Once upon a time, Bitcoin was the beginning and the end of the cryptocurrency market. Today, while still the largest, Bitcoin is merely one of dozens of important coins and tokens. From Ethereum to Bitcoin Cash to Particl to SALT, the market is flooded with other blockchain-based projects.
Although many of these coins compete with each other in various ways, they are not all identical. Regarding privacy, they generally fall into two main categories: public and private. Public coins offer a degree of anonymity but focus on other areas. Others place privacy first and foremost.
Anonymity vs. Privacy
Before delving into the details of various cryptocurrencies, let's take a moment to consider how anonymity and privacy work in the blockchain world.
All blockchain-based cryptocurrencies offer some degree of anonymity for users because they allow users to operate under pseudonyms. However, anonymity and pseudonymity are not the same thing as privacy. Bitcoin transactions can be traced , as can those for many other coins and tokens that were not designed with privacy in mind. Addresses can be linked and transaction amounts can also be traced. If someone can reveal the true identity linked to an address, privacy totally disintegrates.
Indeed, the very nature of a public blockchain makes transactions traceable. All transactions that occur on an open blockchain can be viewed by any person that has access to the blockchain. The degree by which they are traceable depends on the cryptography employed by the project team. Public coins not focused on privacy tend to be linkable and traceable, while privacy coins use a variety of stealth tactics to break one or both of those characteristics.
Public Coins and Utility Tokens
True privacy comes with advanced cryptography and is why most of the cryptocurrencies in use today offer no privacy features beyond basic anonymity, or rather pseudonymity. They are happy being public, in the sense that traceable and linkable transactions on their blockchain doesn't affect the product, only possibly the end user.
Popular public cryptocurrencies and tokens include:
- Bitcoin : The cryptocurrency that put cryptocurrency on the map. While Bitcoin offers anonymity, it does not offer much in the way of true privacy. Transactions are linkable and traceable by design.
- Litecoin : Litecoin was created as a response to what some Bitcoin users perceived as unacceptably slow transaction speeds and storage problems. Compared to Bitcoin, Litecoin offers considerable improvement in transaction rates and storage efficiency. However, Litecoin does not offer any major privacy features that aren't available in Bitcoin, as privacy is not a design goal.
- Ethereum : Ethereum was conceived to extend blockchain use to areas beyond financial transactions. Ether is probably the most popular alternative to Bitcoin at the moment, but it does not offer any special privacy features at this time.
- Ripple : XRP is a token developed for use on the Ripple exchange , which also supports other cryptocurrencies. Ripple was premined and then XRP was given away for promotion, and because Ripple is designed to provide resiliency against attacks on the blockchain, XRP may become more popular as the threat of Bitcoin hacking increases. However, apart from resistance to hacking, XRP offers no special privacy features.
Alongside the projects described above, there are popular tokens designed to be private by default by hiding transaction details. These cryptocurrencies are still public in the sense that they have public open ledgers, but transaction information is obfuscated in varying degrees to protect the privacy of the end users. It is also important to point out that there is a difference between secrecy and privacy . Every human has the right to privacy and fighting for that right doesn't mean you have something to hide.
Popular private cryptocurrencies include:
- Monero : Monero provides privacy at all times through two features: Ring Signatures and Ring Confidential Transactions (RingCT). Ring Signatures make it difficult to trace the parties involved in a transaction because transaction signatures are shared by a large group of people; as a result, associating specific users with a transaction is very difficult. RingCT (which, technically speaking, is actually a special type of Ring Signature, rather than a distinct feature) provides additional privacy by obscuring transaction amounts.
- Particl : PART is a token created by Particl for use on its privacy platform and decentralized marketplace (which also supports many popular cryptocurrencies). Particl is a utility token with extremely robust privacy in mind. Built on the latest version of Bitcoin, Particl enhances the protocol with Confidential Transactions (CT) and RingCT. Like Monero, transactions are untraceable and amounts are unlinkable. However, unlike Monero, Particl gives the privacy control back to the user. The PART token provides multiple layers of privacy protection as it can seamlessly switch between public and private while never leaving the owner's control and never compromising their right to privacy.
- Dash : One of the first privacy-focused cryptocurrencies to emerge, Dash (formerly Darkcoin) seeks to prevent transaction tracing through a technique called coin mixing. Coin mixing is a third-party technique that may optionally be used with public cryptocurrencies, including Bitcoin, to add some privacy, but Dash incorporates mixing by default. The major criticism of Dash from a privacy perspective is that it depends on "masternodes," which is not advanced cryptography, rather third-party mixers. If you don't trust the masternode operators or the central servers many reside on, it is difficult to feel confident in the privacy of Dash.
- Zcash : Zcash's privacy strategy is essentially to erase the "memory" - that is, the transaction history - of coins whenever a transaction occurs. Like Monero and Particl, by obfuscating transaction history, Zcash makes it impossible to trace transactions. ZEC uses an advance cryptographic technique called zk-SNARKs to make their coins private. And like Particl, Zcash is developing uses for its privacy beyond the currency.
Although cryptocurrencies are often associated in the popular imagination with privacy, in reality, most cryptocurrencies provide only basic levels of pseudonymity. Essentially, crypto-coins like Bitcoin offer the same level of privacy that you get if you buy something using cash in a store where no one recognizes you. In this scenario, your transactions are anonymous, but the transaction amounts can easily be traced. And if someone is able to determine your identity, all privacy quickly evaporates.
However, a handful of cryptocurrencies, such as Particl, fall into a different category. Designed to provide true privacy and not just anonymity, they include special features that make it effectively impossible to trace users' identities and, for some of the coins, the transaction amounts. While some of these private cryptocurrencies have trade -offs (like masternodes in the case of Dash) that make them less attractive from a privacy perspective, others achieve privacy in a fully decentralized way.
Disclaimer: Particl is a client of BTC Media, which owns Distributed.com .