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As the world became more and more connected, privacy continued to erode. For many libertarians and cryptocurrency users Bitcoin doesn’t offer enough privacy. This is why tokens like Monero (XMR) and zCash (ZEC) have made privacy their number one priority.
Tokens like Monero make transactions more difficult to track using Ring signatures and hidden addresses. These methods help hide the identities of both the sender and the recipient. Large-scale adoption due to a number of issues such as:
- Regulatory uncertainty
- Privacy in question
- Increased competition
In an effort to avoid becoming irrelevant, there are efforts that will hopefully dispel these aforementioned fears.
Compliant lists
Regulatory uncertainty has been hovering over privacy coins since day one. As a result, cryptocurrency markets have seen various high-profile exchanges decide to remove privacy-focused projects in recent years. The most common occurrence of this occurred in Japan, as the nation’s regulators made a concerted effort to do so.
In these cases, the greatest strength of these projects has also become their greatest weakness. If these projects are to survive, there must be a clear path forward in which they can continue to operate by placating regulators. The developers recognized this obstacle and decided to do something about it.
These efforts should lead to the completion and release of a new white paper. This white paper, being completed in collaboration with the developers behind Monero, Tari Labs and the Perkins Coie law firm, will be titled ‘The fundamentals and regulation of cryptocurrencies that enable privacy’. As the title suggests, this new white paper will serve as a guideline for exchanges to follow, allowing privacy-based projects to be listed in a regulatory compliant manner.
Although the white paper has not yet been published, the first comments from the people involved look promising. Louis Willacy, of Tari Labs, recently stated, While the authors support their findings with extensive research and detailed analysis, the white paper’s main conclusion is deceptively simple: Regulated financial institutions can meet AML obligations when they support privacy tokens. Period.”
The white paper, which is expected to be released at any time, is a potentially huge plus, not just for Monero, but for all coins of similar build.
Coinbase will not be listed
Coinbase is a great example of why upthe upcoming white paper is an important step. Probably the best known company associated with cryptocurrencies is Coinbase. Its CEO, Brian Armstrong, recently shared his thoughts on Monero. He indicated that while he would have no problem supporting the asset, this will not happen as it is, due to regulatory uncertainty in the US. It is precisely this problem that the next white paper tries to address.
Armstrong stated, “Coins for privacy are the next topic, one of the next on the horizon, among many. (Regulators) are very concerned, so we haven’t been able to at least list it the way we want it for these reasons. But I think with enough time and foresight, regulators will be comfortable with this. Then, there will be another new problem on the horizon that will affect them. “
While those hoping to see privacy coins like zCash’s Monero soon listed on the main exchange, Coinbase, may be out of luck, the pending whitepaper will hopefully be able to influence decisions like these and, in doing so, accelerate. the adoption of projects focused on privacy.
Not so private
However, fears surrounding the use of coins for privacy may not always be an issue. Through the use of artificial intelligence, the “Russian Federal Financial Monitoring Service” is attempting to develop a new analytics tool. This tool was developed with the aim of reducing illicit activity, by tracking transactions on privacy-based protocols – such as Monero, Dash and others.
People are turning to coins for privacy because of this, privacy. If you remove this attribute, the appeal to these coins is lost. If Russia can truly track down coins, such as Monero, others will surely follow suit, leading to their demise.
Not all privacy coins are created equal. Some use suspicious measures to achieve privacy, some offer the ability to turn privacy features on or off, while others are solid and private on a permanent basis. Regardless of what category a privacy coin falls into, it could be in trouble.
Increase competition
When you think of privacy coins, there are a few that immediately come to mind: Monero, zCash, Dash. This list may soon start growing, as various other projects roll out network updates.
Another battle, which will eventually have to be fought by privacy coins, is this increased competition. As it stands, they are able to exist because they offer something that popular currencies like Bitcoin cannot: anonymity. If this benefit is removed, why use these designs?
The developers behind products like Litecoin (LTC), GRIN, and others are actively working to support privacy. This is done through the development and implementation of a network update known as a “Mimblewimble”.
While the inner workings of Mimblewimble may be complex, their effect will be simple: it will allow these projects to steal users and market capitalization from the aforementioned, more traditional privacy projects.
Halve your hopes
All of these points, good or bad, will continue to influence the adoption of privacy coins. However, there are other factors at play that can help some projects grab the attention of investors.
For those who follow the cryptocurrency markets, we’ve all seen what a “halving” event can do for a project. These events are typically associated with projects using proof of work protocols, such as Monero and zCash.
Over the past few months, Monero has seen its position in the market drop to 15th, overall. By the end of the year, the project could decline further. This would be because the rival, zCash, will suffer a halving in the fall of 2020, drastically reducing its inflation rate. Such an event could entice Monero users to switch to zCash in anticipation of potential earnings.
If so, will zCash be able to override Monero as the most popular privacy coin?
Free fall
Monero was once one of the top ten respected cryptocurrencies. While it may still be a fantastic project and the cream of the cream among the privacy coins, it hasn’t been able to keep its hold in any of the top ten positions.
Due to various controversies, such as those discussed here today, involving Russia, Coinbase, and Exchange revocations, he is now found with a weak understanding of the 16th placed on Coinmarketcap.
Despite this drop in CoinMarketCap rankings, participation in the Monero network remains close to all-time highs when measured by the hash rate.
