Bitcoin is not interchangeable, not to fiat money, not to other cryptocurrencies. It is a unique and special kind of currency with a very special mechanic base that it operates on. While other cryptos are similar and they are copies of bitcoin, they are never the same, or interoperable. This is a problem, but at times being fungible is bad. So whether the fungibility bit is working for bitcoin or not is a big shady question.
This is a trait you want in a currency. You’ll have a hard time distinguishing between bullion that’s been freshly minted, and bullion that’s been used as a means to hire assassins and purchase slaves.
The same goes for the fiat currencies. Even though fiat is serialized making notes not the same but similar, but it is still valued the same and is a part of the same larger currency and economy of the nation or region.
If fiat had QR codes instead of serials there would be a problem. Because then each notes’ history would be on stake. People would quickly kick out the notes that have drug and criminal history. The same could happen with bitcoin, but really why would it? Isn’t money just money after all? Wouldn’t people just use it living in the present, or does the past matter, let’s find out.
The Bitcoin Dilemma
Big Data is both a curse and a cure. The blockchain is transparent, we have not found yet all the ways to decipher this data, not with big data and nit with blockchain. So things can get quite pesky ahead.
As entities begin to link addresses to unsavory activities (and coins to said addresses), the ‘taint’ metric can be applied. Prominent organizations in the space and governments are already blacklisting addresses. When things get illegal, the money will be held or spied and involve all users in a snowball of legal affairs.
As time goes on, it’s not unreasonable to assume that services pliable by regulators could be forced into rejecting/freezing/turning over coins that have passed through flagged addresses.
People would want virgin coins, and that would mean that the old money would be undesirable and sometimes even rejected. The hooker coins will have to be driven out as the Gresham law.
Privacy is what it needs to prevent this from happening. Over time, as analytics improve, it’s imperative that mixers and other privacy-enhancing tools evolve in order to preserve this difficulty. The viability of Bitcoin depends on it.