Privacy coins occupy a much-needed niche within the cryptocurrency space. Many of the early cryptocurrency adopters consider privacy coins to be essential. Many people incorrectly refer to Bitcoin as anonymous, though due to the blockchain, it’s inherently public. The minute a Bitcoin (BTC) address is linking to a user, their whole transaction history is essentially public. Privacy coins work to solve this problem by integrating many different privacy-oriented techniques.
Monero (XMR) is one of the most popular privacy coins available on the cryptocurrency markets. It does this by randomly generating a one time address for the destination of each transaction on the network. This essentially breaks the link between a specific transaction and a user’s public address. This ensures the security of your public address as it doesn’t grant any access to your balance or transaction history. As well as this, XMR transactions go through coin mixers in order to add an extra layer of security.
Secret keys are used in order to ensure the recipient is able to scan the Monero Blockchain, identifying the one-time address associated to an account. As a result, these keys give access to the full transaction history and account balance to any trusted third parties.
Though Monero (XMR) offers an effective solution to the privacy dilemma, there is a downside. The additional data that needs to be kept in order to keep everything anonymous comes at the cost of scalability. This could compromise adoption in the long run.
Regardless, Monero (XMR) still dominates the cryptocurrency market as the top privacy coin by market cap. Plus, as it’s one of the most mature privacy coin options available, it has strong community backing.
Contrary to Monero, ZCash (ZEC) has support for several different transaction types, allowing people to choose between transparency and privacy when transacting.
All ZCash transactions that take place are kept on the Blockchain. However, all data involving the address itself as well as the amount transacted is encrypted. Essentially, this hides all sensitive data from being publicly available. ZCash uses cryptographic zero-knowledge proofs (zk-SNARKs) to ensure that none of the above properties are broken. If all is good, the transaction went as intended. zk-SNARKs are in place to ensure that all information is able to be verified as valid without revealing any if the information.
However, the downside to the implementation of zero-knowledge proofs is the need for a special key. If discovered, it could potentially compromise the whole ZCash network. Be that as it may, there are many efforts in place in order to minimize any risk of this happening. Though, inherently, it means users must trust these efforts to be adequately fulfilled.
Another feature ZCash shares with Monero, is view keys. ZCash provides special view keys that allow users to disclose their transaction history with any third parties they trust.
Originally known as ‘Digital Cash’, Dash (DASH) works on improving on elements of the original Bitcoin (BTC) in order to bring more properties of cash to the cryptocurrency space. Privacy is one of these features. Dash gives users a platform that offers privacy and security for their transactions, including the possibility of transacting at almost instant speeds with very low fees.
Dash achieves anonymity when transacting by mixing coins with others (a similar technique Monero uses), making it difficult to identify the origin or destination of any transaction by just looking at the blockchain. Thus, Dash achieves anonymity by implementing a level of obscurity. Balances of wallets aren’t hidden much as they are often split between multiple addresses.
The downside to this, however, is the fact that users essentially disclose their identity to any masternodes mixing their coins. Thus, in order to mitigate the effects of this, coins should be mixed several times.
BEAM is a new cryptocurrency that launched in January this year. In addition to this, Beam is one of the first cryptocurrency to launch with full implementation of the MimbleWimble protocol. Similar to ZCash, it also uses zero-knowledge proofs in order to verify transactions without disclosing any sensitive information.
As Beam is a new cryptocurrency, it has the potential to provide solutions to problems that were found after it’s competitors entered the crypto space. For example, the way in which Beam uses network protocols to ensure privacy. They need to be sure that someone simply observing network traffic can’t compromise their privacy. Also, the way the blockchain is able to function by storing far less information than what is ‘normal’ for privacy coins.
Similar to ZCash and Monero, Beam uses ‘Auditor keys’. These are private keys that users can give out to allow third parties to view their balances and transaction history.
With all of the cryptocurrencies on the market, you would have thought there’d be far more options for privacy. While there are many altcoins out there that claim to offer privacy solutions, many of them are too new to be sure of. The coins listed above all have strong market caps and a community behind them who actively transacts each of these cryptocurrencies.
Have you used a privacy coin before? If so, which one? Let us know your thoughts in the comments below! Would you like to see specific Privacy Coin on iCE3X exchange platform?
This article is intended to educate and should in no way be seen as investment advice or an enticement to use the ice3x.com platform. Bitcoin is highly volatile with big profit opportunities but you should also remember that you could lose part or all of your investment whenever you take part in any high risk investment. Bitcoin trading is not a regulated industry in South Africa, which in itself carries additional risks. IF YOU ARE NOT AN ASTUTE BITCOIN TRADER, SEEK INDEPENDENT FINANCIAL ADVICE BEFORE MAKING ANY INVESTMENTS.