The degree of anonymity provided by cryptocurrencies is one of its strongest selling features. But many crypto fans, on the other hand, believe that many popular coins lack actual privacy. And that is exactly how various developers got the idea to start working on privacy coins.

Privacy coins were designed with the idea to add multiple layers of privacy and various other benefits to the core features of cryptocurrencies. Let’s take a better look and discover what privacy coins are and why they are so important.

Definition of privacy coin

A privacy cryptocurrency coin encrypts data about its users, including their identities and other transactional data.

Contrary to common misconception, the popular cryptocurrency Bitcoin is not anonymous. In fact, because all transactional records are maintained in the blockchain, it is one of the most transparent ways to move money.

People can’t see your name (i.e., Will Rock), but they can see your public address. It doesn’t take much to link an identity to a public key, especially if you have access to the FBI or DEA’s resources.

Before using a cryptocurrency exchange, many of them demand users go through KYC/AML to specifically define their identities.

That is where privacy coins enter the stage, and one good example is ZCash. The main benefit of privacy coins is that they protect your privacy 100% although they’re an open-source protocol.

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The main thing to note is that ZCash was built by a security-specialized engineering team. This is something to look for if you decide to invest in privacy coins.

How to stay private with private coins

In most cases, privacy coins enable privacy in one of two ways. One is that they emphasize anonymity to conceal the names of those involved in transactions. The other is that they focus on making it impossible to trace users make it impossible for people or computers to follow a transaction trail.

What does the government have to say?

a man taking notes

Given the nature of privacy-focused cryptocurrencies, it’s no wonder that they’ve piqued the interest of a number of government agencies. Officials in the United States are already considering tightening regulations around privacy coins in order to prevent money laundering.

Regulators are concerned that privacy coins could make it easier to launder money and conduct unlawful operations. While it’s true that criminal actors have exploited privacy coins and other cryptocurrencies in the past, there’s another side to the story.

For starters, Bitcoin was used in around 70% of all cryptocurrency-related unlawful actions probed by the FBI, not privacy coins. In addition, proponents of privacy coins believe that these cryptocurrencies are simply the digital version of currency.

There are no records, no open databases of who owns what, and there are many acceptable reasons to use some, just as there are no records and no open databases of who owns how much cash.

What are the best privacy coins?

a man taking notes

Finally, let’s walk you through the best privacy coins that you should consider investing in.

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ZCash (ZEC)

ZCash was established as a Bitcoin alternative that promises increased privacy and security. Private transactions are not necessary while utilizing ZCash, unlike Monero.

Instead, people can use the increased privacy feature to obscure transaction details and keep transactions private by using either a transparent wallet address or a “shielded address.”

ZCash achieves this by combining the zero-knowledge security layer with zk-SNARK, which stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge” (ZSL).

Existing blockchain apps can now handle semi-transparent transactions thanks to these two security methods, which essentially allow users to see only a limited portion of transaction data.

Monero (XMR)

Monero began as a split from Bytecoin in 2014 and is currently one of the most well-known privacy coins. Monero keeps both the sender and receiver’s addresses hidden on the ledger, so it’s impossible to see the value of a user’s wallet.

The Monero network preserves user privacy by using stealth addresses (a one-time address established by the sender for each transaction), ring signatures, and Ring Confidential Transactions, or “RingCT”.

Dash (DASH)

Unlike Monero, Dash isn’t solely focused on privacy although it does provide users with the option of encrypting their transactions.

The cryptocurrency was formed as a fork of Litecoin and functions as a Decentralized Autonomous Organization (DAO), with token holders governing the cryptocurrency.

In general, the public Dash blockchain makes all addresses and transactions visible. Users can, however, obscure transactions by using the PrivateSend feature.

Final words

There are a variety of reasons why someone would wish to keep their transactions secret, including disguising their riches so cyber-criminals don’t target them or simply not wanting to reveal how they spend their money. So if you don’t want to be exposed, buying privacy coins is a great option.


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