- Privacy coins allow anonymous blockchain transactions.
- Privacy coins encase the fundamental operations to conceal the identity of wallet holders
- As a result of government’s increasing proficiency at tracking Bitcoin transactions, users now switch to private cryptocurrencies.
Privacy coins are a class of cryptocurrencies that enable anonymous blockchain transactions by hiding their source and destination.
With Zcash, transactions may be confirmed without disclosing the sender, receiver, or transaction amount thanks to Zero-Knowledge Proofs.
A cryptocurrency user can occasionally desire characteristics you’d often find in a traditional currency like the U.S. dollar. For instance, it can be challenging to manage cash transactions even when you know the serial number of each note that was used. You may achieve a similar result by employing a privacy coin in circumstances when this anonymity is desired or even essential.
How do they work
Like all other cryptocurrencies, privacy coins operate similarly. Owners of the digital currencies can keep them in a variety of cryptocurrency wallets, and they use a public blockchain network to record and validate transactions.
However, privacy coins encase these fundamental operations in higher levels of protection to conceal the identity of wallet holders or to anonymize transactions. Normal cryptocurrencies like Bitcoin (CRYPTO:BTC) or Ethereum (CRYPTO:ETH) are simple to follow as they move from one digital wallet to another, and the amount of these cryptocurrencies that are stored in these wallets is known to the general public. To obscure that information, privacy coins employ a variety of strategies.
In what ways does a privacy coins provide privacy
- They offer anonymity so that the identity of those who are behind transactions can be masked.
- To stop outside observers from tracking a transaction trail, offer untraceability.
- When your wallet’s transaction history is made public, online retailers may start to examine the wallets of prospective consumers and modify their pricing to reflect your known spending patterns. By protecting your data, privacy coins get around this problem.
What are some of the popular privacy coins
Monero
Monero is the biggest and most well-known privacy coin. Through the almost-defunct Bytecoin, the underlying blockchain technology of Monero is a substantially modified version of Bitcoin.
Bytecode, a previous privacy-focused coin, was abandoned by its community in favor of Monero when it was learned that Bytecode developers were reportedly engaging in questionable activities, leading to the launch of Monero in 2014.
Zcash
If Bitcoin is like http for money, then Zcash (ZEC) is https, highlighting its improved security and privacy capabilities. Participants in Zcash have the possibility to conceal transactions thanks to a cryptographic mechanism called Zero-Knowledge Proof that has been deployed. Participants can conduct transactions without disclosing their addresses to one another.
Dash
Dash debuted in 2014 and is based on the source code of Bitcoin. Its original name was “Xcoin,” which was changed to “Darkcoin” to emphasise its privacy and anonymity capabilities, and then again to “Dash,” which is based on how “digital cash” is spelled when it is abbreviated.
Horizen
Similar to how Bitcoin works, Horizen (ZEN) provides public T-Addresses and Z-Addresses with privacy protection. But when transferring money to a T-Address from a Z-Address, the amount received will be displayed. Additionally, Horizen has a sizable node network, which enhances anonymity.
Conclusion
Despite being the most popular option, government organisations still use Bitcoin. They have gotten really good at tracking Bitcoin transactions, which makes switching to more private coins very appealing. Since many people use Bitcoin to hide their identities, government authorities are continuously targeting and keeping an eye on transactions. They have gotten fairly adept at tracking Bitcoin transactions, which has strongly encouraged users to migrate to cryptocurrencies with better privacy, including those listed above.