Among the many attractive attributes that have drawn people to cryptocurrencies and made it popular, privacy and anonymity feature at the top of everything. These two very essential and most coveted components allowing users to retain their identities and transactions private assures people in an otherwise corrupted scenario. Cryptocurrencies, when started, based its identity on these two factors predominantly, so much so that Satoshi Nakamoto, the creator of Bitcoin too, is still an anonymous figure whose pseudonym is only known to the world. His true identity is not known to anyone yet.
However, there seems to be some problem in paradise now, with the growing concerns in deteriorating privacy. Bitcoin transactions are not anonymous in certain ways as the open ledger furnishes a transparent payment history to the financial system.
The thing is, on the one hand, Bitcoin employs cryptography to conceal identities and on the other hand, owing to its implications such as visibility by anyone, makes it raise the alarm.
Keeping this aspect in mind, some steps are being taken to deal with this problem. Privacy coins’ involvement comes into the scenario in this context. Privacy coins are a section of cryptocurrencies like bitcoin where they are used for bitcoin games also, introduced as a step to ensure privacy.
Why Are These Coins Called Privacy Coins?
Going by the name, these coins are created to provide a certain amount of anonymity in a decentralized manner. The privacy coins are slightly different. Bitcoin and other cryptocurrencies are not exactly like these coins. They entirely depend upon the same blockchain technology as the other two, but in matters of handling information about transactions, privacy coins go further. That is, Bitcoin transactions are all recorded on an open public ledger exhibiting that A address sent B address an X amount of BTC; though there are no names tagged to wallet addresses, the job of linking addresses with people is not that hard in spite of the absence of name in wallet addresses.
By disguising information about senders and receivers while conducting transactions via a myriad method, privacy coins ensure privacy. These privacy coins hide wallet activity.
The strategies employed by privacy coins are:
- Stealth addresses
- Ring signatures
Let us take a look at the five most popular privacy coins doing the rounds in the current market:
- Monero (XMR) – This is the most used coin in recent times and hence the most popular as well. Transactions done through Monero coins are untraceable; its source and destination, both are private. It uses the tactic of ring signatures to obfuscate the ledger transactions. CryptoNight Proof-of-Work is the technology that is used to achieve this.
- Zcash (ZEC) – Marketing Director of Zcash said that they have come up with 2 kinds of transaction options – one happens on the public ledger and the other maintains that the individual address is protected. This enables anonymous trading. Private and legal are not two different things. And these coins have been made keeping that in mind.
- DASH (DASH) – From being named Xcoin, to Darkcoin, and finally Dash, it is one of the oldest privacy coins. Having undergone so many name changes since 2014, this is a fork of Bitcoin and its privacy aspect is considered as an additional characteristic, named as PrivateSend.
- Verge (XVG) – Targeted on communication via protocols such as I2p and Tor, Verge has 5 Proof-of-Work algorithms running on its blockchain consisting of Scrypt, X17, Lyra2rev2, myr-groestl, and blake2s. It furnishes protection against 51% attacks with advanced security.
- PIVX (PIVX) – Simon Fischer, the founder of FusedHelios, a PIVX class, has been quoted mentioning that they are trying to make privacy a right for all and sundry. This should be made into a policy not suited for just the affluent or the corrupt, which is why they are targeting an on-chain solution. A solution with a decentralized marketplace built on the PIVX network is zDEX.
With the increasing corruption awareness, governments are also taking notice of this. Indian governments have declared that privacy coins are meant to be prioritized first. With the development of the technological advancements in projects such as TeleCoin and PIVX, one can hope for a secured, private crypto environment in the near future.