS) tokens or also to NXT's core token, NXTcoin. After only a day, the community's response was incontrovertible with nearly 100% of the votes supporting coin mixing implementation to NXTcoin. The votes will be weighed on July 26 based how much NXT each voter holds.

Coin mixing is the technology used by DASH (Darkcoin) to bring a greater level of privacy and protection from blockchain analytics to users of a given cryptocurrency. NXT's implementation, however, will not come with 'Masternodes' or any 'Federated servers' (as with DarkWallet) to facilitate coin mixing. Instead, it will function as a special type of transaction that will float on the memory pool until it matches other interested users.

I've written before about the danger that such blockchain analytics could pose to Bitcoin and other kinds of money, as it could destroy its fungibility. This is a problem that's been well understood since at least 2013.

On the other hand, businesses with high risk exposure and a need to be KYC and AML compliant might at some point be regulated out of accepting anonymity enabled cryptographies, given the core conflict of values between financial regulators and privacy advocates. But just how regulators will approach and utilize blockchain analytics technology remains to be seen.

NXT was great for transparency, terrible for privacy

Up until now, NXT has been a cryptocurrency with minimal privacy support. While it functions similar to Bitcoin, by using pseudonymous strings of 'gibberish' for its public addresses. It still has not developed many of the privacy practices and tools that Bitcoin has.

For example, there’s no automatic generation of NXT addresses per wallet, so that deposits are always made to fresh, never before used addresses, as it is recommended by privacy advocates.

Instead, users hold many of their 'Assets' and MS tokens in accounts that they must manually create, and tend to hold very unique combinations of investments in a handful of accounts. This is a great thing for transparency, particularly for organizations and companies, since it is very clear what they are doing with their money. It is also a good way to enable decentralized autonomous organizations.

However, it is terrible news for privacy, and it is a complaint that has been brought up several times in the NXT community.

CoinShuffle and a certainty about its implementation to NXTcoin and MS tokens is thus a major milestone for the community. It also means that NXT will be entering the 'anoncoin' market, competing with Bitshares, DASH and many others to take a piece of the market share that –at least in part - brought DASH into the top ten coins by market cap.