What are privacy coins and how are they different from Bitcoin?



Cryptocurrencies are usually pseudonymous, but not necessarily private. Bitcoin (BTC) and other assets work on the Blockchain, and every transaction is published online. During a transaction between two or more parties, assets are moved to different wallets, each represented by a string of characters.

However, with these addresses and transactions visible to everyone, There is a certain level of traceability, especially if a portfolio transfers funds to an exchange that requires KYC verification.

Certain crypto assets, often referred to as privacy coins, private coins, or anonymous coins, attempt to hide information about transactions, giving users more privacy. ¿Why might someone need privacy if they are not doing anything illegal? It could be the preference or a vision of privacy as a basic human right could be two reasons. Cash is largely private. Every transaction is not recorded somewhere for everyone to see at the push of a button.

There are several possible methods for adding privacy to Bitcoin, including peer-to-peer trading, although multiple crypto assets focus on privacy more directly through their technology. Some known privacy assets in the crypto space are Monero (XMR), Zcash (ZEC), Verge (XVG), Beam, and Grin. Dash is also on the list as it allows for greater anonymity, although the coin is not technically classified as a privacy asset.

Monero

Monero, one of the industry’s best-known privacy-focused assets, appeared on the scene about seven years ago, and has garnered numerous headlines since. Monero prides itself on decentralization, and boasts origins that support those stated values. “It was a fair and pre-announced release of the CryptoNote referral code,” says the Monero website. “There was no pre-finished or pre-finished, and no part of the block’s reward goes to development.”

Monero, a coin based on its own proof-of-work (PoW) blockchain, touts multiple different privacy technology features, according to its website, including stealth addresses and RingCT. Added to XMR in 2017, “RingCT, short for Ring Confidential Transactions, is the way in which transaction amounts are hidden in Monero”, explains Moneropedia, the explanatory section of the asset site.

Monero piqued the interest of the US government in late 2020. The Internal Revenue Service (IRS) put a bounty on the asset, promising up to $ 625,000 in exchange for cracking the coin’s privacy technology. . Two blockchain analytics teams, Integra FEC and Chainalysis, took home the award just weeks after the IRS announced the award.

Zcash

Zcash presents itself as another popular privacy-focused asset in the cryptocurrency space. It started in 2016 and was started by the Electric Coin Company, which is run by cypherpunk Zooko Wilcox. Zcash arises from the same code as Bitcoin, according to the asset’s website. ZEC operates on its own PoW mining consensus blockchain, independent of Bitcoin.

ZEC allows both private transfers, called shielded transactions, and public transactions. “Zcash gives you the option of conducting confidential transactions and having financial privacy through shielded addresses, “explains the Zcash website, adding:” Zero Knowledge-Proofs allow you to verify transactions without revealing the sender, receiver or the transaction amount. The selective disclosure features within Zcash allow a user to share some details of the transaction, for compliance or auditing purposes. “

Dash (more or less)

Dash is another well-known cryptocurrency that houses privacy features. The entity that manages the development of the coin, the Dash Core Group, however, has clarified on several occasions that Dash is not a privacy asset, although it does come with elective features to add anonymity.

“Dash is a payments cryptocurrency with a strong focus on usability, including speed, cost, ease of use, and user protection through optional privacy.“the group’s chief marketing officer, Fernando Gutiérrez, previously told Cointelegraph.

“Dash is not an AEC!” said Ryan Taylor, CEO of DashPay, in a Tweet January 2021 in which he referred to Anonymity Enhanced Cryptocurrencies, or AEC for its acronym in English, a term used by regulatory bodies in the United States. “As a literal fork of Bitcoin, all Dash transactions are completely transparent,” added his tweet: “All entries, exits, addresses and amounts are recorded in each and every transaction and are visible -by anyone- on your public blockchain.

XCoin joined the world of cryptocurrencies as a fork of Bitcoin in 2014, which was later renamed Darkcoin and later Dash. The asset is built on its own proof-of-stake blockchain, PoS for its acronym in English.

The currency allows users to transact anonymously, if they wish, through what is known as PrivateSend. “The technology that Dash uses in our PrivateSend feature is CoinJoin, which is a technique to complicate transactions to the point that they are more difficult for analytics companies to analyze.“Gutiérrez explained, as previously reported.

Verge

A PoW asset that works on its own Blockchain, Verge exists as another cryptocurrency that offers privacy capabilities. Verge started out under a different name. “Verge was created in 2014 under the name DogeCoinDark,” says the asset’s website, but later became Verge.

An open source asset, Verge enables private transfers via I2P and Tor technology, which hides carrier locations (IP addresses), according to information from BitDegree, as well as a previous report from Cointelegraph.

Verge gained significant price traction in late 2017, reaching highs around $ 0.31, according to data from TradingView. The asset is currently trading at approximately $ 0.023.

Beam and Grin

Grin and Beam stormed the crypto market in 2019, touting a different technology called Mimblewimble. A type of blockchain technology, the Mimblewimble concept was made public in 2016 as a PoW variation., according to a community introduction article by William M. Peaster on Binance Academy.

Grin and Beam were launched on the basis of Mimblewimble, although Litecoin (LTC), a long-standing prominent asset in the crypto space, has been working on implementing the technology.

In an MW blockchain, there are no identifiable or reusable addresses, which means that all transactions look like random data to a stranger“reads the Binance Academy article.”A Mimblewimble block looks like one large transaction rather than a combination of many“adds the article, which later delves into other aspects of technology.

Privacy and regulation currencies

Government surveillance of privacy coins has grown in recent years, as the Treasury’s efforts against Monero technology show in part. References to privacy coins also emerged in the regulation proposed by the United States FinCEN on self-custodial crypto wallets in December 2020.

Various types of AECs (for example, Monero, Zcash, Dash, Komodo, and Beam) are increasing in popularity and employing various technologies that inhibit the ability of researchers to both identify transaction activity using blockchain data.“the December document read, referring to anonymity-enhanced cryptocurrencies. Additionally, South Korea banned anonymous assets in November 2020.

Some crypto exchanges have delisted the assets mentioned. In October 2019, OKEx Korea stopped trading on its Monero, Zcash, Super Bitcoin (SBTC), Dash, and Horizen (ZEN) platforms. BitBay retired Monero near the beginning of 2020. Bittrex retired Zcash, Dash, and Monero from its exchange in January 2021. Several other cryptocurrency platforms have also delisted privacy assets over the last year or two, including ShapeShift.

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