It is probably safe to assume that the creation of Bitcoin was inspired by ideals of decentralization and financial independence. Users of the network can make payments and money transfers without the use of intermediaries (banks, governments or other third-party financial institutions).
Bitcoin and the Blockchain technology have given birth to a new monetary system, partially transferring the power and control assumed by banks and government institutions to the people. The intrinsic characteristics of the Blockchain, supported by cryptography, have enabled the emergence of a more transparent system, where transactions are permanently recorded on a public digital ledger accessible to all.
To some extent, the Blockchain also provides security and privacy, since most wallet addresses are not directly linked to our names and addresses or personal data. Bitcoin wallets can be used by anyone with access to the Internet and do not require verification of any kind. Bitcoin’s pseudonymous addresses are probably the reason why many people tend to believe that Bitcoin transactions are anonymous. However, Bitcoin does not really offer complete anonymity or privacy and has never claimed to do so.
Although Bitcoin addresses are relatively anonymous, all transactions are public and traceable. Thus, individual users can have their addresses compromised through repeated use, transaction history, payment tracking, IP address monitoring, etc.
In an environment where privacy and anonymity are facing an ever-increasing demand, a myriad of cryptocurrency projects are being developed to provide enhanced levels of anonymity protection. In the following sections, you’ll find a brief overview of some of the privacy-focused projects, such as Monero, Dash, Zcash, PIVX, Verge, ZenCash and ZClassic.
Monero is an open-source crypto currency project that focuses on privacy and anonymity. It was originally proposed in 2014 by Nicolas van Saberhagen (pseudonymous author) and is now one of the most popular coins, especially on the dark web. The Monero Blockchain offers TOTALLY untraceable and confidential transactions, where sending/receiving addresses and amounts processed are cryptographically obfuscated. Its underlying technology is based on a protocol called CryptoNote, which gave birth to the so-called CryptoNight algorithm.
Zcash is an open-source project developing a crypto currency that aims to provide selective privacy and transparency. The launch of Zcash in 2016 was led by ZookoWilcox and his company Zerocoin Electric Coin Company, also known as ZcashCompany. Like Bitcoin, Zcash has a set total supply of 21 million ZEC units, but 20% of the coins are pre-mined in the first four years as a reward for founders, developers and early investors (also known as the 20% MinersFee or Founder’s Reward). There has been no initial coin offering (ICO). Zcash transactions can be transparent and are publicly recorded on the blockchain, but users can choose to add a privacy feature that aims to protect sender and recipient information, as well as transaction amounts.
Dash is an open-source cryptocurrency project that allows for semi-anonymous and instantaneous transactions. It was created by EvanDuffield (lead developer) and launched in 2014 under the name XCoin (XCO). A few days later, the name was changed to Darkcoin, before being renamed DASH (Digital Cash) in 2015. Darkcoin was created as a privacy crypto currency with the DarkSend feature, which is now known as PrivateSend.
In simple terms, the PrivateSend feature is an optional coin blending service (provided by DashMasternodes) that obscures the origin of transactions among many others. It also provides fungibilityDash (all units of the currency have the same value). The maximum allowed for a PrivateSend transaction is 1000 DASH.
Verge is a decentralized open-source crypto currency founded in 2014 under the name DogeCoinDark. The project is designed to offer fast transactions that hide the location and IP addresses of its users. This is achieved through the integration of blockchain technology in addition to Tor and I2P technologies.
It should be noted, however, that Verge is not cryptographically private. Its public ledger (blockchain) is as transparent and public as Bitcoin’s, where sending and receiving addresses are visible to all, as are transaction amounts. Its privacy features are mostly derived from Tor and I2P integration, which makes it at least questionable as a privacy coin. In addition, XVG is not considered a fungible coin due to its transparency. As a result, coins are not protected from being blacklisted. In simple terms, Verge offers almost the same as Bitcoin, but with IP obfuscation…
Despite a wide range of privacy-oriented coins, each of them uses particular mechanisms and features. Furthermore, it seems that most of these projects are not 100% perfect, so make sure to do the proper research before relying on the level of privacy claimed by a given project.
This article was intended to give you a brief overview of some of the privacy-focused crypto-currencies (there are a bunch more!). The list could go further, as we have many more privacy-focused projects in the works, but the article would probably get too long.
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