Every time you receive a dollar bill you don´t know where it has been or what was done with it before getting to you, at the time you only care if you are able to buy a cup of coffee or hamburger at your favorite restaurant.
Fungibility, is an essential property of money, it can be exchange for goods or services at some point with a high level of anonymity. However, digital currencies are ruled by the transparency of the blockchain. Even if the bitcoin addresses are pseudonymous, the blockchain will expose the flows of funds between seller and buyer.
Bifury, a startup, has been looking for a while a way to remove bitcoin as a medium of black market transactions. They have designed Crystal, this software will help to track every transaction done with a bitcoin address. Every user will be able to check the source of the transaction and validate if the source is green or black.
Bifury is not the first one trying to clean up the bitcoin trading, there are a couple of options like Chainalysis, Elliptic and Skry in the market. The objective is catching criminals, lets assume that the crimes they commit are to another person, a victim.
There are many benefits that the cryptocurrency markets can get hold of with the usage of this kind of software. The banking system around the world doesn´t back up the idea of a badge without monitoring and policies, it just doesn´t feel right. Crystal or any other similar software can demonstrate banks that the bitcoin users are not moving any money with illegal intentions. However, using the blockchain this way may also have some perverse effects.
Developers main concern about cryptocurrencies is to guarantee privacy to the users, as a complement, this will preserve fungibility. There are some startups dedicating to design applications to enhance the privacy in every transaction.
Bitcoin was created as a solution for those who want to make transactions over the Internet, but don´t trust each other. Governments and financial institutions want to keep a close look of every transaction looking for “dirty” money, however, there is no one looking for the serial numbers on every bill available in the system.