Privacy coin is a unique type of cryptocurrency that allows users to be completely anonymous when making transactions on the blockchain. Recently, many coins in the privacy coin category have recorded positive growth, increasing the demand and interest in privacy coins even further. So, what exactly is a Privacy coin, and how do they differ from other coins? What are the best privacy coins available today? Join us as we explore these details in the content of the article below.
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What is a Privacy Coin?
Privacy Coin a type of digital currency that uses advanced technologies to protect users’ privacy and anonymity. This means that transactions made with privacy coins are kept confidential, and the identities of the participants are not publicly displayed on the blockchain..
There are several ways in which privacy coins can achieve this, usually through:
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Ring Signatures: When you sign a transaction with your private key, others could link your signature to your address. Ring Signatures prevent this by having many different signatures in the same transaction, making it harder for others to connect your signature to your address.
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Stealth addresses: where each transaction generates a new address to protect the recipient’s privacy, making it difficult to link transactions to a specific user.
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Zk-SNARKs: allow transactions to be verified without revealing any information about the parties involved. This technology is deployed in privacy coins such as Zcash and Monero.
While privacy coins were created to provide a more private and secure digital transaction method, it is important to note that they have been controversial due to the potential for their use in illegal activities. Law enforcement and regulatory agencies have expressed concerns about the use of privacy coins for money laundering, tax evasion, and other illicit activities. Facing this pressure, many exchanges have had to delist some privacy coins.
Previously, Binance announced that they planned to remove 12 privacy coins in France, Spain, Italy, and Poland. The list included: Dash (DASH), Verge (XVG), Beam (BEAM), Monero (XMR), Navcoin (NAV), Firo (FIRO), Horizen (ZEN), Secret (SCRT), Zcash (ZEC), Pivx (PIVX), Decred (DCR), and Mobilecoin (MOB). However, on June 29, Binance reversed their decision, and they will not delist the 7 privacy coins after further review. The prices of these “reprieved” privacy coins surged following the decision.
Top Potential Privacy Coins 2024
If you already understand what privacy coins are and are looking to invest in this field, then this section will help you. Below is a list of the best, leading privacy coins currently on the market that you might consider exploring.
Moreno (XMR)
Despite Monero always being in the sights of many regulators, and many exchanges being “wary” of it, it is undeniable that Monero (XMR) is the father of all private coins and remains the best coin in the market. It is a major project, with a market capitalization of ~four billion dollars, making it easily the highest-ranked privacy coin today. It was created around the year 2014 and has thwarted any attempts to break its code ever since. All because of its technology, which is quite impressive.
The two main improvements that Monero uses are stealth addresses and ring signatures. Stealth addresses are created using a public view key and a public spend key that is attached to every Monero wallet. The transaction itself can be seen on the blockchain, thus it can be verified by the network, but the receiving address remains completely anonymous. Meanwhile, the sender of the transaction is protected by using ring signatures, where a number of other users also sign the transaction, making it impossible to determine exactly who sent it. As a result, the transaction is completed with only the sender and recipient knowing where it has been sent.
Besides its unparalleled security technology, Monero’s developers have also implemented subsequent upgrades to the network that make it faster and cheaper to use. This is in stark contrast to the absurdly high fees that Bitcoin and Ethereum users have to pay when using the network. In turn, this has helped drive the wider adoption of Monero as a payment method, with merchants around the world beginning to accept it in greater numbers than ever before.
Oasis Network (ROSE)
Oasis is a decentralized Layer 1 proof of stake blockchain network, providing security, privacy, and high scalability that allows users to own and manage their data while harnessing the potential benefits of data. Oasis’s security features can create a type of digital asset called Tokenized Data, allowing users to control their data and earn rewards from staking.
By bringing privacy and scalability to DeFi, Oasis has the potential to bring DeFi to new users in the mass market. Oasis allows private smart contracts, high scalability, and data encryption capabilities that open up new use cases like private lending, collateralized loans, and private AMMs.
In addition, Oasis also uses ParaTime Architecture to separate the consensus layer from the computation (ParaTime Layer), allowing for higher scalability and supporting diverse specialized computational needs.
Oasis has had many applications built on its network to take advantage of secret smart contracts, with examples such as Binance’s CryptoSafe Alliance – which allows exchanges to share sensitive data without privacy concerns, and Nebula Genomics which allows users to control their genetic data. Overall, if privacy coins serve the purpose of transaction and payment ease while facing pressure from regulators, then ROSE may not be caught in this pressure.
Zcash (ZEC)
The next potential privacy coin is Zcash (ZEC), which has a market capitalization of over one billion dollars. Although it plays second fiddle to Monero, it is still a strong and respected project because it has its own clever way of ensuring user privacy.
Zcash was born in 2016 and is the result of a split from the Bitcoin blockchain. Therefore, it has a 21 million coin limit, and uses the PoW algorithm, although its hash function is different from Bitcoin’s. The goal of Zcash is to enable private and untraceable transactions using a specially developed protocol called zk-SNARK.
The workings of zk-SNARK are too detailed to present here, but essentially, they encrypt transaction metadata to hide the identities of the senders and recipients. At the same time, the Zcash protocol protects the inputs and outputs of Zcash transactions, making it impossible for anyone viewing the blockchain to know how much money has been sent. Thus, all transaction data is obscured from prying eyes. The cryptography behind zk-SNARK is called zero-knowledge proof, which is a way to verify secrets without revealing any details of the secret itself.
Secret Network (SCRT)
Secret Network is the first privacy-preserving, programmable blockchain. For the first time, you can create dApps using encrypted data to ensure personal information remains private. In Web3.0, all data is publicly accessible, posing security risks and usability challenges. The truth about accessing this public data is sometimes we don’t want every piece of information to be available. Secret was created for this purpose.
Most smart contracts, like those on Ethereum, are public by default. This means all data used in the smart contract is public. Secret improves upon traditional smart contracts and is supported by encrypting inputs, outputs, and the encrypted smart contracts themselves. First, users send encrypted data to Secret’s decentralized “secret nodes” network. Next, nodes in the network securely compute this data. The raw data itself is never revealed, not even to the nodes themselves. Then, all nodes reach consensus and agree on the computation result, updating the network state.
Secret Network is built using the Cosmos SDK and operates on a Delegated Proof of Stake (DPoS) blockchain, allowing it to process up to 14,000 transactions per second. It is important to remember that SCRT – the native currency of the network – is not privacy-preserving itself; it is publicly visible on its blockchain.
Haven (XHV)
Next is another project that uses similar techniques as Monero to keep transactions private and untraceable. Haven (XHV) is a lower market cap currency compared to Monero or Zcash, however, its value has soared throughout 2021 and is currently near its all-time high.
Haven was launched in 2018 as a fork of Monero. Hence, it ‘inherited’ Monero’s security functions, to which it later added additional functionalities. Two anonymous developers launched it and then abandoned the project, seemingly after realizing they couldn’t achieve the set goals. Haven was subsequently taken over by its community, forked once more, and became open-source.
Haven aims to act as an “offshore bank in your pocket,” allowing users to create their own money based on other assets like precious metals or stablecoins. It uses a technique called Colored Coins, initially designed for use with Bitcoin. Colored Coins allow Haven users to assign a different attribute to their XHV, thus allowing it to represent that asset.
Haven also utilizes a synthetic stablecoin – xUSD – as its core asset, allowing users to retain value even as the price of XHV fluctuates. A process known as minting and burning enables these value transfers between xUSD and other assets like XHV, while still retaining its original dollar value.
DASH (DASH)
Dash (DASH) is a peer-to-peer (P2P) privacy-oriented cryptocurrency focused on the payment sector. It was born after successfully forking from Bitcoin’s code in 2014. Since then, DASH operates on its own blockchain.
To achieve decentralization and anonymity, Dash has developed and implemented three specific features into their blockchain: Masternodes, PrivateSend, and InstantSend. Additionally, Dash has cleverly combined two consensus mechanisms, PoW and PoS, within its blockchain network.
Overall, DASH is a longstanding coin with a definite place in the market and is still listed on many major exchanges. The fact that DASH has avoided being delisted by Binance is also a positive signal, making it an interesting option for investors interested in privacy coins.
Beam (BEAM)
Finally, on our list of privacy coins to consider is Beam (BEAM). It uses the Mimblewimble protocol and has been around since early 2019. It has been developed by learning from some of the observable failures of other privacy coin projects.
Unlike Zcash, Beam transactions are automatically private, meaning there’s no risk of sender or recipient data being compromised. No addresses or any other trackable information are stored on its blockchain. It is designed for scalability and speed. The project operates as a non-profit organization and had no mining rewards or ICO at launch.
Confidential transactions and confidential assets are two other new concepts that Beam introduced to enhance privacy. These will allow for the creation of new types of digital assets, such as debt instruments, real estate assets, or new currencies, which can then be traded on Beam’s platform.
In summary:
As you may know, all privacy coins relate to some of the most advanced technologies around to help their users remain unscrutinized. An interesting fact you may not know is that some of the greatest minds in the crypto field are involved with these projects.
Tax authorities, regulators, and governments are all keen to crack the code that privacy coins use, although it seems that, for now, privacy coins are winning. Some might argue that privacy coins will offer criminals and money launderers the chance to stay one step ahead of the authorities – BUT – that’s not all, as there’s also a segment of cryptocurrency enthusiasts who believe that governments and tech corporations aren’t always the most trustworthy entities. Hence, they support Privacy Coins.
Read more: What is Narrative Crypto? The Top Current ‘Narratives’ to Watch
