The vast majority of crypto users (traders and holders, does not matter) seems to care little about privacy, especially the privacy of their transactions, deals and total asset value. It is definitely a strange attitude because, out of that space, I am pretty sure that all of them could go mad if their bank would disclose to the world how much they own in their bank account or how much they spend in a certain period of time. When it comes to crypto currency, they seem to forget that keeping information confidential should have the same importance. The same goes for commercial activities, only at a higher scale.
PRIVACY IS NOT A CRIME
The reasons why privacy is so underrated are not completely clear to me. Probably it depends on the fact that a small number of users are actually “all in” in crypto and for that reason they don’t tend to consider the topic as marginal as their total assets owned are marginal in respect of the total. It can also depend on the fact that many are into crypto basically because of speculation: as a consequence, they might be more focused on the potential profit they can achieve then on how “private” is their behavior in trading. Anyway, I tend to think that also the huge propaganda aimed to associate privacy features to criminal activities has convinced a lot of users that whoever cares about it has some malicious intentions. This last is clearly a false statement because it is much easier to launder money or to do illegal activities by using cash transactions instead of a tool like the blockchain where each and every transaction performed or even pending is public and accessible to anyone who wants to check what is going on (and what happened) with any address. By the way, if you have this kind of needs, it would be much better to use the well-known services of the major banks as they fall under investigation for money laundry every second day: from 2002 to 2019 a total of 31.51 billion USD has been issued in fines in USA, UK and Europe because of breeches in anti-money laundering regulations. Numbers are clearly showing that criminal activities happen outside the crypto space.
WHAT IS A PRIVACY COIN?
A privacy coin is a special kind of cryptocurrency that obfuscates some elements of a transaction (mostly sender, receiver and amounts) and do not make those information public. To date, and according to Crypto Slate, there are 91 privacy coins available for trade and notably they represent a ridiculous 1.19% of the whole sector with a total of slightly more than 3 billion market cap.
The best known among them are Monero (XMR), DASH (DASH) and Z-Cash (ZEC): these three together have almost 66% of the total market cap in the niche. Each of them uses different techniques to protect the privacy.
Monero uses a combination of three different tools: one-time address for the receiver, ring signature for the sender and a cryptographic tool named “confidential transactions” to keep undisclosed the amount transacted. This protocol is good enough to have encouraged the IRS to issue a bounty of 625k USD to be given to whoever will be able to crack it.
DASH uses a system called CoinJoin that combines multiple transactions from multiple parties into one making the flow difficult to reverse engineer.
Z-Cash is relying on Zero-knowledge proof that makes it possible to prove certain facts about otherwise encrypted data and prove that certain facts are true about that data without revealing additional information
PRIVACY COINS OR COINS WITH PRIVACY FEATURES?
For those who consider privacy as a religion, the use of a privacy coin is (or should be) simply a natural choice. The problem is that privacy coins are not so welcome when it comes to compliance with regulations. The matter is complicated and technicalities are probably of no interest, but it is well known that many of those privacy coins are starting to be de-listed from exchanges because of the problems they put with local legislation. This does not mean that holders won’t be able to trade them, but these coins will stay in the spotlight of legislators and their life will become harder and harder.
Probably it will be a better solution to use currencies that are not native privacy coin, but that could offer some privacy features, but this will be the topic of a future post.
It stays that whatever the local and/or the international legislation, a certain level of privacy should be defended because the world is full of nice people, but some of them are not