Third part of the TOP Altcoins series is here and today’s topic will be a bit more controversial than others, since this article will be mainly looking at privacy altcoins.
Privacy coins are known for offering complete anonymity for its users which is a prime characteristic of these altcoins. Over the years, regulators and policymakers have been a bit worried that privacy coins could be primarily used as a go-to payment alternative for criminals or terrorists. But according to the Chainalysis 2021 report, such beliefs are not inherently true (Crypto Crime Summarized: Scams and Darknet Markets Dominated 2020 by Revenue, But Ransomware Is the Bigger Story, 2021).
As hinted to before, what sets privacy coins apart from other cryptocurrencies is their ability to offer better kinds of anonymity. This is done usually via special types of technologies or better yet, technological procedures implemented right into the nature of these projects. Such technologies are usually complex and would need deeper research in order to get a full or proper understanding of them (we will also include sources, so you can study about these technologies).
Discussing privacy coins and excluding Monero, would be like talking about cryptocurrencies without making mention to Bitcoin. In some ways, Monero is the Bitcoin of privacy coins. The reason for this is simple. It is still by far the biggest privacy coin as well as the most popular and traded one. Currently sitting at market capitalisation of around 5.3 billion dollars, Monero is the only privacy coin that sits in the TOP 30 of coins according to market capitalisation.
Monero was essentially created as a hard fork of Bytecoin in 2014. Monero was first given a name of Bitmonero, later changed to Monero, which in Esperanto means “coin.” From then onwards, the coin gained much attention from the crypto community, due to its ability to provide privacy for its senders and receivers (Top 5 Privacy Coins To Watch Out For in 2021, n.d.).
This is done via the ring confidential transactions (RCT or RingCT), which is a technology that provides privacy of the transaction by concealing the amount being transacted. Moreover, the stealth addresses as well as Multilayered Linkable Spontaneous Anonymous Group signatures (MLSAG) provide for anonymity of the senders and receivers by implementing special decoy elements in combination to RingCT. To learn more about the underlying technologies as well as the privacy elements of Monero, follow for example on this comprehensive guide or Monero website (Rosic, 2020).
Monero is one of those coins that already proved itself in several bull and bear markets and is definitely here to stay. It is also one of the more stable cryptocurrencies (not stablecoins) that does not usually pump up by 100% or fall down by 50% in a single day. Monero is therefore a go-to privacy coin that offers not only stability, but also almost cash-like privacy.
Our second and third privacy coins are very close to each other, when looking at their market capitalisation. For now, Dash is a bit higher in the market capitalisation than Zcash, which means that we should probably cover it first. Like Monero, Dash was also created in 2014 and is also one of the better known privacy coins.
Dash was originally named DarkCoin or XCoin, however, in 2015, rebranding to Dash – short for “digital cash” – happened. Now it is a well-known anonymous cryptocurrency that occupies 46. position in the cryptocurrency market capitalization due to its overall value being more than 2,76 billion dollars.
However, there is one huge difference between Monero and Dash. While Monero is anonymous by default, Dash is not. This means that the sender of the Dash transaction can decide, whether he/she wants the transaction to be anonymous. This is done thanks to the PrivateSend feature that Dash offers, which camouflages the origins of the funds, essentially leaving the transaction anonymous (Bocett, 2021).
This is done via a mixing protocol that utilizes a decentralized network of master nodes, which can be perceived as servers. These master nodes are checking the inputs into the transactions and ensure that they remain anonymous when necessary. In exchange, they receive a proportion of the fees (How Masternodes Work, 2021).
Moreover, Dash is one of the fastest and cheapest cryptocurrencies in the market. Average transaction costs approximately 0.008 dollars and is usually mediated within seconds. Enabling the PrivateSend feature will increase the cost of the transaction, however, the change is almost negligible. With fast, cheap and anonymous transactions such as these, it is very hard to imagine Dash being left out of the cryptocurrency market. If you want to explore this coin more, its official website can be helpful (coindesk.com/price/dash)
The next privacy coin up for discussion is Zcash. Zcash and Dash are similar when it comes to the overall market capitalisation. Zcash has a market cap of around 2.3 billion dollars, ranking it at 52. position.
Zcash was created in 2016 as a fork of Bitcoin (z.cash/the-basics/)and is viewed by many as the most private cryptocurrency in the whole market. Alike with Dash, Zcash is not anonymous by default, meaning that users can choose the level of privacy they want. This is also visible when looking at the addresses, where addresses beginning with “t” are transparent, whereas addresses beginning with “z” are shielded addresses. This is one of the pros as well as cons of Zcash, since users can choose the levels of privacy they want to have, for instance to comply with regulatory rules in their jurisdiction. However, this can also lead to confusion especially amongst newcomers or new users, who might assume that all transactions of Zcash are anonymous, which is not true (You’re One Step Closer to Financial Freedom With Shielded ZEC Withdrawals, 2020).
Its privacy is based on Zero-Knowledge Succinct Non-interactive Arguments of Knowledge known as zk-SNARKS, which gives the option to the participants to shield their transactions. This simply means that they can transact funds without any of them revealing addresses to others. It also allows for obscuring the transacting amount, essentially leaving all the information non transparent for third party observers (What Are ZK Snarks, n.d.).
Taking all the technology features into consideration, Zcash qualifies as one of the strongest on the cryptocurrency market when it comes to privacy. This is also another reason why the popularity of this altcoin is very likely to flourish. It is also one of the reasons why Edward Snowden endorsed it (SHARMA , 2018).
We do not do this very often, but we have decided to discuss Pirate Chain as our forth privacy coin which is not a very well-known cryptocurrency. This coin has been actually on a very nice run in the past week with about 200% increase in the last 7 days. This coin is named Pirate Chain (ARRR) and is referred to as “a little brother of Monero”.
Even though it is compared mostly to Monero, Pirate Chain uses zk-SNARKs, just like Zcash. This is probably because the team behind this project used to work on Zcash itself. Pirate Chain is described as a “privacy protocol that cannot be compromised by other users or activity on the network”.
According to its creators, the privacy coins that are not private by default can have problems with the feature of optional privacy. This is not the case of Pirate Chain, where all transactions are 100% shielded by zk-SNARKs. Protocol set like this makes sure that sender address, transaction amount, receiver address, transaction ID or the size of the transaction are never publicly revealed. This is one of the reasons why Pirate Chain is described as the most anonymous cryptocurrency in the space, being a huge competition to Zcash, Dash or even Monero.
However, with the market capitalisation of around 150 million dollars, this cryptocurrency is a low cap coin that has huge growth potential.
Crypto Crime Summarized: Scams and Darknet Markets Dominated 2020 by Revenue, But Ransomware Is the Bigger Story. (2021). Retrieved from chain Alysis: https://blog.chainalysis.com/reports/2021-crypto-crime-report-intro-ransomware-scams-darknet-markets
Top 5 Privacy Coins To Watch Out For in 2021. (n.d.). Retrieved from Kackernoon: https://hackernoon.com/top-5-privacy-coins-to-watch-out-for-in-2021-3p4535r2
Rosic, A. (2020, 5 4). What is Monero? [The Most Comprehensive Step-by-Step Guide]. Retrieved from Block Geeks: https://blockgeeks.com/guides/monero/
Bocett, S. (2021, 2 15). The best anonymous cryptocurrencies in 2021. Retrieved from Brave New Coin: https://bravenewcoin.com/insights/dash-monero-zcash-and-more-anonymous-cryptocurrencies-explained
How Masternodes Work. (2021). Retrieved from Dash: https://www.dash.org/masternodes/
You’re One Step Closer to Financial Freedom With Shielded ZEC Withdrawals. (2020, 9 29). Retrieved from Gemini: https://www.gemini.com/blog/youre-one-step-closer-to-financial-freedom-with-shielded-zec-withdrawals#:~:text=Zcash%20offers%20two%20types%20of,Gemini%20account%20in%20t%2Daddresses.
What Are ZK Snarks. (n.d.). Retrieved from Z Cash: https://z.cash/technology/zksnarks/
SHARMA , R. (2018, 3 26). Edward Snowden Comes Out in Favor of Zcash. Retrieved from Invest OPedia: https://www.investopedia.com/news/edward-snowden-comes-out-favor-zcash/