Anonymity Feb 07, 2020

Privacy Coins and Why You Need to Use Them

Privacy Coins- What they are and why you should use them

The cryptocurrency world relies heavily on the secrecy of those who engage in the business, and so privacy coins primarily represent the anonymity of a given cryptocurrency and the users.

The main focus of the founders of cryptocurrencies right from the inception was anonymity and privacy.

Nicolas van Saberhagen, the developer of CryptoNote Protocol, released a whitepaper in 2013, stating that privacy and anonymity are the most important aspects of electronic cash. Peer-to-peer payments seek to be concealed from a third party’s review, a distinct difference when it comes to traditional banking.

Besides the privacy coins, no one truly knows the faces behind the production of the coins, for instance, bitcoin creator, Satoshi Nakamoto, remains a mystery.

Apart from several coins representing different cryptocurrencies, bitcoin has become a household name, and its use has become more acceptable and not private as initially intended.

The open ledger in bitcoin transactions opens up to the world with the transparency involved, a kind that stands out in the history of all financial systems. Bitcoin is not categorized as an anonymous way of value transfer because its blockchain is inherently public with the wallet address openly indicating the user.

Privacy coins, on the other hand, are not easily traced or open to the broader public, yet, they equally rely on blockchain technology like any other cryptocurrency. Different privacy coins employ various techniques to maintain its privacy and conceal the transaction details, exchange value, exclusively to the users.

The Level of Privacy in These Coins

The long-term adoption of privacy coins may be compromised in light of the additional data that requires storage, and which comes at the cost of scalability. The zero-knowledge proofs require a unique key which must remain anonymous, failure to which the whole network may face serious compromise.

The brains behind the cryptocurrency are up to the task of ensuring that the privacy coins maintain their status for as long as they can. But then, who can tell what can happen in the digital world with the rise of technology?

Privacy Coins and Government Authorities

Government authorities across the globe are keen on the financial activities in their states and more specifically, the effect of cryptocurrencies in the market. With the increase in cybercrimes and money laundering and the association of cryptojacking with terrorism, stringent regulatory measures have been set up to monitor and control the insurgent of the cryptocurrency activities.

In the US the FBI investigated some crimes that were highly linked to bitcoin users, resulting in the government considering the use of professional chain analysis companies, able to trace coins involved in illegal activities, such as darknet markets, ransomware, and theft.

Privacy coins, on the other hand, are typically difficult to trace, and as such, they are determined to have government regulatory bodies recognize them as genuine and ideal, non-physical currency.

Popular Private-Eccentric Coins


Monero was launched on April 18th, 2014, started as a hard fork of the Bytecoin project whose discrepancy was that the developers would keep 80% of the tokens to themselves. Monero came in to create a fairer privacy coin that would not be prone to pre-mine accusations.

The privacy coin hinges on the CryptoNight proof-of-work hash algorithm, used by the CryptoNote protocol, a brainchild of Nicolas van Saberhagen who raised concerns over the lack of privacy and confidentiality in transactions within the Bitcoin network.

Monero coins remain anonymous through its random generation of a one-time address as the destination when the transaction is being carried out, breaking the connection between a user's public address and a specific transaction.

This prevents access to the transaction balance and details through your public address. Monero transactions also go through mixers to conceal the features. The technique employed by Monero to maintain its privacy is the secret key used by the recipient to scan the Blockchain to identify the one-time address connected to his account.

The recipient further uses the secret key to provide access to their trusted third party, the transaction history, and account balance. While Monero enjoys the backing of the cryptocurrency community with an extensive market, the long-term ability to remain anonymous is never too certain.


Dash was created as a fork of Bitcoin, and operates as a Decentralized Autonomous Organization (DAO) with the token holders running the cryptocurrency’s governance. The sole purpose of Dash is not privacy in transactions, but has made optional privacy protection.

You can view addresses and transactions on the public Dash blockchain. A user can, however, choose to use the PrivateSend feature to obfuscate transactions.

The holders of a minimum of 1000 Dash tokens at all times and employ a static IP (Dash Masternodes) contribute to the coin privacy by mixing the coins transacted with several others sent on the network. This results in grouped payments completed simultaneously; thus, making it impossible for snoopers to decipher the details of the transactions.

Zcash – ZEC

Just as Dash, Zcash offers its users two transactional options, allowing the transaction to happen on the public ledger or keep the individual address shielded to allow for anonymous trading. Zcash complies with the regulatory agencies at the cryptocurrency exchange level.

Zcash uses zk-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) and the zero-knowledge security layer (ZSL), a special feature to obfuscate transaction details and the use of transparent wallet address or a shielded address for privacy.

Zk-SNARK and ZSL are security mechanisms which allow for semi-transparent transactions, where the user can display the needful information for verification purposes, while it masks critical details that should remain private. Zcash is; therefore, among the top privacy coins in 2019.


The newest baby in the cryptocurrency world, Beam had its inception in January 2019. It uses zk-SNARK proofs to conceal any information in every transaction. This crypto coin comes in to provide a solution to problems encountered with the other privacy coins.

Since any given system may develop loopholes, Beam just arrived with the use of a networking protocol that ensures zero compromises by observers of the network traffic and how the blockchain can function by less storage of data than the norm for better scalability prospects.

In conclusion, we must note that in as much as there is caution when it comes to privacy coin usage, the privacy aspect of it does not necessarily prevent the dangers associated with cryptocurrency trading, but there individuals engaging in purely legal activities and they prefer to keep their crypto transactions purely anonymous.

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