I'm all for persuing maximum fungibility and improving bitcoin's level of resistance to de-anonymisation via information gleaned off-chain. But when people start to justify compromising blockchain transparency using anecdotes such as salary payments and health transactions it's just delusionary nonsense because the commercial world does not and will never be run on a blockchain.
Whether the crypto of the future on which the commercial world will run will use "block chain technology" or other cryptographic techniques that have not yet been invented, I don't know. But I surely would hope that we reach a day when distributed, grass-roots founded, non-state-or-corporate-monopoly digital assets ARE the currency on which the commercial world will run, or this whole crypto circus has no meaning at all.
We already know that bitcoin can't be that currency, at least not on-chain, and that even adaptive chains like monero will face practical problems of chain growth with current technology. Maybe there will be smarter ways of doing this. But the idea is, I would hope, to get liberated from state fiat money one day, and be free in the choice of the currency used in the economy. In fact, the best would be that there are myriads of currencies from which to chose, in permanent competition and in permanent creation.
In ALL OF THESE CASES, it is to be hoped that there is no traceability of the succession of transactions, but at most "proof of right to spend". All the other information is in any case 1) leaking private information and 2) harming the fungibility of the asset under scrutinity.
So *in any case* there is no need for a "transparent block chain" but only for a "proof of right to spend". Whether that proof of right to spend is derived directly from things on the block chain, or from structures on top of that which are even not public, doesn't matter.
In fact you are heavily contradicting yourself here in several ways.
1) In as much as, according to you, crypto currencies will remain a very minor toy in the hands of a few geeks considering that stuff having value, you are probably right that between getting your money off an exchange in fiat, turning it into cash, and using that cash whenever you want privacy, and only return onto an exchange to "play trader" and not to pay for any real world goods, you are prefectly right that a transparent block chain is not harming privacy much.
But hey, you don't even need a block chain in that case. You can just trade the tokens on the web site of your exchange. So the "transparent nature" of the block chain is not a problem, but also not necessary. If crypto is not used as a currency, there's no problem, but also no need to have a transparent block chain (or no block chain at all).
2) In as much as crypto currencies ARE used as a "backbone" to OTHER ASSETS, but are widely used, then the transparency of the underlying block chain is just as broken because you cannot follow the off-chain transactions. The off-chain assets will in any case just be cryptographic proofs to spend of the corresponding on-chain assets. We're just as "opaque" as with a non-transparent block chain. Yes, you can explicitly see the few transactions which are the final results of very long off-chain transaction histories, but as you don't have those, these settlements only indicate you that, whatever happened off-line was correct, without knowing WHAT happened off-line - exactly like a cryptographic proof of right to spend gives you. You are right that the on-chain verification is explicit, but that on-chain happening is only a very minor fraction of what happens off-line. So your "proofs of right to spend" are just as indirect (but nevertheless just as valid) as on a chain like monero.
3) The denomination of goods in a currency depends on the usage of that currency as currency. If it is used a lot as currency, the "stickyness of prices" will stabilize the currency value and hence allow for denominating the stuff in the currency at hand. In fact, when a large part is denominating its trades in a currency, the volatility risk of that currency diminishes strongly.
If I have a store, and I sell and I can buy in currency X, actually the "value" of X doesn't matter much, because what matters to me is the ratio of my selling price in X, and my buying price in X, to have a margin. If, however, I sell in X, but I have to buy in Y, then the ratio of X to Y is very important to me. I will tend to denominate my stuff in Y too, to avoid the risk of X to Y.
That is what a currency is even if Monero were to be adopted around the entire world - just a way to denominate prices that's independent of hard assets.
On the contrary. If most of the economic cycle has its products denominated in, say, monero, then by the stickyness of prices, monero will stabilize, and will induce others to denominate their stuff also in monero. Simply because that eliminates a risk for them. This is why essentially, we look at stuff in $ or Euro, even if we pretend to look at it in bitcoin. Because right now, most stuff is denominated in $ or Euro. Bitcoin has almost no economic integration as a currency, and the few companies that do, denominate actual prices in their main provider's currency, and CONVERT to bitcoin. They have to, because otherwise the risk is too big.
If crypto is to succeed, this has to change. If not, crypto is a geek's toy, and nothing more. This can easily take a century.
So designing a cryptocurrency to support operational aspects of the financial system is folly which leaves you with a whole lot of redundant features because the transactions all get done off chain anyway. (See exchanges for example). Keeping your financial life "private" will be nothing to do with whether blockchain addresses are transparent or not, so in that respect you're compromising one of bitcoin's huge strengths and perhaps the single thing that's kept it alive for the last 9 years for......nothing !
I really, really don't see what is the "strength" of a transparent block chain. What you are essentially saying is that "we should keep a transparent block chain, because it doesn't matter; we don't use it as a currency". You are perfectly right that a TRANSPARENT AND UNUSED BLOCK CHAIN preserves privacy and can remain transparent
If you don't use bitcoin, it won't leak your financial information, so much is true.
