If the data was encrypted non of this would be an issue
Discussion
What exactly are you suggesting to be encrypted?
Amounts and arbitrary data
The power of Bitcoin is that it’s thermodynamic measurement device (not just a database of balances). Every satoshi input and output can be traced through the ledger, allowing anyone to verify that the conservation law holds, no double-spend has occurred, and that every joule of work has crystallized into permanent structure. If transaction amounts were encrypted, this transparency would vanish. You could no longer audit the full energy pathway of the system. The conservation of inputs and outputs would rely on cryptographic proofs and trust in their construction, not open verification. At that point, Bitcoin stops being a universal energy ledger and collapses back into the same model as fiat. That destroys its role as a measurement system, because measurement requires direct visibility of conservation at every step.
You can’t measure Joules to Satoshis if amounts were encrypted as you could not publicly measure the entropy resolution of each block. This destroys the innovation of Bitcoin.
Arbitrary data inscriptions are different as they are not about conservation of supply, but about expression. They are still monetary because they cost sats and consume scarce blockspace, but their semantic form (plaintext vs encrypted) should be left to the user’s discretion. Forcing all data to be encrypted would erase Bitcoin’s role as a public inscription medium. The ledger would no longer carry messages visible to the community, only opaque ciphertext. This matters because inscriptions are not noise, they are proofs of energy expenditure with meaning attached. Sometimes that meaning is private and should be encrypted. Sometimes it is public and meant to be witnessed. Bitcoin’s neutrality lies in allowing either, so long as the thermodynamic cost is paid.
Bitcoin’s genius is to keep the energy ledger public while leaving freedom at the edges. Conservation must remain observable, but inscription must remain free of choice.
You can still verify the total supply of a fully encrypted block chain its just not as easy
Verifying just the total supply misses the point. Bitcoin’s power is that every satoshi can be traced back to Genesis and the initial creation of each, and each block proves conservation at the moment of transformation. To measure this you need both the number of UTXOs and their relative amounts vs a changing total supply. Encrypting amounts hides those relationships. You can check the end total, but you can’t verify that conservation held across the chain, nor measure the entropy each block resolved from Genesis onward. That breaks Bitcoin as a thermodynamic measurement device and re-introduces trust, turning it from an auditable process into a black box.
Are you willing to preserve your trustless, auditable, thermodynamic measurement system if it means every participant has to be registered in a government digital ID and KYC database to use it?
At what point does transparency turn into surveillance?
Are you willing to preserve your private, un-auditable, thermodynamically unmeasurable system if it means every participant can never be registered, never proven, and the supply can never be verified openly?
At what point does privacy turn into obfuscation and destroy the intention of money?
The balance is nuanced. Bitcoin must remain a transparent thermodynamic measurement system to preserve conservation of value. KYC is not part of that structure, it’s policy not protocol. The right path is to preserve Bitcoin’s protocol-level transparency while resisting compulsory identity overlays. Bitcoin works with anonymity; its design doesn’t require surveillance, only verifiability.
