There still seem to be a common misconception that Bitcoin transactions are anonymous. Bitcoin transactions are not anonymous. They are pseudonymous. All transaction on the Bitcoin blockchain is stored forever and they are available to be viewed by anyone. Therefore, if you can link an identity to a Bitcoin address (ex. by KYC on an exchange), every transaction on that address can be linked to that identity. Not only that, the total balance of each address is available to the public so an owner of a Bitcoin address with alot of coins can become a target for doxing, kidnapping, and blackmailing.
Privacy Coins can give you Anonymity:
Due to this privacy issue with many of the cryptocurrencies, privacy coins, which are privacy focused crypto was created. Currently the top 3 privacy coins (by market capitalization) are Monero (XMR), Dash (DASH) and Zcash (ZEC). I would like to go over these 3 coins in this article and decide which one I think is the best to use for anonymity.
With Monero, all transactions are confidential. The fact that all transactions are confidential makes it so it every user's activity enhances the privacy of others. Wallet address will never appear on the blockchain, transactions are encrypted, and sources of funds are concealed using proven ring signature cryptographic techniques. Monero also implemented RingCT (Ring Confidential Transactions) which proves that the sum of the input amounts is the same as the sum of the output amounts without revealing the actual numbers. Monero transactions are processed by miners around the world. Monero is working hard to keep their mining ASIC resistant so their network will stay decentralized.
Monero development are all done by volunteers. So far over 240 developers have contributed to the project. They actively meet in forums and chat channels and their Github is very active. Funding for Monero development proposal is done by Community Crowdfunding System.
Current median transaction fees is 0.00033XMR. Which is $0.002USD@rate on 2/28/2020.
Privacy on Dash is not a requirement for transactions but it is one of the optional feature. This privacy feature is called PrivateSend. PrivateSend offers this feature by way of mixing, a method initially created to "anonymize" Bitcoins. Mixing is done by combining the transaction inputs of at least two other people in a single transaction to the masternode to be mixed and spit back out to a different address that you own. From a privacy point of view, this is not an ideal way to anonymize your coins because you have to trust that the masternodes are not logging user's output destination.
Dash masternodes require the owner to stake 1000 Dash to run. This could make Dash blockchain more centralized because only the whales can run the masternodes. Block rewards are split 45/45/10 with miners and masternodes both receiving 45% and Dash Treasury receives the remaining 10% for development. This Dash Treasury fund is kept decentralized by a system called Decentralized Governance by Blockchain(DGBB). At the end of every month, 10% Dash Treasury Fund gets paid out in a "superblock" to a budget proposal that earns the net approval of at least 10% of the masternode network. Anyone can make a budget proposal to the network during the same month.
Current transaction fee for PrivateSend on Dash is .001DASH per 10 rounds of mixing(average, more rounds=more private). Which is $0.09USD@rate on 2/28/2020
On Zcash, like Dash, privacy is not a requirement for transactions. There are two different types of Zcash addresses, private and transparent. Private addresses start with a "z" and t-addresses start with a "t". Only z-address to z-address transactions are completely private. To accomplish this, Zcash uses a zero-knowledge cryptography called zk-SNARKs. zkSNARKs stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge" and it allows one party to prove to another that a statement is true without revealing any information other information. The privacy component of Zcash sounds good but there are concerns with how this it is developed and how the development is funded.
Zcash is ran by a company called The Zerocoin Electric Coin Company LLC based out of Colorado, USA. Which makes the development of this blockchain very centralized and vulnerable to censorship or complete shutdown by state entities. Not only that, 20% of all coins mined for the first 4 years will be distributed to the stakeholders in the Zcash Company. When the max amount of coin in existence (21million) is reached, up to 10% of coins could have been distributed to the stakeholders in the Zcash Company.
Current transaction fee for Zcash is .0001ZEC. Which is $0.01@rate on 2/28/2020.
I will be honest with you guys. I have been a fan of Monero before I wrote this article but I tried to be least biased as possible. After doing my research for this article, I have caught up on Dash/Zcash knowledge and still think that Monero is the best privacy coin. I believe that by requiring all transaction to be anonymous, Monero achieves better privacy than Dash or Zcash. I also believe that Monero keeps the blockchain more decentralized and secure than Dash by allowing anyone to mine somewhat profitably without the need of special ASIC miner by keeping the network ASIC resistant. Monero also achieves better decentralization than Dash by not requiring any staking to run a node or have special voting powers. On the other hand, decentralization on Zcash is very questionable since it's development is spearheaded by a for profit company that rakes in 20% of all coins mined for 4 years. From this, it can be said that Monero is the most decentralized and privacy focused. Zcash is the least.
What do you think? Please let me know in the comments below! :)