Privacy coins occupy a niche within the cryptocurrency industry that many of the early adopters of cryptocurrencies consider being essential. After all, Bitcoin itself is often incorrectly referred to as an anonymous way of transferring value yet the Bitcoin blockchain is inherently public and once a wallet address can be linked to a user, all the transaction history becomes public. Privacy coins solve this problem by employing a number of different techniques, giving its users a truly anonymous and privacy means of exchanging value.
Monero achieves anonymity by randomly generating a one-time address as the destination when the transaction is sent, breaking the link between a user’s public address and a specific transaction ensuring your public address does not grant access to your balance or history. In addition, transactions on Monero go through mixers to add a further layer of anonymity.
A secret key ensures that the recipient can scan the Blockchain to identify the one-time addresses associated to his account and, in turn, give access to the transaction history and balance only to trusted third parties.
While Monero manages to tackle the privacy problem effectively, the additional data that needs to be stored comes at the cost of scalability which might compromise adoption in the long term.
In spite of this, Monero is currently the top privacy coin by market cap and one of the most mature options available, enjoying the backing of a strong community.
Unlike Monero, Zcash supports multiple transaction types in order to allow everyone to choose between transparency and privacy depending on the use-case. All transactions that take place are recorded on the public Blockchain, but data involving the address itself as well as the transaction amount and the memo field that are sent to or from a private address is encrypted which effectively hides away the data from being visible publicly. In order to ensure that none of the properties were broken and the transaction actually took place as intended, Zcash makes use of cryptographic zero-knowledge proofs (zk-SNARKs). These cryptography techniques ensure that information can be verified as valid without needing to reveal that information.
The downside to Zcash’s implementation of zero-knowledge proofs is that they require a special key which if discovered can compromise the whole network. While there are a lot of efforts in place to minimize the possibilities of this ever happening, it does inherently mean that users need to trust these efforts are carried out adequately.
Similarly to Monero, Zcash provides view keys which allow users to be able to disclose their transaction history to third parties they trust.
Derived from Digital Cash, Dash tries to build on elements of the original Bitcoin to bring forward more properties that are brought about by cash including, privacy. Dash provides a platform that claims to give users privacy and security over their transactions, as well as the possibility to transact at near instantaneous speeds and low fees.
Dash achieves private transactions by mixing coins with several others which makes it hard to identify the origin (or destination) of a particular transaction just by looking at the public blockchain. This means that it achieves privacy by obscurity, and the balances aren’t as much hidden as they are split between several addresses.
The downside to this process is that users will be disclosing their identity to the masternodes mixing the coins, meaning that ideally coins should be mixed multiple times to mitigate the effects but this comes at a cost.
Grin is an implementation of MimbleWimble launched in January 2019. It is written in Rust and uses two versions of Cuckoo Cycle as its PoW algorithm (an ASIC-resistant one and an ASIC-friendly one). Unlike Bitcoin, there is no public ledger. The network uses no addresses and encrypts all amounts. However, Grin relies on Bitcoin’s CoinJoin method to achieve scalability and privacy.
In the words of its anonymous developers, Grin is designed to be simple, fast (one block per minute), and hold a fixed block reward of 60 Grins over time with a decreasing dilution. It is not trying to compete with Bitcoin or Ethereum. It is trying to offer an alternative. Originally, the project was intended to be a side chain for Bitcoin. However, Bitcoin’s scripting system presented limitations, and the developers decided to launch it as a new cryptocurrency.
It is the first cryptocurrency with the attempt to solve privacy and anonymity using MimbleWimble protocol, so it is rather an experimental project instead of a business product.
AMC is a new cryptocurrency project that launched in October 2019. It is also based on the MimbleWimble protocol which, like Zcash, uses zero knowledge proofs to verify transactions without revealing any information.
Being a newcomer to the scene, AMC can provide solutions to problems that emerged after its competitors arrived on scene. Examples of this include the way AMC uses a networking protocol that ensures that privacy isn’t even compromised by someone observing the network traffic, or how the blockchain is able to function by storing a lot less information than is the norm ensuring far better scalability prospects.
Much like Monero and Zcash, AMC provides the users to allow trusted third parties to view their balances through Auditor keys.
AMC also goes the extra mile to include sharding on its blockchain and endeavor to increase the transaction per second, which is a pain point of all blockchains.
While all signs are positive, we still must wait and see how it develops over time.
Private coins got criminals’ attention while cryptocurrencies were accessible, legal, and unregulated. Now that the market is shaken up by governments attempt to introduce more restrictive regulations, mainstream consumers are finding their benefits. The growth in demand is already served by the acceleration of technical developments regarding anonymity features. We can look forward to a crypto space with more privacy-focused options and subsequent price increases for the best of them!
More information about AMC can be found at http://www.amcoin.ltd