As you start considering “What a privacy coin is”, you have definitely entered the privacy-part of the crypto world. Crypto currency is public, even for Bitcoin, Ethereum or other ERC-20 tokens. Privacy to protect your data about transaction, your account balance and more become significantly important. In this situation, cryptos world rise up with 2 solution: privacy coins and privacy wallets.
What is a privacy coin: The Definition
A privacy coin is the privacy and anonymity-oriented cryptocurrency. This kind of coin aims to shield the sender’s address and also the amount involved.
In short, once you use a privacy coin, no one can track your transaction and also the details associated with it. As a result, your identity is protected and cannot be back-traced.
Many privacy coins also hide the balance of your address, meaning it’s just you who are capable to know how much you are holding.
What is a privacy coin: Reason why we need privacy
Bitcoin utilizes cryptography to cover identities and has a transparent public ledger. That means everyone can check the balance of a single address and know all the details involved, including transaction history and how much is holding.
Moreover, if you send Jack a Bitcoin which was received from Mike, everyone knows it too. This Bitcoin can be traced back to its origin and there’s nothing hidden.
Even if your identity is covered by a nickname, there are many tools used to figure out who you are. This nature of Bitcoin makes it one of the most transparent assets in the world and also, the most publicity.
Privacy coins for the privacy world
Do we really want everyone to see what we have and who we send to?
We, as individuals, do not want it, neither the businessman. Businesses have their own secrets and clients and suppliers they want to hide.
If everything is public, we no longer have privacy and personal data. That’s why privacy coins have surfaced.
Privacy coins shield our financial status, obscure our transactions, and prevent you and your real-world life from hackers.
What is a privacy coin: Best privacy coins
Rewind April 2014, Monero (XMR) is a fork of Bytecoin with the purpose to be a secure private untraceable cryptocurrency.
Back to these days, Monero has become one of the most recognized privacy coins in the crypto community.
It protects user privacy by using the CryptoNight Proof-of-Work protocol, which utilizes Ring Signatures, Ring Confidential Transactions, and Stealth Addresses to obscure the transactions.
In addition, Monero also has a splitting mechanism that divides a transaction into many smaller amounts and sends them disorderly. This helps to mix transactions that are sent at the same time; so that no one can figure out the actual origin.
As a fork of Bitcoin, Dash shares the peer-to-peer nature of Bitcoin blockchain. It is an open-source cryptocurrency that wants to provide instant and private transactions for users.
With Dash coin, privacy is optional, not obligatory. This means the addresses and transactions are public as was common. But you’ve got a choice to choose privacy protection.
When enabling “privacy mode”, Dash master nodes mix your coins with others and are sent at the same time on the network. As a consequence, it’s impossible to trace the input and output of every transaction.
Clearly, Dash helps to obscure your address and transaction, supplying you with all the privacy you would like.
Much like Dash, ZCash has a semi-transparency mechanism. On one side, ZCash has a public ledger that stores all the public wallet addresses. On the other side, the ZCash technique obscures the transactions with a “shielded” address.
This nature allows users to display a part of data to verify payments while masking all the important data including the two parties’ addresses.
Unfortunately, ZCash users must expose their identities when trading on KYC-required exchanges. If not, the coin will be delisted because of regulations and KYC/AML policy.
#4. Other top picks
Clearly, there are not just 3 privacy coins projected existing on the market. The best privacy coins list continues with many names including but not limited to Verge (VGX), Beam Coin (BEAM), Grin (GRIN) and PIVX.
What is a privacy coin: Privacy coins and criminal
As to the nature of anonymity, privacy coins are surely a useful payment method on the dark web.
Many still believe that Bitcoin is used for money laundering and prohibited goods trading. In fact, the privacy coins are.
Monero and Dash are favored by hackers and the underworld and that’s why the governments don’t prefer privacy coins. Many regulated exchanges have delisted XMR and DASH (and also other privacy coins) because of AML policy.
The crypto community soon figured out that privacy coins are not the most optimized solution for the privacy issue. And then, the anonymous and privacy crypto wallet is born.
What is a privacy coin: A better version of privacy coin – The Incognito Wallet
Though the privacy coins offer a relatively high level of anonymity, regulations of the watchdog prevent people from using them. That’s when the Incognito Wallet, a privacy-oriented crypto wallet, has surfaced.
Based on the idea of the incognito mode, the Incognito Wallet creates the sidechain for other blockchains. Once using this wallet, you have the choice to switch your coins into its privacy version.
For example, your Bitcoin can be turned into private Bitcoin (pBTC) at the exactly 1:1 rate. Then you can exchange it without anyone knowing. Finally, just with another tab, you can switch it back to the origin effortlessly.
That’s all the steps you need to follow to send and buy crypto anonymously.
Although privacy preservation is its outstanding feature, the Incognito Wallet has many other awesome functions.
- Privacy tokens issuing: you can create your own privacy tokens for your business with the Incognito Wallet.
- A pDEX: a decentralized exchange where you can trade crypto with total privacy.
- A DApp store: where you can find interesting privacy-oriented applications.
- Staking function: helps you earn more tokens.
And last but not least, the Incognito Wallet is entirely cost-free. You can download it to explore more practical functions.
What is a privacy coin: The Conclusion
The world is focusing more and more on privacy issues in 2020 and beyond. That’s why the potential of privacy coins cannot be denied.
Despite controversial thoughts regarding privacy coins, the demand is still increasing. However, a privacy coin project must have more achievements and technology innovations to gain more users among others. Especially when there are advanced privacy crypto wallets like the Incognito Wallet, the race is increasingly fierce.