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Privacy coins such as Monero and Zcash were established to address privacy challenges. These came with other cryptocurrencies like bitcoin. While transactions using the privacy coins are untraceable, it is different from the public cryptos.
As much as the bitcoin blockchain has anonymity, given time, studies, and understanding of the blockchain network, users’ identities are uncovered.
Why do users transact with privacy coins like Monero and Zcash?
Using privacy cryptocurrency is charming. However, many questions are surrounding their use. Many would wonder why one would like their identity concealed by using Monero and Zcash. Most reasons may be controversial, while others not so.
1. To pay for malicious services
Stories like the one where an Israeli firm used its spyware for cyber-crime for personal and government hacks are not new. Cases similar to this one are among the reasons why people are using privacy coins.
There is software created to help hackers perpetrate their malicious acts. Hackers would not want their transactions to be known to the public as it would make their tracking down easy.
Using privacy coins to pay for illegal services does not have to be as bad as cybercrime. Gamblers use the tokens to gamble in jurisdictions where the activity is prohibited. The same applies to making payments for services that allow the free flow of goods in restricted places.
2. Buying illegal products
This is the most apparent reason for the use of Monero and Zcash. It doesn’t have to be arms; it could be something deemed as harmless as marijuana. Provided the substances are illegal in certain places, sellers and buyers would love to keep their activities private.
The use of privacy coins would thus be the most convenient way to enable the transactions.
3. Fungibility
Remember that bitcoins and other public crypto transactions are usually fungible. This means that it is very easy to see where the coins are coming from. That is the origin of the bitcoins you use to build up for the current transaction.
If the source is questionable, then the user would also not like that to be known. Therefore, traders will use the privacy coins so that vendors and other users don’t reject their transactions if their coins had been used illegally before.
Understanding Monero and Zcash as privacy coins
You might have noticed that the two cryptocurrencies are used more or less in similar ways. They are preferred by traders that want to remain private and untraceable. Monero works differently from public cryptocurrencies like bitcoin. It uses the logic of batch transactions. This is where different transactions are grouped. That way, it is impossible to match the various transactions with the senders. This plays a massive role in the privacy of the transactions.
The coin was established in 2014, and it uses Proof of Work to validate its transactions. This is where computational power is used to update the blockchain on the transactions.
Zcash was established in 2016, after the launch of Monera. The coin has a close similarity to bitcoin than Monero. In Monero, grouping the transactions eliminates the traceability of the senders. Zcash uses zk-SNARKS, which are zero-knowledge proofs.
Zk-SNARKS ensure privacy by concealing the senders and recipient addresses. The feature goes further ahead also to hide the amount sent. Users can choose to send group transactions or individual ones.
A new coin to address privacy issues with Monero and Zcash
While Monero and Zcash have been anonymous for a long time, a competitor has developed a more trusted anonymous coin.
The technology addresses one of the biggest challenges in the privacy coins: a trust setup. The new anonymous coin uses a trustless setup. Users can create nodes and wallets without the need to share information with other users.
This is a challenge with the two privacy coins as users need to share set up information given to them.
Just like the Zcash and Monera coins, the new coin is published fully on the blockchain. The difference is that third parties are not able to reveal that information. This is information that would impede the privacy of the users. That is the address of the sender, recipient and the amount transferred. On top of that, the new crypto has integrated other privacy technologies. That is, stealth addresses, ring signatures, bulletproofs, and ring confidential transactions.
Remember that Monero enhances privacy by having group transactions. It would be hard to match the senders with the transactions with this. The ring confidential transactions mix authentic transactions with fake ones to end traceability. Also, the size of the transactions is determined to boost security.
New coin to address security issues that Monero and Zcash may still be facing
The new privacy coin founders have further stated that they have done everything to ensure security is top-notch. For one, they provide the users with secure wallets that need two-factor authentication to access.
Two-factor authentication offers an extra layer of protection. That is beyond the common passwords, which hackers can bypass by guessing. A renowned cybersecurity company also conducts a security audit on the privacy coin. So far, they have experienced zero attacks or breaches.
The founders of the new coin are dedicated to the constant improvement of cryptocurrency. This is to ensure that they maintain privacy and transactions are untraceable. Privacy coins like Monero and Zcash, among others, came about after the realization that public coins are not as private. The exchange of information on bitcoin and other privacy coins before publishing transactions is a significant risk to privacy.
This is among the gaps that the new coin looks to address to enhance privacy. There is also a commitment to beef security by keeping hackers and cybercriminals at bay.
The question, however, is, will security and privacy issues arise? Note that when bitcoin was established, it was considered completely private. The same happened to privacy coins like Monero. It is safe to say that only time will tell, probably three to four years from now.