Bitcoin was introduced to the world as an alternative monetary system to national currencies controlled by the government.
Unfortunately, due to the nature of its work, some crypto advocates believe that it lacks the privacy features necessary to adequately protect its users, especially in authoritarian countries that ban or forbid the use of cryptocurrencies.
In fact, Bitcoin offers less privacy than fiat currencies in some respects because it is based on a public blockchain, which means that anyone with enough resources to perform a chain analysis can reveal the true identity behind the public address.
Somewhat controversial privacy coins such as Monero and Dash have emerged to address this issue by giving users the ability to send and receive value anonymously.
Many privacy coins have appeared since then.
Today, we have so many privacy-focused coins in the cryptocurrency market that it has become difficult to choose coins that best suit specific needs.
It must be said that privacy coins are increasingly in the crosshairs of global anti-money laundering (AML) regulators due to their ability to facilitate money laundering, and terrorist financing, and have already been omitted by many exchanges as a result.
Therefore, you should proceed with caution when dealing with cryptocurrencies with a privacy nature and make sure that you follow local laws.
In this article, we will discuss what privacy coins are and the most popular names of privacy coins.
What are privacy coins?
Privacy coins are a class of cryptocurrencies that support private and anonymous blockchain transactions by masking their source and destination.
Some of the techniques used include masking a user's real wallet balance and address, and mixing multiple transactions together to avoid network analysis.
In the spirit of transparency, Bitcoin and other non-private blockchains allow anyone to view public addresses and transactions in the network, making it relatively easy to keep track of someone's deposits and withdrawals.
However, privacy coins deal with two different aspects, anonymity and untraceability.
The cryptocurrency hides the identity behind the transaction, while the lack of traceability makes it nearly impossible for third parties to follow the path of transactions using blockchain analysis services.
Privacy cryptocurrencies have gained popularity due to several factors, including privacy and anonymity.
Some of them help users hide their identities and transactions.
So, amid growing concerns about the anonymity of early cryptocurrencies, such as bitcoin, users are looking for new options.
Let's take a look at some of the popular privacy-oriented cryptocurrencies, which have many privacy features built in.
As these privacy coins claim to offer enhanced security features or options that help conceal users' identities and activities.
The most famous digital currencies with a privacy character:
The popularity of Monero (XMR) is on the rise, mainly due to its ability to help anonymize users.
Monero transactions are hard to track because they use scrambled signatures and cloaked addresses.
These methods help conceal the identities of the sender and receiver.
In addition, the “Ring Confidential Transactions” or “RingCT” technology helps to hide the transaction amount, providing more privacy.
Monero is trading at $245 as of May 20, 2021, and Monero is the 29th cryptocurrency by total market capitalization, reaching nearly $4.4 billion.
Zcash (ZEC) defines itself as:
If Bitcoin is like http for money, Zcash is https
This confirms its enhanced security and privacy features.
Zcash has implemented an upgrade that includes an encryption tool called "Zero-Knowledge Proof" that gives participants the option to protect transactions.
Participants are allowed to transact without disclosing their address to others.
Zcash ranks 54th on the list of cryptocurrencies with a market capitalization of $2 billion, trading at $175 per ZEC as of May 20, 2021.
Created in 2014, Dash is a cryptocurrency that allows the user to choose whether their transactions are anonymous or private using the private sending feature.
This allows users who want to stay within their countries' regulatory standards to do so.
The feature blocks the value of the cryptocurrency sent.
Choosing to use the private send feature slightly increases the transaction fee.
Dash achieves this through a shuffling protocol using an innovative decentralized server network called master nodes
As of May 20, 2021, Dash is ranked 50th by market capitalization with a total value of over $2.1 billion.
At the time of writing this article, it is trading at around $217
Rather than relying on cryptographic techniques, Verge Digital Currency (XVG) relies on the current and tested technology of The Onion Router (TOR) and the Invisible Internet Project (I2P) to protect users' identities.
TOR sends the user's communications through a distributed network of relays and tunnels run by volunteers spread all over the world, thus anonymizing the user.
On the other hand, I2P encrypts user data before sending it over an anonymous, peer-to-peer, volunteer-managed globally distributed network.
This allows the locations and IP addresses of transacting participants to be hidden.
Verge Coin made headlines when it was adopted by a popular adult website to start accepting cryptocurrency payments.
The main reason for developing the currency was to offer privacy features.
As of May 20, 2021, the Verge cryptocurrency is ranked 112th by market capitalization with a total value of $503.6 million and an estimated trading price of 0.03 cents.
Horizen (ZEN) offers privacy-protected Z addresses and public T addresses that work similarly to Bitcoin.
However, sending money from Z-Address to T-Address will show the amount received.
Horizen also boasts an extensive network of nodes, which helps improve anonymity.
On May 20, 2021, Horizen was trading at $80 with a total market capitalization of about $903 million.
This makes it the 91st place in the list of the largest cryptocurrencies.
Beam is a security focused cryptocurrency with core features that include complete control over your privacy.
All transactions are private by default and no addresses or other private information is stored on the blockchain.
Beam claims to have superior scalability due to the size of the compact blockchain, the ability to audit subscription, support for online and offline transactions, atomic swaps, and hardware wallet integration.
As of today, May 20, 2021, Beam is trading for $0.91 with a total market capitalization of $21.9 million, making it the 376th most valuable.
The future of digital currencies with a privacy character:
While privacy is a highly desirable feature in the virtual world, it also carries with it the risk of a significant criminal element.
Cryptocurrency operators have to fend off numerous hacking attempts by malicious participants.
Law enforcement agencies and regulators are also likely to investigate people with large transactions in these private currencies.
Although Bitcoin remains the most popular option, it is constantly targeted by government agencies.
Some companies have become very good at tracking bitcoin transactions, which has created a strong incentive to move towards private cryptocurrencies.