The right to privacy has already become the world standard for ensuring the fundamental human rights in the digital age. In a prosperous society, the right to confidentiality is secured by the state. Confidentiality improves the well-being of society and also helps companies to do business.
However, most of our private information can easily be found online by almost everyone. Internet giants like Google, Microsoft, Facebook, Apple, and others have a lot of Information about us. That’s one of the reasons people are becoming more concerned about privacy the internet.
Big Brother Is Watching You, 1984
With the advent of Bitcoin and blockchain technology, there is a hope to change the present system and to secure our private information. But does Bitcoin provide anonymity?
All bitcoin transactions are stored publicly and permanently on the blockchain. The addresses of the transactions are publicly available. These addresses do not necessarily trace back to specific people and users can use new addresses each time they transact, and in fact, they should, as that was the recommendation in the original whitepaper by Satoshi, creator(s) of bitcoin, which you can argue is also a pseudonym.
That’s why sending and receiving bitcoins is like writing under a pseudonym. If an author’s pseudonym is ever linked to their identity, everything they have ever written under that pseudonym will now be linked to them. If your address is ever linked to your identity, every transaction will be linked to you.
Why do we need anonymous cryptocurrency?
In the 2017 Internet Organised Crime Threat Assessment (IOCTA), Europol states that, although bitcoin is still the preferred currency in cybercrime, the landscape is beginning to evolve, with "monero, ethereum and zcash ... gaining popularity within the digital underground."
Enhanced privacy and anonymity regrettably become a natural attraction for criminals and those engaged in illegal activities, and this became the main narrative against Bitcoin and generally, cryptocurrencies. But embracing privacy and anonymity doesn’t mean you’re a criminal; it just simply means that you’re redeeming your rights to have absolute control over your privacy. Cryptocurrencies represent a conducive medium to exercise your rights to privacy.
Privacy Tech Algorithms
Anonymity in computer science is a combination of pseudonymity and unlink-ability, which is different interactions of the same user with the system, should not be linkable to each other.The three most common privacy algorithms are zk-Snarks, Coinjoin, and RingCT. The latter method is used in monero; Coinjoin features in dash and is also being trialed with bitcoin; and zk-Snarks are used by most of the Z coins including Zcash. Here’s how they work:
RingCT: Monero’s ring signatures allow the sender to hide their transaction among other outputs. In addition, RingCT makes it possible to hide the amount being sent. Coupled with a stealth receiving address, this makes for an extremely discreet way of sending funds. Transparency is optional with monero, which uses an “opaque” blockchain.
How monero’s RingCT works
Coinjoin: Developed by Gregory Maxwell, Coinjoin deploys a ‘safety in numbers’ approach. When two senders despatch a transaction of an identical amount, this is converted into a joint payment. When this occurs, correlating the transaction inputs and outputs is virtually impossible. There are many variants of Coinjoin including Private Send, which is used by dash, and Coin Shuffle; Cash Shuffle is the version currently being tested with bitcoin cash.
How Coinjoin works
zk-Snarks: Zero-Knowledge Succinct Non-Interactive Argument of Knowledge is a technology that allows miners to verify transactions without knowing who sent or received the coins. Using a cryptographic hash, each party can prove that a certain statement is true without revealing the precise details of who sent what and where. Although most commonly associated with the Zerocoin family, zk-Snarks are also being tested with ethereum.
How zk-Snarks work in Zcash
Anonymous cryptocurrencies are gaining attention from mainstream crypto investors. Privacy and anonymity have become marketing buzzwords for all cryptos, helping to bring attention to the crypto investing arena. Privacy is an oft-cited reason for interest from new crypto investors and users.
Let's take a closer to look at the most popular anonymous cryptocurrencies.
Monero was launched in April 2014 as a fork of ByteCoin and uses its CryptoNote codebase. Monero currently provides some of the highest levels of anonymity and privacy available. The basic framework of Monero’s blockchain and transaction structure are the same as those used by Bitcoin, however, it utilizes ring signatures and addresses derivation.
Monero uses ring signatures and ring confidential transactions to obfuscate all the details relating to transactions. These include the amounts, origins, and destinations of all transactions. When coins are spent, the transaction is signed and time-stamped with a ring signature, this signature is verified against a group of public keys without revealing the actual private key used. The default obfuscation of all the transaction details means transactions on the Monero blockchain cannot be linked to a particular user or real-world identity.
Launched in 2016, Zcash is an open-source cryptocurrency that offers privacy and selective transparency of transactions. Payments made with Zcash are published on a public blockchain, but the sender, recipient, and amount of a transaction remain private. Zcash uses advanced cryptographic techniques called zero-knowledge proofs, to guarantee the validity of transactions without revealing key information about them.
Zcash uses a zero-knowledge proof construction called a zk-SNARK (Zero-Knowledge Succinct Non-interactive Argument of Knowledge). These constructions allow the network to maintain a secure ledger without revealing the parties or amounts involved. The process involves encrypting the transaction metadata and zk-SNARKs are used to prove the validity of all transactions. In addition to aiding anonymity, this also helps reduce transaction verification costs compared to smart contracts.
While best known for being a cryptocurrency geared for everyday use, Dash is also a viable option for those interested in private transactions. In addition to providing transparent payment options, Dash allows anonymity with its PrivateSend feature that utilizes the concept of CoinJoin.
Dash offers a decentralized mixing service within its platform called PrivateSend that allows transactions to be formed by multiple parties and paid out to multiple parties and the merging of funds together means that they cannot be uncoupled afterward. Here, funds are mixed together and investigators cannot be sure of the sender, amount, or destination. Successfully mixing payments using the PrivateSend feature requires at least three participants.
About Bitcoin Private
Bitcoin Private, a supposed “fork-merge” of Bitcoin and Zclassic, is intended to add privacy and spendability to the Bitcoin blockchain while remaining cognizant of the challenges, choices, and failures of prior forks. To accomplish this, Bitcoin Private will use a larger block size (2 MB), a shorter block time (2.5 min), and an ASIC-resistant (GPU-friendly) proof-of-work (PoW) algorithm for mining — Equihash.
Furthermore, due to the dual nature of this fork-merge, more of the crypto-community will find themselves involved. After the snapshot, ZCL (t & z) and BTC (segwit & normal) addresses will receive BTCP (1:1 for both) at the same address. This is a first-of-its-kind fork and the open source blockchain community is finally beginning to fully explore the malleability of UTXO sets.
Verge came into life on February 15, 2016 after it officially rebranded from its original name of Dogecoindark, which was a fork of Dogecoin. Verge models itself on the original Bitcoin blockchain and operates as a decentralized currency based on an open-source platform. There is no central control over the coin and it is completely untraceable. Verge uses multiple anonymity-centric networks such as Tor and I2P. This keeps user IP addresses obfuscated and transactions private.
In addition to using anonymity-centric networks, Verge also utilizes multi-algorithm mining support that improves security and provides the equal distribution of coins to miners. Verge differs from other privacy coins as most other platform log user IP addresses and hide or mask transactions on their network. Verge operates a transparent ledger but protects user identities and locations by using Tor and I2P.
The Komodo Platform is a cryptocurrency project that focuses on providing anonymity through zero-knowledge proofs and security through a novel Delayed Proof of Work (dPoW) protocol. The Komodo Platform was forked from Zcash by the SuperNET team and it is the evolution of the BitcoinDark cryptocurrency.
The Komodo Platform focuses on providing complete end-to-end blockchain solutions for developers of any level and any industry. It is simple yet powerful, offering customized blockchain solutions that are easy to deploy, and configurable to meet your needs.
The Komodo platform was built on the foundation of security and privacy, offering ultimate peace of mind. Komodo’s innovative dPOW (delayed proof of work) provides a security layer that creates backups of your blockchain’s data and notarizes it to Bitcoin’s blockchain, providing even the smallest of blockchains with Bitcoin-level security. The platform also offers optional privacy protection through the integration of Zero-Knowledge Proofs.
Allow Komodo’s technologies and experts help accelerate your blockchain development so you can focus on your application. Its goal has always been to drive the mainstream adoption of decentralized blockchain technologies. Komodo offers the technology, support, and services to help developers and partners rapidly deploy the right blockchain solution for them.
ZenCash is a platform designed for private communications and private economic activity. Cutting-edge cryptography and zero knowledge proofs enable fully anonymous peer to peer communications with ZenCash. ZenCash’s distributed and encrypted networking design is resistant, to traffic correlation and metadata analysis.
Zencash uses Zksnarks to shield transactions and keep everything from user sending and receiving addresses to communications and publishing on this blockchain completely private. Rather than just a currency, Zencash is a platform for a store of value, publishing, and communication and one that is going to do big things in the near future.
DeepOnion is a hybrid cryptocurrency that implements proof of stake (PoS) and the x13 proof of work (PoW) algorithm. DeepOnion implements the TOR protocol and is natively integrated within the TOR (The Onion Router) network ensuring that all peer-to-peer connections are secure and anonymous. DeepOnion’s primary purpose is to protect an individual’s identity and privacy by creating an anonymous, secure, scalable, instantaneous and untraceable payment platform.
DeepOnion is also integrated with Obfs4, which is a public key obfuscation protocol on top of the tor network, its purpose is to hide the message content protocol details so all traffic appears to be random traffic. DeepOnion has untraceable payments which let you send and receive payments anonymously and hide your identity. All transactions are private and sent through the TOR network.
NavCoin is a decentralized cryptocurrency that builds on the latest version of Bitcoin, with added features and functionality. NavCoin was created to make online payments easy to do, at low cost, and all the while making sure to protect your privacy.
NavCoin has a sleek and intuitive wallet that allows you to easily manage your NAV. It also provides the option to broadcast encrypted payments through the NavTech private payment platform.
NAV Coin doesn’t use cryptography to become private. Instead, they use complicated obfuscation techniques with a sub-blockchain in parallel to the main blockchain to become private. The obfuscation is achieved by NavTech servers which yet not distributed enough.
Spectrecoin (XSPEC) is an innovative privacy-focused cryptocurrency, featuring an energy-efficient proof-of-stake algorithm that provides rapid transaction confirmations, ring signatures for privacy and anonymity, and a fully integrated Tor+OBFS4 layer for IP obfuscation within the wallet.
They assure privacy and anonymity by using technologies such as Ring Signatures, Zero Knowledge Proofs and Dual Key Stealth Addresses. The communications that take place on the network via chats are protected through AES-256-CBC algorithm.
They also offer an advanced Hierarchical Deterministic wallet with multiple features. Spectrecoin uses Proof-of-Stake v3 algorithm with an inflation of 5% per year. This is a much more energy efficient method for verifying transactions when compared to other similar methods like those employed by Bitcoin.
Launched as a fork of Dash, Pivx is the acronym for Private Instant Verifiable Transaction and the Pivx team pride themselves on providing advanced privacy options. Pivx contains an in wallet mixing mechanism based on CoinJoin. With Pivx, the mixing takes place in a decentralized fashion facilitated by the network of masternodes. This provides an additional layer of privacy as gaining control of 50% of the current masternodes would result in under a 0.5% chance of de-anonymizing an individual transaction that was mixed via eight rounds of obfuscation.
Despite being a Dash fork, PIVX has added staking, moved over to the Quark algorithm, and is upgrading the CoinJoin feature to a Zerocoin protocol that will enhance its ability to provide anonymous transactions.
MoneroV is a community-led project designed to create a limited supply hard-fork of the Monero cryptocurrency to a new scalable blockchain algorithm. The idea is to create a decentralized environment in which professional developers chosen by the community, enhance, simplify, and develop MoneroV to scale for mass use.
The original Monero vision was to create a private digital currency; however, a conservative, centralized core control of few and slow development process prevents new users and technologies from being incorporated. A more rapid development process based on bounty programs that will allow new people around the world to participate, will potentially make MoneroV the first private digital currency used by millions of people with open endless development possibilities.
In addition, MoneroV will adhere to core Austrian school of economics principles by capping the total MoneroV coins that can be created, parting with Monero’s infinite coin supply structure.
MoneroV team stated that the snapshot date will be postponed to around April 30, or at block 1564965. All Monero holders as of block 1564965 will be owners of MoneroV.
|Monero||XMR||$190,07||$3 028 766 313|
|Zcash||ZEC||$220,37||$818 406 810|
|Dash||DASH||$357,92||$2 868 083 906|
|Bitcoin Private||BTCP||$24,46||$499 077 682|
|Verge||XVG||$0,08||$1 211 521 936|
|Komodo||KMD||$3,43||$356 671 050|
|Zencash||ZEN||$32,03||$116 764 068|
|DeepOnion||ONION||$2,09||$32 817 230|
|NavCoin||NAV||$1,12||$70 103 873|
|Spectrecoin||XSPEC||$0,5||$10 992 453|
|PIVX||PIVX||$4,44||$248 482 401|
*Price and market cap at the moment of press
Every community, in their own unique way, is trying to solve this challenge of privacy and that’s why the specific ways they adopt have their pros & cons attached to it. For example, Monero is using complicated on-chain cryptography to make transactions anonymous but that approach has the downside of large transaction sizes.
Some currencies like Verge are going with Tor which will naturally have smaller transaction size while on the other hand we have DASH which is using a mixing service that actually doesn’t give so much privacy to its users. Nevertheless, anonymity and privacy will likely play an increasing role in the cryptocurrency world. With government’s and central banks prying into our affairs it is very likely these type of private networks will only grow more popular.