What is a Privacy Coin?

Privacy coins

We all know, there may be some instances where you would want your transactions to be undetectable.

Let’s not talk about the whys and whats. You just want to be anonymous about your purchases and that’s that. 

View all privacy coins on Coinranking

Before cryptocurrencies existed, people used cash. Even with the serial number on the dollar note, it’s hard to detect if there isn’t a receipt to prove it. 

However, with the emergence of online payments such as credit cards or Paypal transactions, every purchase is trackable. 

This purchase data is valuable for businesses because it tells them what you may be interested in and then targets ads so that you’ll be tempted to buy more similar products. 

So if you bought an iPhone 12, the next thing you know, you’re bombarded with ads about iPhone accessories and AirPods. 

Definitely not great for your (crypto) wallet if you’re easily tempted. 

Privacy coins, on the other hand, are like cash minus the extra weight. 

So, What is a Privacy Coin? 

Privacy coins function similarly to most cryptocurrencies. They record and validate transactions on a blockchain. However, the difference is the transactions are masked under additional layers of security. This hides the transaction codes or even the digital wallet that the tokens are sent to. 

A privacy token may use different ways to hide these transactions. This could include using temporary addresses, splitting up transactions or using encryption to hide transactions. 

Why not just use Bitcoin?

Bitcoin is not a private coin because the transactions are transparent.

Transactions are easy to track with Bitcoin because everything is visible on the public ledger. The wallets and the amount of Bitcoin involved in the transaction is trackable. 

The Privatest of The Privacy Tokens

  1. Monero (XMR)
Logo of privacy coin Monero XMR

Monero is a privacy token that was launched in 2014 and is open-sourced. Anyone can mine the native cryptocurrency XMR using their own CPU or even through mobile devices. 

Monero uses the ring signature concept to ensure its users privacy. These are anonymous digital signatures from a member within a transaction but their identity is kept anonymous. 

The sender is kept anonymous while the recipient’s identity is concealed through stealth addresses. These are randomly generated one-time use addresses that hide the actual destination address of a transaction. 

  1. ZCASH (ZEC)
Logo of privacy coin Zcash ZEC

ZCash was established in 2014 and it is said to be a fork of Bitcoin with some additional features. It was initially called ZeroCash but was later renamed as ZCash. 

ZCash verifies transactions and ownership of the token more anonymously than Bitcoin would. 

It is possible to mine ZCash however the best appliances to use for mining this token would be  on a dedicated system called an application-specific integrated circuit. 

ZCash encrypts transaction data so that it cannot be tracked allowing the senders and recipients to stay anonymous. 

  1. Dash (DASH)
Logo of privacy coin Dash

Dash is also another token originating as a fork of Bitcoin. It was created to offer fast and cheap payments for the public. 

Its privacy features are CoinJoin. It allows users to decide if they want their transactions to be private or public. However, opting for privacy will cause a higher transaction fee. 

DASH also has another feature called InstantSend which processes transactions super fast just like a credit card. 

Final Thoughts on Privacy Coins

Privacy tokens are highly desirable in a world where data is gold.

Companies can do so much with our purchase data and bombard us with ads targeted toward our likes or dislikes. 

Opting to make transactions private may make us more anonymous and less vulnerable to data breaches. 

Furthermore, making large transactions can attract attention from law enforcers and regulators so it might be beneficial to use privacy tokens. 

However, as with most cryptocurrencies, it is important to do your own due diligence when investing in these asset classes due to their volatility and short time in the market.

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