Privacy-focused Cryptocurrencies. The idea that cryptocurrency should remain decentralized and owned by the people is central to its concept. While decentralization is often mentioned as a means to this end, anonymity is also crucial. Despite early claims that Bitcoin could remain anonymous on the public blockchain, its tracing capabilities became apparent as its adoption skyrocketed. Coins like Dash (DASH), Monero (XMR), and Zcash (ZEC) have arisen since then, all with a focus on anonymity.
Monero (XMR) Privacy Features and How it Works
Monero (XMR) stands head and shoulders above the crowd among privacy-oriented digital currencies. It uses cutting-edge cryptographic methods, including RingCT, stealth addresses, and ring signatures, to encrypt transaction information securely. To hide the identity of the genuine sender, ring signatures combine the sender’s Monero signature with that of other users at random. To hide the actual recipient’s address, stealth addresses secretly create new, one-time addresses for every payment. Additionally, RingCT conceals the precise sums of all transactions.
Privacy-focused Cryptocurrencies: Due to Monero’s robust privacy protections, tracing or linking cryptocurrency transactions is nearly impossible. Unlike other coins, improved anonymity is not an optional feature with Monero; it is built into every transaction. Although Monero’s dedication to anonymity has made it a favorite among those who prioritize financial secrecy, the cryptocurrency has also been the subject of debate and regulatory investigation due to concerns that it could facilitate illegal activity.
However, Monero’s market cap is still higher than any other privacy coin. There is a robust community supporting Monero despite the challenges it faces. In 2023, the varied developers and users of Monero worked together to improve the project, fostering an environment that is strong and cooperative and driving many innovations that adhere to the secrecy and decentralization principles that Monero was founded on.
Zcash (ZEC) Privacy Features and How it Works
Another prominent privacy cryptocurrency that split off from Bitcoin’s source but added more privacy features is Zcash (ZEC). It pioneered zk-SNARKs, a more sophisticated zero-knowledge cryptography, for use in digital currencies. Because of this, the Zcash blockchain may encrypt all transaction data while allowing for safe verification.
Compared to Monero, Zcash stands out because of its optional privacy feature. Private z-addresses utilize the zk-SNARKs encryption mechanism, while transparent t-addresses function similarly to Bitcoin. Transparency between t-addresses, complete security between z-addresses, or both are possible for transaction transmission. This adaptability aims to make Zcash more compatible with existing financial systems and facilitate its adoption. That being said, not all Zcash transactions are private because of this.
Dash (DASH) Privacy Features and How They Work
Dash (DASH) has rebranded from “Darkcoin” and moved its emphasis from privacy to the convenience of digital cash. The project initially debuted with a significant focus on privacy. Its ability to provide cheap, fast payments worldwide is one of its most outstanding features. In addition to offering numerous privacy features, it is also easy to use.
To make it harder to trace specific Bitcoin transactions, Dash uses CoinJoin, a technique that combines payments made by several users into a single transaction. The “masternodes” that Dash users are encouraged to run make features like CoinJoin possible. Several user-contributed procedures are required to disguise transactions, in contrast to Monero and Zcash. As a result, only a tiny portion of Dash transactions use the privacy settings.
Monero vs Zcash vs Dash
Of the three leading privacy coins, Monero provides the highest level of anonymity and is the most often used in transactions. If you value your financial privacy highly, you should use it because of its privacy-by-default feature. The delisting of XMR by exchanges to comply with regulations has made it the most difficult cryptocurrency to obtain. Zcash’s distinctive zero-knowledge cryptography may provide even more theoretical anonymity than Monero when wholly protected. However, because privacy is optional, a negligible fraction of ZEC transactions use it. As a compromise to enhance regulatory compliance, some still favor Zcash over Monero due to its opt-in anonymity.
Privacy-focused Cryptocurrencies: Dash was one of the earliest privacy coins, but now that it has evolved, its private characteristics aren’t what makes it unique. Instead of competing anonymously, it competes based on how quickly and easily it processes payments. Using its mixing characteristics, Dash does, however, provide greater anonymity than completely transparent coins. Zcash, Dash, and Monero aim to balance privacy and practicality, but they do it in various ways.
Regarding privacy, Monero stands head and shoulders above the competition. However, for individuals prepared to go to the additional effort, Zcash and, to a lesser degree, Dash still provide substantial privacy benefits over conventional coinage. All three of these coins have a great attraction to consumers who seek privacy, but their adoption rate is relatively low compared to Ethereum and Bitcoin.