This article is featured in Bitcoin Magazine’s “The Privacy Issue”. Subscribe to receive your copy.
When Craig Raw talks, you listen.
His deep voice has a gravity to it, bolstering the urgency of the points he makes.
It’s like that voice in the back of your head that you hear when you’ve left too much bitcoin on an exchange for too long. Or that voice that persists when your bitcoin stash isn’t quite as secure as you know it could be.
It’s an uncompromised voice, constantly reminding you to follow best practices when it comes to storing and using your bitcoin.
Weeks after interviewing Raw — creator of let Sparrow Wallet, a free and open-source Bitcoin desktop wallet beloved by Bitcoin enthusiasts worldwide — for this piece, both the tone of his voice as well as what he shared with me in our interview are still fresh in my mind.
He’s concerned that the rhetoric around the importance of privacy and self-sovereignty as it pertains to Bitcoin is eroding and wants to remind you that both of these concepts are of the utmost importance as we move into an era where more and more bitcoin is KYC’d and/or held custodied within walled gardens (e.g., spot bitcoin ETFs).
So, if privacy and self-sovereignty mean something to you, please heed Raw’s words. Learn from the tips he shares, highlighted in this piece, as well from simply using and (carefully) experimenting with Sparrow Wallet.
If you choose not to, you may end up experiencing a certain pain, which, while it may be a good teacher, would otherwise have been avoidable.
PRIVACY
When it comes to storing and using your bitcoin privately, it’s important to start with the basics, according to Raw.
“The first thing is to try and understand what Bitcoin is — to try and understand the UTXO model,” Raw told Bitcoin Magazine.
“Try and understand the ways in which you can be more private without using any particular kinds of privacy tools,” he added.
He went on to provide two examples of how to do this:
Example 1: Don’t Reuse Addresses
“Address reuse is unnecessary and generally is [a] very, very poor [practice],” warned Raw. “It leads to transactions being correlated on-chain.”
Example 2: Don’t Use Rounded Amounts
“If you create a transaction and your amount is a round number, then there’s a change output and it’s very easy to see which is which,” he explained.
To expand on what Raw means in this second example, when you spend an uneven amount of bitcoin (e.g., 0.0010126 BTC), it’s more difficult for someone watching the blockchain to decipher which UTXO is the payment and which is the change. This makes it more challenging for the observer to follow your UTXO into the future.
The inverse is true if you spend an even amount of bitcoin (e.g., 0.001 BTC). The observer can more easily intuit which UTXO is the payment and which is the change.
Both reusing addresses and using rounded amounts are “common pitfalls that people don’t necessarily consider,” said Raw.
In addition to employing these two practices, you can use Sparrow Wallet to further increase their privacy.
“Sparrow offers two forms of transactions,” explained Raw. “You can either use the efficiency form, which minimizes fees, or you can use the privacy form, which constructs what we call a ‘fake two person coinjoin.’”
Raw on Sparrow Wallet’s privacy form transactions:
“The privacy form is a more complex transaction where it looks like you could have two people bringing funds into a transaction and then two outputs of the same amount. Anyone looking at that is looking at a transaction with more entropy, with more confusion in it. Even if you know that it’s a fake two-person coinjoin, you still have to follow both of those two outputs if you’re trying to follow a change of ownership flow in that transaction graph. So, that’s more expensive, but it’s a useful way to be able to create a more private transaction.”
But what about those who don’t want to bother with UTXO management? Isn’t it just easier to use hardware wallet interfaces like Ledger Live or Trezor Suite that handle UTXO management for you?
Raw seemed unaffected as I played the role of devil’s advocate in posing these two questions. He made the case in his gravelly voice that users sacrifice privacy, or their funds, when they neglect UTXO management.
“You can’t really abstract yourself away from the complexity of what Bitcoin is,” posited Raw. “If you want to transact on Bitcoin, you’re going to need to, at some stage, be aware of what you’re doing. Otherwise, you’re likely to lose your funds or destroy whatever privacy you have.”
He went on to share that wallets with simplistic interfaces that display your Bitcoin balance as if it were a bank account balance are doing a disservice to the user.
“The wallet is handling a lot of the detail for you underneath,” shared Raw. “And it simply doesn’t know — it cannot know — the right decisions to make.”
Raw then contextualized this statement, highlighting the fact that certain wallets don’t know the right decisions to make IF you’re looking to preserve privacy in your transactions.
“If you received some funds from somewhere and then you spent those funds somewhere else, you are creating a cryptographic link on the chain which anyone can see,” he explained. “If somebody knows the identity of either of those two sides, they can start to link things up. That is a dangerous thing that I don’t think people are aware of.”
He likened this scenario to all of your text messages suddenly becoming public — with your name linked to them.
“It’s like if we all had our chat apps and everybody could see everything everyone said and associate an identity to it,” Raw explained. “What we’re talking about is the same thing, but on a financial level.”
Raw doesn’t think most Bitcoin users are ready for this level of transparency.
He believes people should consider whether or not they’re comfortable with publicly broadcasting information that can lead others inferring what they earn or with whom they transact. If they’re not, then they might consider taking UTXO management more seriously with the help of Sparrow Wallet, which displays users’ UTXOs by default instead of hiding them.
“Sparrow is trying to give users an ability to understand what it is that they are doing, to be more safe in their transactions from a security and privacy point of view by giving them the information that they need in order to be able to manage that kind of thing.”
One of the most refreshing things about Raw is that he doesn’t underestimate Bitcoin users. He seems to think of them as both capable and willing to learn, which is, in part, driven by the fact that we all value our privacy — whether we’re conscious of it or not.
“Even those who say, ‘I don’t need to be private’ [might change their mind] if they just spent a moment considering that they wouldn’t like their bank accounts or their email inbox and so forth to be open to everyone in the world. And that is effectively what we have with an open blockchain,” explained Raw.
“I don’t think it is nearly well understood enough, even amongst Bitcoiners, exactly how open and transparent the blockchain is,” he added.
“They may not have privacy from their bank or their government today, but they certainly have privacy from other individuals.”
THE THREAT TO PRIVACY
While neglecting UTXO management is a threat to privacy, it’s not the threat to privacy, according to Raw. The threat, said Raw, is the ability — and desire — of Bitcoin users to self-custody their bitcoin.
To illustrate how dangerous giving up custody of your bitcoin is, Raw provided a theoretical example of what relinquishing self-custody would look like if taken to the extreme:
“Let’s say we have one bank in the world and that bank says, ‘Give me your bitcoin and I will give you an IOU.’ In that situation where everyone transfers their bitcoin over to that bank and the bank issues IOUs, the bank effectively has carte blanche to issue as many IOUs as they want. We’re effectively then back in the fiat world, even if we have bitcoin. I think that that’s the biggest risk that Bitcoin faces today — the desire for people to self-custody the funds that they have.”
Does this mean that if you use a custodial bitcoin platform for even a second, you’ve betrayed a core Bitcoin tenet and should be excommunicated from the Church of Bitcoin Maximalism?
No.
At least not in Raw’s estimation.
“I think we just need to be very careful about relinquishing too many of those original ideals,” said Raw about ideals like oft-cited ‘not your keys, not your coins.’”
At the same time, Raw believes that “Bitcoin doesn’t exist in a vacuum” and that it’s the “product of the environment in which we live today.”
He shared that Wallet of Satoshi, a custodial Bitcoin Lightning wallet, has been a useful tool for the Bitcoin Ekasi project — a circular Bitcoin economy based in Raw’s home country of South Africa.
While Raw admitted that Wallet of Satoshi is “obviously not ideal from a self-custody point of view,” he also shared that “it does nevertheless get people used to [using bitcoin], and there’s something powerful about that.”
Raw seemed less concerned with the idea that people would use Wallet of Satoshi for small, everyday transactions and more concerned with the idea that many stop after downloading and using a custodial app like Wallet of Satoshi and don’t get around to learning about self-custody.
Like many of us who’ve tried to onboard friends and loved ones to Bitcoin, stressing to them the importance of holding one’s own keys, Raw gets that many unfortunately still don’t get it, partially because many have yet to feel the pronounced sting of currency debasement.
“We clearly get the pushback of ‘Why should I care? Why should this matter to me?,’” said Raw.
The idea of having to exit the traditional monetary or financial system in efforts to preserve your wealth “doesn’t seem very real” to many around the world, he argued.
But for those who’ve lived in highly inflationary environments, learning how to properly use bitcoin isn’t a cognitive exercise — it’s something they resort to instinctively.
“If your currency gets devalued by 25% overnight, then it really does become quite material to you to think ‘How do I protect myself against this?,’ Raw added.
This is why Raw advises people to learn best practices when it comes to using Bitcoin before they’re thrown into a scenario in which they have to start using it. He makes this case despite the fact that he understands quite well that the greatest Bitcoin teacher is not a person or a certain class, but a feeling that we all often do our best to avoid: pain.
PAIN
“Maybe they start with the Wallet of Satoshi, and maybe, if the worst comes to worst, that particular service goes away,” theorized Raw.
“They lose their funds, they have a painful lesson, and then they look for something better in future. I’m sure you are familiar with that journey. [Author’s note: Of course I am.] Many of the people I’m sure you have spoken to have lost funds and have learned painful lessons along the way [Author’s note: Of course they are. Many have told me this directly.],” he added.
“What’s interesting, I find, is they often don’t walk away for good. They come back; they try again. They try with those learnings that they’ve managed to gain.”
So, does Raw wish this pain on people? I didn’t get that impression.
He’s not cruel; he’s concerned.
He also comes off as more of a realist than an idealist.
And he thinks that pain will not only compel people to be more careful about how they store the private keys but about how private they keep their transactions, as well.
“We don’t have nearly enough focus on public opinion behind privacy, and I think the only way we’re going to get there is, as is often said in the space, from people touching the stove,” said Raw.
“We need that collective pain — unfortunately. I wish it weren’t so, but unfortunately, I think it is necessary in order for people to take the idea of privacy seriously,” he added.
Raw went on to share that he believes that collective pain is coming and that it’s likely necessary for us as a society to truly recognize just how much we value privacy — a cornerstone of civil society.
“Without the ability to be private, we cannot have a free society. It is simply not possible,” deadpanned Raw. “So, if people want to be free, and I believe that, in general, that is true, then they will need to realize at some point that they need this concept of privacy and the ability to have it in their own lives in order to achieve that goal.”
The good news is that while this wave of collective pain may wash over society, you can do something to insulate yourself from it. You can download Sparrow Wallet after you finish reading this article and begin to work through some of the discomfort that comes with learning to use new technology — which will likely be less painful than having your financial information doxxed.
The Less Painful Path
Luckily for us, Raw designed Sparrow to be intuitive, leading more curious users down a path that educates them if they’re willing to spend some time tinkering with the software.
“Sparrow was always designed to be not just a Bitcoin wallet but an educator, as well,” explained Raw.
“That’s why I’ve tried to put as much detail as I can into it. I designed it in a way, and I hope I’ve got this right, that gradually reveals information to people who want to dig deeper into things,” he added.
“You can use Sparrow in a fairly light way, and you should when you’re just getting into it. But, as time goes on, there’s no harm in clicking or hovering over things, reading the tool tips, and trying to understand more about what you’re doing.”
What’s perhaps most remarkable about what Raw has built is that he’s created it and given it to the world for free. Raw doesn’t monetize Sparrow Wallet. As mentioned earlier, it’s free and open-source software that he continues to iterate upon for no reason other than he “believe[s] that it has some value.”
For someone who realizes just how much is at stake in a world where the powers that be are trying their best to trap us in a panopticon, Raw’s work keeps him optimistic.
“Ultimately it comes down to, for me, the simple idea that Bitcoin is hope,” Raw concluded, with his stern voice softened for just a moment.
“What is hope? Hope is the idea that tomorrow can be better than today, that one can look forward to something. Bitcoin represents that. That’s why it’s the key driving force above everything else to me.”
Download Sparrow Wallet: https://sparrowwallet.com/download/
Questions From The Plebs:
The following questions were crowdsourced from X.
Will you ever create a Sparrow mobile app?
The desktop computer is the most capable device that many people have when they are looking to do self-custody of their funds. That’s really what Sparrow is for.
When it comes to the real important self-custody operations, you want to use the most capable device that you own. It gives you the most screen real estate to display the full context of what you’re trying to do.
There’s a limitation on mobile devices, which is natural just due to the size of the screen. You can see the obvious difference if you are using a mobile app versus using something like Sparrow. There’s a big difference in terms of the amount of information that you can show. So, for me, it was natural to want to focus on the desktop.
I think that there are pros and cons in terms of security on both. Personally, I believe that the desktop can be made a more secure device than the phone. Again, I recognize that there are certain times when that isn’t true, but in general, I think it’s true. That’s the most important thing.
The decisions you make at the start of a project echo throughout its life. It’s really important to make good architectural decisions at the very start because that will inform everything further down the road.
Is using ecash created from protocols like Cashu and Fedimint a good way to preserve transaction privacy?
It’s too early to say. If you’re talking about a project that hasn’t really even reached a meaningful production level yet, it’s just really too early to say. They haven’t been put to the test.
They’re certainly interesting. I think really from a technological point of view, there’s a lot of positive things to be said, but from an actual implementation and a regulatory point of view, they haven’t been put to the test yet. We’ll just have to see.
I will obviously keep an eye on all of those things, but I think people should treat any new technology with a great deal of caution before they trust any significant amount of funds to it.
Will you ever integrate Lightning into Sparrow Wallet?
The best I can say is not at this time. I’m really focused on the ideal of financial self-sovereignty and that’s really, at this stage anyway, on the sort of on-chain level.
Now, there might be a time in the future where, for example, fees are too high and it’s not practical to do that anymore. We simply don’t know the way that things are going to play out.
Right now, Sparrow is a desktop app. It’s a client app. It’s not designed to be a server. It’s not designed to be run all the time.
If you’re trying to design something for Lightning, you very quickly run into this idea of needing to be online to receive funds. As soon as you start to work with that requirement, you get into a lot of complexity around “Am I online? What happens if I’m not online? Do I then need a third party involved?”
As I said, the decisions you make at the start of a project echo through its life. Sparrow is good at what it does. It’s an app that is designed for self-custody, for cold storage, and the important thing about cold storage is that it should be cold. You shouldn’t be necessarily running your cold storage wallet open on Sparrow all the time. That wallet should be closed, and you should be able to close Sparrow, as well.
So, as soon as you start to move away from those key goals, you’re trying to find some kind of compromise, and that needs to be treated with a lot of caution because it’s a different thing than what I’m building today.
An interview with Craig Raw, creator of the popular Sparrow Wallet, on Bitcoin privacy best practices and pain as a teacher. From “The Privacy Issue”.
Amazon’s journey from a modest online bookstore to the world’s largest online retailer is a narrative of innovation, disruption, and relentless ambition. Today, Amazon dominates the e-commerce landscape, setting the standard for online shopping with its vast product selection, lightning-fast delivery, and customer-centric approach. This article explores the evolution of Amazon’s leadership in online shopping, examining the key strategies, innovations, and challenges that have shaped its rise to the top.
The Early Days: From Bookstore to Everything Store
Amazon was founded by Jeff Bezos in 1994 as an online bookstore, capitalizing on the internet’s potential to reach a global audience. The decision to start with books was strategic; books were easy to ship, did not require much storage space, and had a universal appeal. From the beginning, Bezos envisioned Amazon as more than just a bookstore. His long-term goal was to create the “everything store,” a one-stop-shop where customers could find and purchase anything they needed online.
The initial success of Amazon was driven by its innovative approach to e-commerce. While traditional bookstores were limited by physical space, Amazon offered an extensive catalog of books that was virtually limitless. The company’s early focus on customer satisfaction, with features like customer reviews, personalized recommendations, and a user-friendly interface, set it apart from competitors.
By 1997, Amazon had gone public, and its rapid growth continued. The company began to expand its product offerings beyond books, gradually adding categories like music, electronics, and toys. This diversification was essential to Amazon’s strategy of becoming the go-to online retailer for all consumer needs. The company’s ability to offer a wide range of products, combined with its commitment to customer service, established it as a leader in online shopping.
Innovation and Expansion: The Prime Revolution
One of the most significant milestones in Amazon’s evolution was the launch of Amazon Prime in 2005. For an annual fee, Prime members received free two-day shipping on eligible purchases, a proposition that was revolutionary at the time. The introduction of Prime was a game-changer, transforming customer expectations and further solidifying Amazon’s leadership in online shopping.
Prime was more than just a shipping service; it was a strategic move to create customer loyalty. The subscription model incentivized customers to make Amazon their default shopping destination, as the more they used Prime, the more value they received. Over time, Amazon expanded the benefits of Prime to include streaming video and music, exclusive deals, and other perks, making it an indispensable service for millions of customers.
The success of Prime can be measured by its membership numbers, which have grown exponentially over the years. As of 2024, Amazon Prime has over 200 million members worldwide, a testament to the value it offers. The Prime membership model has been so successful that it has influenced the broader retail industry, with many competitors launching their own subscription services in response.
The Technology Edge: Fulfillment and Logistics
Amazon’s dominance in online shopping is not just a result of its vast product selection and customer-centric approach; it is also rooted in its technological prowess. The company has invested heavily in building a state-of-the-art fulfillment and logistics network, which has been a critical factor in its ability to offer fast, reliable delivery to customers.
Amazon’s fulfillment centers, which are strategically located around the world, are marvels of automation and efficiency. These facilities use advanced robotics, artificial intelligence, and data analytics to manage inventory, process orders, and ship products with unparalleled speed. The company’s ability to deliver products quickly and accurately is a key reason why customers choose Amazon over other online retailers.
In addition to its fulfillment centers, Amazon has developed a vast logistics network that includes its own fleet of planes, trucks, and delivery vehicles. The company’s investment in logistics has allowed it to reduce its reliance on third-party carriers like UPS and FedEx, giving it greater control over the delivery process. This vertical integration has enabled Amazon to offer services like same-day and next-day delivery, further enhancing its competitive advantage.
Moreover, Amazon’s logistics innovations extend beyond its own operations. The company’s delivery service partner (DSP) program has created opportunities for small businesses to operate delivery routes for Amazon, while its crowd-sourced delivery platform, Amazon Flex, allows individuals to deliver packages using their own vehicles. These initiatives have expanded Amazon’s delivery capacity and ensured that it can meet the growing demand for fast shipping.
Expanding the Ecosystem: Marketplace and AWS
Another key component of Amazon’s success in online shopping is its ability to create a comprehensive ecosystem that extends beyond retail. The Amazon Marketplace, launched in 2000, has been instrumental in expanding the company’s product selection and driving revenue growth. The Marketplace allows third-party sellers to list their products on Amazon’s platform, giving customers access to a wider range of goods and enabling Amazon to earn a commission on each sale.
The success of the Marketplace has been staggering. Today, over half of the products sold on Amazon are from third-party sellers, many of whom are small and medium-sized businesses. The Marketplace has also been a critical factor in Amazon’s global expansion, as it allows sellers from around the world to reach customers in different markets without the need for a physical presence.
In addition to the Marketplace, Amazon Web Services (AWS) has played a crucial role in the company’s growth and profitability. Launched in 2006, AWS offers cloud computing services to businesses, allowing them to store data, run applications, and scale their operations with ease. AWS has become the backbone of the internet, powering everything from startups to large enterprises. The revenue generated by AWS has given Amazon the financial flexibility to invest heavily in its retail operations, including its logistics network, Prime, and original content for Prime Video.
Challenges and Criticisms
While Amazon’s leadership in online shopping is undeniable, it has not been without challenges and criticisms. The company’s dominance has raised concerns about its impact on competition, with critics arguing that Amazon’s scale and market power give it an unfair advantage over smaller retailers. There have also been concerns about the treatment of workers in Amazon’s fulfillment centers, with reports of grueling conditions and low wages sparking public outcry and calls for better labor practices.
Amazon has also faced scrutiny over its impact on the environment. The company’s rapid delivery services, which require a vast logistics network, contribute to carbon emissions and environmental degradation. In response, Amazon has pledged to achieve net-zero carbon emissions by 2040 and has invested in renewable energy and electric vehicles to reduce its environmental footprint.
Despite these challenges, Amazon continues to grow and innovate, constantly pushing the boundaries of what is possible in online shopping. The company’s ability to adapt to changing consumer preferences, invest in technology, and create a seamless shopping experience has ensured its position as the leader in e-commerce.
The Future of Amazon in Online Shopping
As Amazon looks to the future, it faces both opportunities and challenges. The rise of new technologies like artificial intelligence, machine learning, and automation will continue to shape the e-commerce landscape, and Amazon is well-positioned to leverage these innovations to enhance its operations and customer experience.
The company is also likely to continue expanding its ecosystem, integrating its retail operations with other services like AWS, Prime Video, and Alexa. This integration will further entrench Amazon in the daily lives of consumers, making it even more difficult for competitors to challenge its dominance.
In conclusion, Amazon’s leadership in online shopping is the result of a relentless focus on customer satisfaction, innovation, and scale. From its early days as an online bookstore to its current status as a global e-commerce giant, Amazon has consistently pushed the boundaries of what is possible in retail. As the company continues to evolve, it will undoubtedly remain a dominant force in the world of online shopping, shaping the future of commerce for years to come.
