If blockchain technology is the foundation on which cryptocurrencies are based, it is also the channel through which individuals, organizations and companies collect, in abundance, information on crypto transactions carried out by targeted third parties. And it is precisely on this aspect that cryptocurrencies such as Bitcoin have proven their limits. In fact, on their respective blockchains, all the information relating to each transaction is accessible to anyone willing to take the time to consult it. From this weakness were born cryptocurrencies – Actually – anonymous, paving the way for confidentiality-oriented cryptography. Let’s embark on a tour of the world of currencies that protect the confidentiality of your transactions!
Why anonymous cryptocurrencies?
Understanding the importance of anonymous corners requires an understanding of how blockchains work. For the purposes of our discussion, it should be noted that the blockchain of a cryptocurrency is a time-stamping chain of transaction records involving this crypto and managed by several thousand interconnected computers called “nodes”.
These blockchains or record timestamp strings transactions are not governed by a central authority – this is one of the main reasons behind the creation of Bitcoin – all transaction information, including the identity of both parties and the transaction amount, are accessible to all who know the public address of the sender and / or recipient. This principle of transparency facilitates verification and ensures that network decentralization is maintained at all times.
And that’s how the best known cryptocurrencies like Bitcoin, the Ethereum, the Litecoin, the Ripple, etc. They therefore do not guarantee confidentiality transactions which in essence are available and visible to everyone all the time. The anonymous cryptocurrencies were born from this observation, with systems designed to offer anonymity missing from their elders.
Some anonymous cryptocurrencies and how they work
Although their common goal is to offer anonymity, anonymous corners do not all work the same. It all depends on anonymization protocols which they use. In this section, we present some of the most used anonymous corners, starting with the Monero, of course.
Created in april 2014, the Monero is the most used anonymous crypto right now. She is from a hard fork of Bytecoin and is so secure that it’s impossible to know even the amount of the transactions.
The Monero uses, in fact, very complex cryptographic systems such as:
- The ” Ring Signature “, for hide address from the sender via a mixture of public keys;
- The stealth addresses, to hide the recipient’s address;
- The ” Ring Confidential Transaction To hide the amount of transactions.
All XMR transactions are therefore confidential.
Zcash is also one of the best known anonymous cryptocurrencies. Created by Zooko Wilcox, it ensures the confidentiality of transactions thanks to its zk-SNARK protocol (or Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). In French, it is said more simply “Proof of zero knowledge”.
In fact, the zk-SNARK protocol allows the user to authenticate without username and without password, which prevents verifying nodes from accessing personal data while verifying transactions.
And of course, the Komodo (KMD) which is a cryptocurrency from a ZEC hard fork in September 2016 is also on the list of anonymous crypto.
Launched in January 2014, the DASH – who first called himself XCoin then Darkcoin – offers optional anonymity mainly based on functionality PrivateSend.
The functionality PrivateSend allows you to mix the pieces, much like vending machines do. This helps prevent parts identification, and therefore the operations tracing of exchanges. In addition, with DASH, the user can carry out transactions without creating an account and without authenticating.
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Alongside these industry stars, there are also several other anonymous cryptocurrencies of lesser scale, certainly, but which are worth mentioning. These include:
- Rod (XVG), who uses Tor protocol and I2P network (Invisible Internet Project) for delete them direct connections between the parties to a transaction by passing them through relay, so it’s impossible to identify the recipient and the sender.
- Horizen (ZEN), formerly known as Zencash, and which is also based on the protocol zero-knowledge-proof.
- Zcoin (XZC), created in september 2016 and also based on zero knowledge proof.
- NavCoin (NAV), created in june 2014 and whose users have the choice to accept or refuse anonymity.
- PVIX ((Private Instant Verified Transaction), launched in january 2016 and using the Zerocoin protocol to offer complete anonymity.
As can be imagined, anonymous cryptocurrencies have often served as privileged channels for illicit transactions, which have regularly attracted mistrust from regulatory authorities. However, that doesn’t stop them from offering an advantage that powerful cryptocurrencies like Bitcoin do not offer: protection against espionage.
In the crypto-bath since 2017, both much too late but quite early from the point of view of my future grandchildren ????
Writer, Amateur Trader, Ethereum and NEO-compatible