Crypto traders care about privacy because of the numerous scam accidents that happen to fiat money in banks. Avoiding such situations is more likely if the personal information is not linked to the account. Which cryptocurrencies guarantee anonymity? How it is technically conducted and what an anonymous cryptocurrency exchange is — read in the article.
What Are Privacy Coins?
Privacy coins maintain anonymity by obscuring the transaction information within their networks. It makes it almost impossible for an outside observer to figure out who sent certain assets to whom. So, privacy coins are useful if you don’t want anyone spying on your financial activity. Also, the fact that potential robbers cannot trace assets down to your address entails the second main feature of privacy coins — strong funds security.
How Do Privacy Coins Work?
Crypto transactions are recorded on the public blockchain. So, basically, anyone can see the transaction history, like in the case of Bitcoin. But private coins hide a user’s wallet address to a certain degree (it all depends on the crypto you use). The obscuration of sensitive information is done by implementing cryptography techniques. Here are a few of the most widely used:
- Zk-SNARKs
Zero-Knowledge Succinct Non-Interactive Argument of Knowledge is a validating system that allows proving the transaction without sharing any information.
- Ring Signatures
A ring signature is created by a group of users where every participant has their own keys. Thus, it is impossible to know who exactly created the signature so that no one can link it to you.
- Stealth addresses
The easier way to hide the real wallet addresses is by generating a new address every time you send or receive crypto.
The type of obscuration depends on the privacy coin you use. So, we recommend reading the white paper of the chosen cryptocurrency.
What Cryptocurrencies Can Be Classified as Privacy Coins?
If cryptocurrency uses one of the described cryptography methods, they are classified as privacy coins. Take a look at the list of such coins:
- Monero
- Horizen
- Secret
- Phala Network
- Decred
- BEAM
- Oasis Network
- Zcash
- Verge
- Dusk Network
Remember that the listed above cryptocurrencies are claimed to be untraceable. But, as a rule, every coin implements a certain degree of obscuration. It depends on how well the protocol is designed and whether it contains some flaws.
Why Is Bitcoin Not on the List?
It is a common thought that BTC conceals the identity of a person because the wallet address does not contain personal information. Usually, it is a combination of numbers and letters, but still, such an address is “pinned” to a certain person. So, it takes a little to discover the whole transaction history of a person because of the transparent BTC blockchain.
Moreover, each BTC receives a serial number. It means that not only is the transaction history of a person visible, but also the usage of a certain coin can be monitored as well.
Monero Is Confidently Holding on to the Top
The best privacy coin is Monero (XMR). Its developers prioritize the privacy of investors and transaction security. Here are a few features of XMR:
- A big market capitalization and investor’s trust
Monero is among the 30 most popular cryptos. Its market capitalization is $2,7 billion.
- Long history
XMR was launched in 2014 and continues to be one of the best investment options on the market.
- Fungible coins
You should not worry about tracing your identity after receiving XMR because all the coins are fungible.
- Multiple cryptography techniques
Monero ensures your privacy by using both ring signatures and stealth addresses.
So, if staying anonymous is important for you, think twice before conducting an XMR to BTC exchange.
Are Private Coins Expected to Develop in the Future?
One of the biggest features that cryptocurrency has to offer is the possibility to maintain the security of personal information and financial activity. But, some coins are more pseudonymous rather than anonymous.
So, since today there is a demand for anonymity, privacy coins will thrive and develop even better solutions.
