How does anonymous cryptocurrency work? • Blocklr


What are private coins and how does anonymous cryptocurrency work? Unlike traditional cryptocurrencies, a private currency allows the user to obscure the connection between a transaction and its sender and recipient. As a result, users can prevent the tracking of portfolio activity. The best private privacy coins make it impossible for anyone to monitor the assets of a particular cryptocurrency portfolio, including the funds it holds and the transaction history.

How can anonymity coexist within a distributed, peer-to-peer ledger that is by definition public? Here's where complexity comes. The developers have innovated different approaches to address the problem of privacy without breaking the solution to the problem of double spending. Here's everything you should know about privacy coins, how they differ from traditional crypts and which are considered the best private coins.

What are the coins for privacy?

A currency for privacy is a type of cryptocurrency that cryptographically obscures the connection between a transaction and the addresses of the public portfolio of the parties involved. And this makes privacy an answer to a problem that exists with all other cryptocurrencies from a privacy point of view.

Bitcoin is not anonymous

How Bitcoin is anonymous? Bitcoin (BTC) is more pseudonym than anonymous, which means it's not among our privacy coins. The link between a person's real identity and his or her public portfolio address is not public. But the connection between a portfolio and its transactions is not.

If someone can connect a wallet address with a true identity, they can connect it to the entire cryptocurrency transaction history with that wallet.

Even without knowing someone's real-world identity, it is still possible to track the assets of the portfolio and other portfolios with which it interacts.

Who uses privacy coins and why?

Coins for privacy: how does anonymous cryptocurrency work?

As such, there are a variety of uses for privacy coins. And for sure, some of them are illegal. In fact, these anonymous cryptographers are controversial precisely because they are perceived as a tool for money laundering and illegal trafficking.

But criminals already have the incentive to hide their cryptic activity. So the argument against the use of privacy coins presupposes that making something more conducive to criminal activity more available will cause more criminal activity.

The coins for privacy also provide guarantees for legitimate users. Some advantages of using privacy coins include:

  • Safeguarding against hackers who may try to target large portfolios
  • Protection of customer and supplier lists (for companies)
  • Protection of financial information

There are many advantages for legitimate users, especially in the face of modern identity theft and data collection.

7 best coins for privacy

There are different types of cryptocurrency for privacy. Functionally, they all do the same thing. What distinguishes them is the basic technology that masks, obscures or otherwise confuses the link between the portfolios and their transactions.

Mainly, these differences come to the consent mechanism that validates the transactions and adds them to the blockchain, avoiding double spending. How do network nodes get the job done to add a blockchain transaction?

The best coins for privacy have the most solid privacy features. They are also competitive with the traditional cryptocurrency in terms of costs and transaction times. The following list is not an investment advice.

Monero (XMR)


Monero (XMR), Esperanto for "money", is the leader of the private coin market and even has its own church. Furthermore, the 85% of the objectives of illegal extraction Monero (XMR).

This secure, private, and untraceable encryption is actually a fork of the Bytecoin protocol (BCN), which in turn is the result of a dispute within the dev team of Bytecoin and the user community. Monero (XMR) uses a variety of signature technologies to keep cryptocurrency transactions private.

The most important privacy functions of Monero (XMR)

1. Ring Signatures
Where traditional cryptographers use invariable signatures to validate transactions, Monero uses ring signatures. Ring signatures mask the XMR sender by using a "ring" of signers who join to sign a transaction.

Through this method, the actual sender remains unknown. The recipient's privacy is also guaranteed as it is the only party able to detect and spend the funds transferred using the ring's signature.

2. Ring Reserved transactions
In addition, Monero implements mandatory ring transactions, which mask the total amount of a transaction.

3. Stealth addresses
Finally, Monero uses stealth addresses or a one-time public key for recipients. This makes it impossible for outside observers to determine if the funds are moving, let alone link the portfolio addresses.

The combination of all these features makes Monero (XMR) one of the best privacy coins for most users.

Particl (PART)


Particl (PART) exploits many of the technologies behind Monero (XMR), including ring signatures and confidential transactions. A project exclusively focused on privacy, Particl (PART) is also developing anonymous applications on the market.

Particl users (PART) can also earn passive income through the POS consensus mechanism of Crypto (POS).

Zcash (ZEC)

Coins for privacy: how does anonymous cryptocurrency work?


If Monero is the king in the world of private currencies, Zcash is the most immediate challenger. Zcash (ZEC) is an implementation of the Zerocash protocol, based on Zerocoin, a 2013 Bitcoin fork.

Zcash is the first widespread application of Zerocash zk-SNARKs, or Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, consensus mechanism.

The zero knowledge protocol works by using a public key pair.

  • A payment key linked to funds sent to the address
  • A transmission or display key that can be accessed by only the owner of the related private key

A payer sends encrypted funds to the blockchain. And the receiver uses the transmission key to scan the blockchain for the funds addressed to them. They use their key to decrypt funds and access them.

This prevents Zcash (ZEC) from running out of being connected to the transaction that created it. The recipient confirms that he has found a payment on the blockchain, but has not said which one.

Silence (HUSH)


Hush is a modified implementation of the Zerocash protocol, just like Zcash. It uses the same zero-knowledge encryption to preserve the confidentiality of all transaction metadata.

Hush aims to improve the support of the Port of Counteryparty currently devoid of Zcash. This will allow Ethereum developers to create smart contracts on Hush. Hush (HUSH) is also a big project for miners, offering incentives to early adopters in the form of HUSH tokens.

Instantaneous verified private transaction (PIVX)


Private Instant Verified Transaction (PIVX) is a decentralized and open-source privacy token. It works with the Blackcoin Proof of Stake 2.0 protocol, based on a Bitcoin fork like Dash (see below).

Like HUSH, PIVX offers incentives to enter the ground floor through its 100% consent mechanism of Proof of Stake. This means that PIVX is not based on mining. Instead, holders receive block premiums in proportion to their interest, although this gives more control to the masternodes.

PIVX guarantees privacy through the use of its own sub-currency called zPIV. The "z" stands for Zerocoin, which is the protocol used by PIVX to allow anonymous and private transactions. His focus on community and novelties make it an interesting alternative to Dash (DASH).

Dash (DASH)


Dash (DASH) is a 'Decentralized Autonomous Organization (DAO) widely adopted originally forked by Bitcoin.

Offering similar functionality, Dash also offers some extended features, including a feature called PrivateSend. PrivateSend is essentially a coin-mixing service that groups multiple masternodes to keep source addresses and recipients of transactions private.

The decentralized protocol creates some challenges, including 51% attack vulnerabilities. Dash responded by collating masternodes with 1000 Dash requirements.

DeepOnion (ONION)


No list of the best coins for privacy would be complete without DeepOnion, the ultra-private Tor-based cryptocurrency that offers a range of security and privacy features. DeepOnion (ONION) is entirely focused on privacy, anonymity and security.

Like other private coins, DeepOnion uses a native portfolio with a Stealth Address function that protects balance sheets and transaction histories. The DeepOnion portfolio software also offers several additional levels of privacy measures, including the latest version of Tor.

Coins for privacy: the future of Crypto?

Bitcoin is anonymous only up to a certain point. His privacy ends where the general register of blockchains begins.

To solve this problem while taking advantage of the revolutionary capabilities of digital money, private currencies are in many ways in the lead of innovators in the development of cryptocurrency software.

The tools and technologies used by a currency for privacy can quickly spread to other wallets of coins, dApps and cryptocurrencies. And today there are dozens of options for private currencies.

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