Privacy-focused Cryptocurrencies
Privacy-focused cryptocurrencies use sophisticated cryptography and obfuscation techniques to conceal the identities of their users and the specifics of their transactions, in conflict with traditional cryptocurrencies like Bitcoin, which are based on a transparent ledger that enables anyone to see all transactions.
Introduction to privacy-focused cryptocurrencies
Definition and goals
Digital currencies that put a strong priority on maintaining users’ anonymity and privacy are known as privacy-focused cryptocurrencies. Privacy-focused cryptocurrencies use sophisticated cryptography and obfuscation techniques to conceal the identities of their users and the specifics of their transactions, in conflict with traditional cryptocurrencies like Bitcoin, which are based on a transparent ledger that enables anyone to see all transactions.
The main goal of privacy-focused cryptocurrencies is to give all users who are worried and afraid about their financial activities being recorded or monitored a high level of privacy and security. These digital currencies seek to establish a genuinely decentralized financial system where people have total control over their money and private information.
Typical characteristics of cryptocurrencies with a privacy focus include:
Anonymity: Customers can make purchases without disclosing any personal information.
Encryption: Transactions are encrypted in order to stop unwanted access.
Decentralization: Instead of being managed by a single entity, a network of users keeps track of transactions on a distributed ledger.
Obfuscation: To make transactions harder to track, strategies including mixing, ring signatures, and stealth addresses are employed.
Comparison with non-privacy-focused cryptocurrencies
In terms of user privacy and anonymity, cryptocurrencies with a privacy focus function fundamentally different than those without. Less private cryptocurrencies like Bitcoin and Ethereum run on a public ledger that is accessible to all users. There are benefits and drawbacks to this transparency. On the one hand, it offers a high level of accountability and openness, enabling anybody to check transactions and preventing duplicate spending or fraudulent activities. On the other hand, the sender and recipient addresses, the amount transferred, and the transaction timestamp may all be seen by anybody.
Those who want their financial privacy and do not want their transaction data to be shared publicly may find this lack of privacy to be quite concerning. A privacy-focused cryptocurrency employs advanced encryption and obfuscation methods to make sure that transactions are secretive and anonymous. This implies that all transaction information, including the sender and destination addresses and the transfer amount, is kept confidential and can not be found by anyone else.
Popular privacy-focused cryptocurrencies
Monero (XMR)
From what we know, Monero was developed by 7 developers, five of whom opted to remain anonymous. There have been allegations that Satoshi Nakamoto, the person who created Bitcoin, also created XMR.
Bytecoin, a cryptocurrency with an emphasis on anonymity and decentralization that was introduced in 2012, is where XMR’s roots may be found. Two years later, the codebase of BCN was forked by a user only known as thankful for today from the Bitcointalk forum, giving rise to Monero. They took matters into their own hands when others in the community objected to “controversial adjustments” they had proposed for Bytecoin.
The goal of Monero, which was introduced in 2014, is to enable transactions to be conducted secretively and anonymously. Despite the widespread belief that BTC may be used to mask an individual’s identity because blockchains are transparent, it is frequently simple to track payments back to their original source. The aim of XMR, on the other hand, is to conceal both senders and recipients through the use of cutting-edge encryption.
Monero Mining
Monero uses the Proof-of-Work algorithm RandomX to verify transactions. This algorithm replaced the previous one, CryptoNightR, in November 2019. Both were designed to resist ASICs. Monero was built to be mined efficiently on consumer-grade hardware like x86, x86-64, ARM, and GPUs, which helps prevent the centralization of mining caused by ASICs. However, this has also made Monero popular among malware-based non-consensual miners. In October 2021, the Monero project released P2Pool, a mining pool operating on a sidechain that gives members complete control of their node, similar to solo mining settings.
Read More: What is Monero (XMR)?
Zcash (ZEC)
Source: The Basics | Zcash
Zooko Wilcox-O’Hearn, a cypherpunk computer security specialist, and entrepreneur, launched Zcash in 2016. Privacy and anonymity are the main focuses of the decentralized cryptocurrency Zcash. It makes use of the zk-SNARK zero-knowledge proof technique, which enables network nodes to confirm transactions without disclosing any sensitive data about those transactions.
The primary benefit of Zcash is its optional anonymity, which enables a level of privacy that is not possible with other cryptocurrencies that use pseudonyms, such as Bitcoin or Ethereum.
Transparent and shielded transmissions of ZEC transactions are also options. As Zcash was originally built on Bitcoin technology, transparent transactions operate similarly to that of Bitcoin in that they are transferred between public addresses and recorded on an immutable public ledger (the blockchain). The sender and recipient addresses, as well as the transaction’s total amount, are all readily accessible online for anybody to view. The only identifiers a third party may get from the blockchain are public addresses, hence these public transactions do not explicitly expose user identities. However, over the past few years, data scientists and law enforcement have worked to advance the techniques for blockchain analysis to the point where a curious party can now fairly reliably link a public address on a blockchain to the actual identity of its owner, effectively prohibiting private transactions.
Dash (DASH)
A cryptocurrency called Dash was introduced in 2014. It is made with an emphasis on user privacy and is meant to be quick and secure. Dash offers customers a high level of anonymity and quick transaction times by combining PrivateSend and InstantSend.
Dash wants to “be the most user-friendly and scalable payments-focused cryptocurrency in the world,” according to its website. The project depends on a network of master nodes, which are servers backed by collateral stored in Dash and created to deliver sophisticated services securely and governance over Dash’s proposal system, to do this. Masternodes give the network a second layer of services in return for a portion of the block rewards. They support features like ChainLocks, InstantSend, and PrivateSend.
Dash is promoted to both individual users and institutions, such as businesses, financial institutions, traders, and anyone who needs to move money abroad. Dash Core Group stated in October 2020 that its strategic goals going forward include developing its ecosystem and brand, assuring user satisfaction, and further developing the technology underlying the network. Dash’s governance system, distributes 10% of the block rewards in a decentralized manner for the project’s development. In addition, the Dash Foundation, which promotes the use of cryptocurrencies, receives donations and offers paid individuals and organizations.
Read More: What Is Dash?
Other privacy coins that have found a lot of success in the crypto world that we think should be mentioned are:
- PIVX (PIVX)
Key features of privacy-focused cryptocurrencies
Anonymous transactions
A crucial component of cryptocurrencies that prioritizes privacy is anonymous transactions. With the use of these cryptocurrencies, users may transact with a high level of secrecy and anonymity. This entails that users can transfer money without disclosing their identity or the specifics of the transaction to anybody else.
Ring signatures, stealth addresses, and zero-knowledge proofs are just a few examples of the encryption and obfuscation methods employed by privacy-focused cryptocurrencies to accomplish this. These methods give users a high level of privacy and anonymity by making it difficult for anyone to track a transaction back to its source or destination. Users who are concerned about their financial privacy, such as those who reside in nations with tight financial restrictions or who are worried about fraud or identity theft, should pay special attention to anonymous transactions. These individuals may make transactions without disclosing their personal information by utilizing cryptocurrencies that focus on privacy, aiding in the preservation of their security and privacy.
Untraceable addresses
Another important aspect of privacy-focused cryptocurrencies is the use of untraceable addresses. These addresses are used to ensure that transactions are kept confidential and anonymous, in contrast to non-privacy-focused cryptocurrencies that utilize a visible ledger to record all transactions.
The use of strategies like stealth addresses or one-time addresses is normally how untraceable addresses are obtained. These addresses are made to be distinct for every transaction in order to make it challenging for anybody to track the transaction’s origin or destination. This aids in preserving the users’ anonymity and right to privacy during the transaction. For example, each transaction using stealth addresses generates a separate address that is unrelated to the sender’s or recipient’s public address. As a result, it is extremely challenging for anybody to ascertain who provided or received the payments, offering a high level of confidentiality and anonymity.
Confidential transaction amounts
Another crucial aspect of cryptocurrencies that prioritizes privacy is the use of private transaction amounts. Privacy-oriented cryptocurrencies utilize confidential transaction amounts to keep transaction information secret and anonymous, in contrast to non-privacy-oriented cryptocurrencies that record all transaction amounts on a public ledger. Private transaction amounts are generally achieved using strategies like homomorphic encryption or confidential transactions. These methods make it possible to obscure transaction quantities so that only the sender and recipient of the transaction can see them. This aids in preserving both the value of the transaction and the privacy of the users making the transaction.
With confidential transactions, the actual transaction value is concealed behind a cryptographic technique that is used to prove the transaction’s validity without revealing the exact amount. Consequently, it is highly improbable for anyone to determine the transaction’s value, which provides a high degree of confidentiality and security.
Stealth addresses and ring signatures
Source: vitalik.ca
Further essential characteristics of privacy-focused cryptocurrencies include stealth addresses and ring signatures, which support a high level of user privacy and anonymity.
Each transaction generates a unique address called a “stealth address,” which is unrelated to either the sender’s or the recipient’s public address. This offers a high level of secrecy and anonymity by making it exceedingly difficult for anybody to ascertain who provided or received the payments.
In this example Ring Signature of Monero from Ring Signatures vs zkSNARKs: Comparing privacy technologies
On the other hand, ring signatures are cryptographic methods that let users sign a message on behalf of a group while keeping the identity of the group member who actually signed the message a secret. This offers a high level of secrecy and anonymity by making it extremely difficult for anybody to ascertain who actually donated the payments.
Ring signatures and stealth addresses work together to create a strong level of secrecy and anonymity for bitcoin transactions. Users may ensure that their transactions cannot be tracked or connected to their identities by utilizing a privacy-focused cryptocurrency that takes advantage of these characteristics, giving them a high level of privacy and security.
Lição 1:Privacy's Importance in Crypto Industry: Overview
Lição 2:Privacy-focused Cryptocurrencies
Lição 3:Privacy Tech in Blockchain - Zero-knowledge Proofs
Lição 4:Practices for Maintaining Privacy When Using Crypto
Lição 5:Ethical Considerations in Crypto and Privacy
Privacy-focused Cryptocurrencies
Privacy-focused cryptocurrencies use sophisticated cryptography and obfuscation techniques to conceal the identities of their users and the specifics of their transactions, in conflict with traditional cryptocurrencies like Bitcoin, which are based on a transparent ledger that enables anyone to see all transactions.
Introduction to privacy-focused cryptocurrencies
Definition and goals
Digital currencies that put a strong priority on maintaining users’ anonymity and privacy are known as privacy-focused cryptocurrencies. Privacy-focused cryptocurrencies use sophisticated cryptography and obfuscation techniques to conceal the identities of their users and the specifics of their transactions, in conflict with traditional cryptocurrencies like Bitcoin, which are based on a transparent ledger that enables anyone to see all transactions.
The main goal of privacy-focused cryptocurrencies is to give all users who are worried and afraid about their financial activities being recorded or monitored a high level of privacy and security. These digital currencies seek to establish a genuinely decentralized financial system where people have total control over their money and private information.
Typical characteristics of cryptocurrencies with a privacy focus include:
Anonymity: Customers can make purchases without disclosing any personal information.
Encryption: Transactions are encrypted in order to stop unwanted access.
Decentralization: Instead of being managed by a single entity, a network of users keeps track of transactions on a distributed ledger.
Obfuscation: To make transactions harder to track, strategies including mixing, ring signatures, and stealth addresses are employed.
Comparison with non-privacy-focused cryptocurrencies
In terms of user privacy and anonymity, cryptocurrencies with a privacy focus function fundamentally different than those without. Less private cryptocurrencies like Bitcoin and Ethereum run on a public ledger that is accessible to all users. There are benefits and drawbacks to this transparency. On the one hand, it offers a high level of accountability and openness, enabling anybody to check transactions and preventing duplicate spending or fraudulent activities. On the other hand, the sender and recipient addresses, the amount transferred, and the transaction timestamp may all be seen by anybody.
Those who want their financial privacy and do not want their transaction data to be shared publicly may find this lack of privacy to be quite concerning. A privacy-focused cryptocurrency employs advanced encryption and obfuscation methods to make sure that transactions are secretive and anonymous. This implies that all transaction information, including the sender and destination addresses and the transfer amount, is kept confidential and can not be found by anyone else.
Popular privacy-focused cryptocurrencies
Monero (XMR)
From what we know, Monero was developed by 7 developers, five of whom opted to remain anonymous. There have been allegations that Satoshi Nakamoto, the person who created Bitcoin, also created XMR.
Bytecoin, a cryptocurrency with an emphasis on anonymity and decentralization that was introduced in 2012, is where XMR’s roots may be found. Two years later, the codebase of BCN was forked by a user only known as thankful for today from the Bitcointalk forum, giving rise to Monero. They took matters into their own hands when others in the community objected to “controversial adjustments” they had proposed for Bytecoin.
The goal of Monero, which was introduced in 2014, is to enable transactions to be conducted secretively and anonymously. Despite the widespread belief that BTC may be used to mask an individual’s identity because blockchains are transparent, it is frequently simple to track payments back to their original source. The aim of XMR, on the other hand, is to conceal both senders and recipients through the use of cutting-edge encryption.
Monero Mining
Monero uses the Proof-of-Work algorithm RandomX to verify transactions. This algorithm replaced the previous one, CryptoNightR, in November 2019. Both were designed to resist ASICs. Monero was built to be mined efficiently on consumer-grade hardware like x86, x86-64, ARM, and GPUs, which helps prevent the centralization of mining caused by ASICs. However, this has also made Monero popular among malware-based non-consensual miners. In October 2021, the Monero project released P2Pool, a mining pool operating on a sidechain that gives members complete control of their node, similar to solo mining settings.
Read More: What is Monero (XMR)?
Zcash (ZEC)
Source: The Basics | Zcash
Zooko Wilcox-O’Hearn, a cypherpunk computer security specialist, and entrepreneur, launched Zcash in 2016. Privacy and anonymity are the main focuses of the decentralized cryptocurrency Zcash. It makes use of the zk-SNARK zero-knowledge proof technique, which enables network nodes to confirm transactions without disclosing any sensitive data about those transactions.
The primary benefit of Zcash is its optional anonymity, which enables a level of privacy that is not possible with other cryptocurrencies that use pseudonyms, such as Bitcoin or Ethereum.
Transparent and shielded transmissions of ZEC transactions are also options. As Zcash was originally built on Bitcoin technology, transparent transactions operate similarly to that of Bitcoin in that they are transferred between public addresses and recorded on an immutable public ledger (the blockchain). The sender and recipient addresses, as well as the transaction’s total amount, are all readily accessible online for anybody to view. The only identifiers a third party may get from the blockchain are public addresses, hence these public transactions do not explicitly expose user identities. However, over the past few years, data scientists and law enforcement have worked to advance the techniques for blockchain analysis to the point where a curious party can now fairly reliably link a public address on a blockchain to the actual identity of its owner, effectively prohibiting private transactions.
Dash (DASH)
A cryptocurrency called Dash was introduced in 2014. It is made with an emphasis on user privacy and is meant to be quick and secure. Dash offers customers a high level of anonymity and quick transaction times by combining PrivateSend and InstantSend.
Dash wants to “be the most user-friendly and scalable payments-focused cryptocurrency in the world,” according to its website. The project depends on a network of master nodes, which are servers backed by collateral stored in Dash and created to deliver sophisticated services securely and governance over Dash’s proposal system, to do this. Masternodes give the network a second layer of services in return for a portion of the block rewards. They support features like ChainLocks, InstantSend, and PrivateSend.
Dash is promoted to both individual users and institutions, such as businesses, financial institutions, traders, and anyone who needs to move money abroad. Dash Core Group stated in October 2020 that its strategic goals going forward include developing its ecosystem and brand, assuring user satisfaction, and further developing the technology underlying the network. Dash’s governance system, distributes 10% of the block rewards in a decentralized manner for the project’s development. In addition, the Dash Foundation, which promotes the use of cryptocurrencies, receives donations and offers paid individuals and organizations.
Read More: What Is Dash?
Other privacy coins that have found a lot of success in the crypto world that we think should be mentioned are:
- PIVX (PIVX)
Key features of privacy-focused cryptocurrencies
Anonymous transactions
A crucial component of cryptocurrencies that prioritizes privacy is anonymous transactions. With the use of these cryptocurrencies, users may transact with a high level of secrecy and anonymity. This entails that users can transfer money without disclosing their identity or the specifics of the transaction to anybody else.
Ring signatures, stealth addresses, and zero-knowledge proofs are just a few examples of the encryption and obfuscation methods employed by privacy-focused cryptocurrencies to accomplish this. These methods give users a high level of privacy and anonymity by making it difficult for anyone to track a transaction back to its source or destination. Users who are concerned about their financial privacy, such as those who reside in nations with tight financial restrictions or who are worried about fraud or identity theft, should pay special attention to anonymous transactions. These individuals may make transactions without disclosing their personal information by utilizing cryptocurrencies that focus on privacy, aiding in the preservation of their security and privacy.
Untraceable addresses
Another important aspect of privacy-focused cryptocurrencies is the use of untraceable addresses. These addresses are used to ensure that transactions are kept confidential and anonymous, in contrast to non-privacy-focused cryptocurrencies that utilize a visible ledger to record all transactions.
The use of strategies like stealth addresses or one-time addresses is normally how untraceable addresses are obtained. These addresses are made to be distinct for every transaction in order to make it challenging for anybody to track the transaction’s origin or destination. This aids in preserving the users’ anonymity and right to privacy during the transaction. For example, each transaction using stealth addresses generates a separate address that is unrelated to the sender’s or recipient’s public address. As a result, it is extremely challenging for anybody to ascertain who provided or received the payments, offering a high level of confidentiality and anonymity.
Confidential transaction amounts
Another crucial aspect of cryptocurrencies that prioritizes privacy is the use of private transaction amounts. Privacy-oriented cryptocurrencies utilize confidential transaction amounts to keep transaction information secret and anonymous, in contrast to non-privacy-oriented cryptocurrencies that record all transaction amounts on a public ledger. Private transaction amounts are generally achieved using strategies like homomorphic encryption or confidential transactions. These methods make it possible to obscure transaction quantities so that only the sender and recipient of the transaction can see them. This aids in preserving both the value of the transaction and the privacy of the users making the transaction.
With confidential transactions, the actual transaction value is concealed behind a cryptographic technique that is used to prove the transaction’s validity without revealing the exact amount. Consequently, it is highly improbable for anyone to determine the transaction’s value, which provides a high degree of confidentiality and security.
Stealth addresses and ring signatures
Source: vitalik.ca
Further essential characteristics of privacy-focused cryptocurrencies include stealth addresses and ring signatures, which support a high level of user privacy and anonymity.
Each transaction generates a unique address called a “stealth address,” which is unrelated to either the sender’s or the recipient’s public address. This offers a high level of secrecy and anonymity by making it exceedingly difficult for anybody to ascertain who provided or received the payments.
In this example Ring Signature of Monero from Ring Signatures vs zkSNARKs: Comparing privacy technologies
On the other hand, ring signatures are cryptographic methods that let users sign a message on behalf of a group while keeping the identity of the group member who actually signed the message a secret. This offers a high level of secrecy and anonymity by making it extremely difficult for anybody to ascertain who actually donated the payments.
Ring signatures and stealth addresses work together to create a strong level of secrecy and anonymity for bitcoin transactions. Users may ensure that their transactions cannot be tracked or connected to their identities by utilizing a privacy-focused cryptocurrency that takes advantage of these characteristics, giving them a high level of privacy and security.