What are anonymous cryptocurrencies?
The openness of the blockchain registry has caused many users of cryptocurrency networks to question their anonymity. Intelligence agencies, hackers, and even ordinary users can easily track any transaction, and even calculate the identity of the holder when cashing digital coins. Therefore, many developers have focused their efforts on creating truly anonymous cryptocurrencies that would allow users to observe maximum privacy.
Anonymous cryptocurrencies are peer-to-peer payment systems with their own unit of calculation. A high level of privacy is achieved by using cryptographic protocols that make it difficult or completely impossible to track transactions on the blockchain.
The most anonymous cryptocurrencies
With the discovery of the vulnerability in the crypto industry, a real race has begun among developers who are issuing new anonymous cryptocurrencies and applying various protocols to achieve a high level of privacy. To date, there are more than 10 anonymous cryptocurrencies with different methods of protecting the privacy of users.
The creators Monero has developed a special blockchain structure based on the cryptographic Protocol CryptoNote, which allows you to hide the addresses of the sender, recipient and transaction amount in the blockchain itself.
To achieve anonymity, the system uses a complex ring signature mechanism, in which transactions are signed immediately by a group of users, and not by a single person, so it is impossible to find out who exactly made the transfer. In addition, the system generates one-time stealth addresses for each transaction.
The coin appeared in 2014 and at this stage is considered the most anonymous cryptocurrency, but as a result of the use of complex cryptography, the transaction size in the Monero network is 50 times larger than that of Bitcoin.
Currently, the ZCash network operates simultaneously anonymous and public transactions. This is due to the fact that secure transactions require the use of more powerful verification equipment and, accordingly, have increased Commission fees. In the future, ZCash plans to switch to a completely anonymous system.
Anonymization of users in the system is achieved by applying the zk-SNARK Protocol, also known as a zero-value proof of work. It is a mathematical algorithm that confirms the authenticity of information without revealing it. A random number generator is used for this purpose. In hidden transfers, only the payment time is saved in the system.
Dash is one of the first anonymous cryptocurrencies that allows users to hide their data using the PrivateSend system. Anonymity is achieved through a two-level blockchain system and the use of masternodes, which share the reward equally with the miners.
A user who wants to make an anonymous transaction addresses masternodes, sending them a request to complete the transaction. When a certain amount of transactions is collected, the coins are split into small parts, mixed several times between different users, and only then sent to the final recipient. Coin shuffling occurs in several stages with randomly selected masternodes, which makes it impossible to track the connection between the sender and recipient of the transaction.
Verge cryptocurrency has an ambiguous reputation and a distinctive mechanism for hiding data from its competitors. Unlike other cryptocurrencies, where cryptographic methods are used for anonymization, Verge uses the Tor and I2P networks.
There are two types of transactions that can be made on the network. The first type occurs through an open blockchain, and anonymization is achieved through a private connection to the blockchain using Tor. The second type of transaction is conducted through anonymization of the address, similar to the Monero system, with additional hiding of the IP address.
Bytecoin was developed back in 2012 and many consider it the first anonymous cryptocurrency that gave an impetus to the development of a whole direction in cryptocurrency technology. Bytecoin uses the cryptographic Protocol CryptoNote.
It's from Bytecoin that Monero originates. Just like in Monero, transaction anonymity in the system is achieved by using a unique one-time public address for each transaction, which makes it impossible to track the identity of the sender.
During its existence, many forks were made with Bytecoin, but in recent years, developers have taken a course to improve their own positions, rebranded and began to actively promote their development.
Bitcoin Private is a fork merger of Bitcoin and Zclassic, which combines the security level of bitcoin and anonymization, based on the technology of the ancestor of ZCash.
The goal of the developers was to create a cryptocurrency that would combine the advantages of two digital coins at once. Transaction anonymization is achieved by using the zero-value proof Protocol, as in ZCash, but without remuneration to the founder.
PIVX is a cryptocurrency that is completely resistant to tracking the transaction register. It allows you to maintain complete confidentiality of the transaction participants by using the Zerocoin Protocol, which is based on a cryptographic scheme of proof of authenticity with a zero value. The Zerocoin Protocol allows you to add transactions to the blockchain without revealing the addresses of the recipient, sender, or transaction amount.
Anonymous and open transactions are available in the system. In order to perform an anonymous transfer, you should initially convert PIVX cryptocurrency to zPIV and then conduct the transaction.
SmartCash is a relatively new cryptocurrency that appeared as a result of the hard fork in the Zcoin network. User anonymity is achieved using the innovative SMART PRIVACY technology.
After receiving an incoming transaction, in order to break the connection between the input and output of coins on the wallet, the user has the option to burn the coins and order a similar number of completely clean new coins. This approach ensures anonymity and complete disconnection of communication, but you will need to pay a small commission for burning and issuing new coins.
Zcoin is another cryptocurrency based on the Zerocoin Protocol. To anonymize the transaction, the principle of burning coins is applied. When making a transaction, Zcoin coins are destroyed, and the wallet receives a similar number of new coins that do not have a transaction history behind them.
Nav Coin is an anonymous cryptocurrency that does not use cryptographic methods to ensure privacy. Instead, it uses a complex method of entangling traces in the sub-chain of the main blockchain. Instead of sending cryptocurrencies directly to the recipient, the transaction is initially sent to a subchapter of the NavTech blockchain, where it is encrypted getting into a pool consisting of many servers and only then sent to the final recipient.
Komodo is a cryptocurrency based on the principles of bitcoin security and with the ability to conduct anonymous transactions with a proof of zero value applied in ZCash.
In the network, you can choose between regular transactions and anonymized ones. When conducting private transactions, only the fact of the transaction is disclosed, while the recipient and the transfer amount remain hidden.
Zen Cash is another fork of Zclassic. At the same time, it's also a decentralized platform for sharing content. Based on the anonymity Protocol, the developers plan to launch several more services in the future, including an anonymous cryptocurrency exchange, insurance and banking services.
Transaction privacy is achieved by using anonymous and pseudo-anonymous addresses over the zero-value proof Protocol.
Criticism of anonymous cryptocurrencies
Shadow financial areas are an attractive area for attackers. State control authorities are significantly concerned that cryptocurrencies can be used in criminal schemes, while remaining completely uncontrolled. In particular, they allow hackers and extortionists to hide the further movement of coins. At the same time, there is no liability for illegal actions. The Japanese authorities even ordered cryptocurrency exchanges to remove anonymous currencies from the listing. The US intelligence services are also seriously concerned about the problem.
Another negative factor of anonymous cryptocurrencies is the size of transactions. It is increased by using complex cryptographic and other algorithms that are used to hide data. This leads to high fees and the need for more power (more computer memory) to perform transaction verification.
Note: Don't let this deter you. Governments, bankers, and politicians are criminal entities who partake in illegal activity everyday. They are quick to claim cryptocurrency is used for illegal activities, but remember who controls the international drug cartels and trade, remember that the US dollar is the currency of choice for illegal transactions. When you hear "leaders and bankers" complaining about cryptocurrency, really what they are saying is - they don't like not having control of you, so they can't manipulate or steal from you.
Anonymity of confidential data is considered the main problem of the century. By their very nature, the best anonymous cryptocurrencies are able to allow a person to remain in the shadows and be protected from manipulation.
In the modern world, where Facebook massively transfers user personal data, and the concept of bank secrecy already means practically nothing, and the user's money can be debited without notifying the customer, anonymous cryptocurrencies are a popular means of protecting personal life and savings. Some experts believe that it's one of the anonymous cryptocurrencies that will later become the key currency of the world.