A comparative analysis of different privacy coins
How do bitcoin, Dash, Monero, Zcash, Verge and Civic stack up?
The blockchain technology that powers the cryptocurrency space seeks to shift power away from established financial institutions and give it back to the masses.
Blockchain uses a decentralised system that is transparent and can't be manipulated. It is built using a complex encryption system that allows varying levels of privacy and security for its users.
With the rising popularity of anonymous transactions, digital currency users are looking for privacy-based coins that can offer distinct features. Below we've explained some of the top privacy-oriented coins users can choose from.
Bitcoin was the first digital currency, and anonymity is one of its key selling points. However, it is only partly anonymous.
Transactions on its network are shared on a public ledger, but wallet ownership remains private. However, it is easy for police or financial authorities to link wallet addresses to real-life identities. This is because in many cases, these addresses are connected to bank accounts.
Civic is another popular privacy-oriented cryptocurrency. It uses an authentication service known as ChainAuth to validate personal information from its users.
Following verification, this information is not permanently stored on the system, and Civic can only be accessed from the device used for registration.
Verge offers privacy to its users through Tor technology and I2P routing. This means that its privacy is not cryptographic, but user IP addresses are concealed during transactions.
All other information on this network is just as public as it is on the bitcoin blockchain. The only difference is that without IP addresses it is difficult (though not impossible) to trace the original source of funds.
Monero is a digital currency that uses a technology known as Ring CT. This uses ring signatures to enable senders to conceal their transactions from others on the network. The system does this by pulling several other keys from the system along with your own and listing all of them as transaction sources. Therefore there is no way of telling the real source.
Transaction amounts and destination addresses are also concealed making this one of the more privacy-centric networks of them all. However, the transparency feature is optional, so not everyone will use it.
Zcash uses the zk-SNARKS protocol for privacy. It allows network miners to do their job of confirming transactions without knowing the sender or recipient. It uses a cryptographic hash to achieve this.
This makes the transactions on the Zcash blockchain fully encrypted and therefore inaccessible to the public. However, the shielding option on this network is optional and most transactions are conducted without encryption.
Dash uses a form of non-cryptographic protection known as Coinjoin. Transactions on the network are mixed so as to eliminate traceability. This optional privacy feature uses a server called a masternode to carry out the mixing process.
The use of a server on the decentralised system is quite a deviation. However, users have to trust that no record is made of the transaction details on this server.