When cryptocurrencies became relevant, one of their selling points was that they prioritized anonymity. There are different technologies and protocols that cryptocurrencies use in order to leave their users anonymous, with ongoing debates between community members as to which of those protocols is the best when it comes to anonymity.
Some of the old and most popular coins such as Bitcoin and Ethereum appeared to have good anonymity features. But as we learned to navigate through blockchain more efficiently, we found out that huge amounts of information is still available for people to see, if we know where to look. With governments implementing more and more control mechanisms, the anonymity of those tokens are practically non-existent.
This flaw has left many people who want to hide their identity as much as possible looking towards tokens that give them this opportunity. With lots of coins implementing protocols that hide a big chunk of information from the blockchain, there are still a few secure blockchains out there.
It also needs to be mentioned that most of these tokens are huge variables, and don’t guarantee stability, so if you are looking to invest, these tokens might not be a great investment and are generally only used for payments and transfers.
Now let us take a look at some of the tokens, which offer users the best anonymity.
Built on CryptoNote technology, Bytecoin has a claim that it is the first private untraceable cryptocurrency. CryptoNote technology was created with the purpose of keeping transactions unlinkable and untraceable.
Unlinkable transactions guarantee that no one can see if any two transactions were sent and received by the same source, while untraceable means that it is impossible to see who sent the assets.
Ring signatures are what make these transactions untraceable. These ring signatures make transactions perplexing to understand, as no one can see who sent it, how much they sent, and where they sent it. These rings join transactions in a way that is really hard, but not impossible to tell them apart.
One-time keys are used to guarantee the un-linkability of those transactions. People are still able to see incoming transactions on the specific wallet even if they are scrambled using ring signatures. To combat this CryptoNote is using the Diffie-Hellman Key Exchange method, which generates a one-time key to hide the transaction path.
Monero is another private cryptocurrency, with privacy features built into every transaction. This crypto is a hard fork of BCN. What this means is that these two cryptos are in essence the same and utilize the same protocols.
Unlike most other cryptos, when Monero was launched, it already had 80% of its supply in existence, while other cryptos usually start with a low amount of available tokens.
DASH, which saw its birth in 2014, allows users to choose if their transaction should or should not be anonymous using CoinJoin. This feature masks the origins of your funds, but it is not a cheap feature as it raises transaction fees. Master nodes, decentralized networks, that through mixing protocols achieve this feat. DASH also offers a feature where transactions can go as fast as credit card transactions, called Fast Send.
If Bitcoin is HTTP, then Zcash is HTTPS, this is how people see Zcash, with advanced security and protection highlights. To achieve this, Zcash uses a cryptographic tool, called zero-information verification, and gives its users the ability to safeguard their transactions. With this zero-information verification tool, users are able to hide their wallet addresses from other people while doing transactions.
Cryptocurrency for everyday use, for regular people, is how Verge describes itself. Developed in 2014, under the dome DogeCoinDark, it shortly after rebranded itself as Verge.
The protocol which Verge uses to make transactions is called Wraith Protocol which uses the Tor Network to anonymize every transaction.
Just like the Tor Browser, which, in order to hide IP addresses, routs the internet connection through a few anonymous nodes on the internet, Wraith Protocol anonymizes its cryptocurrency users. This is not the main feature, and it needs to be turned on.
But it also has a big drawback, despite fast transaction speeds, low fees, and the potential to attract more people, a big supply of limited tokens is already in circulation, which is likely to cause inflation in its price.
Verge also has five different hash functions. Scrypt, X17, blake2s, Lyra2rev2, and myr-groestl. These functions are used to secure and protect our information even more.
Released in 2016, initially named Zcoin, Firo uses Dandelion Technology, through which it shuffles the IP addresses of its users, in random steps between nods.
To hide the link between transactions and tokens, Firo uses Lelantus Technology which burns its tokens in sets of 65,000 from which receivers redeem tokens. It leaves no trace as the tokens on the receivers’ end don’t have any prior links to anything. This is the polar opposite of coins like Bitcoin which store the whole transaction history within the blockchain.
While the whole concept of crypto and blockchain is anonymity, it carries some risks as it gives criminals the platform to operate their enterprises. So cryptocurrency developers are trying to develop their private tokens in a manner that tries to avoid this problem, as much as possible.
More popular cryptos such as Bitcoin and ETH 2.0 still remain peoples’ tokens of choice. But as more and more governments start to control and monitor those, they are easier to trace and link to individuals. This caused more demand for these private tokens and improved their development.
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Well, there is no definitive answer to this question. It comes down to which crypto we use, what kind of transactions we are making, and where these transactions are being made.
If enough resources and talented manpower is tasked to crack these protocols, it is not an impossible feat to achieve.
It comes down to what kind of privacy we are looking for. Each crypto prioritizes different aspects of security and information.
Yes, private cryptos are legal. The whole concept of crypto and blockchain is decentralization and anonymity, and while most cryptos fail to achieve this there are those that prioritize it. But there are some exchanges and governments that might ban certain cryptos, so before deciding which crypto to use, do some research and check for yourself.
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