Here at Token Metrics, we understand that our most valuable asset is you, our audience.
With your help, we have put together a guide to the Top 3 Privacy Coins of 2020, as voted upon by you.
So sit back, relax, and enjoy the Moon Awards.
What Are Privacy Coins?
The foundation of cryptocurrency lies in the idea that the power wielded by the big banks and government should transfer to the masses.
Crypto aims to do this through the decentralization of the current monetary system.
The ability for cryptocurrency to be decentralized is a result of its innovative Blockchain technology.
Blockchain serves as the building blocks necessary for all cryptocurrencies.
Its design is to make a financial system that is both free and transparent while also creating enhanced security and privacy.
While almost all cryptocurrencies are used for decentralization, some coins take the concept of privacy further than others.
These types of coins form the category of crypto known as privacy coins.
Although it is not always portrayed this way in the media, cryptocurrency is quite transparent as the majority of blockchain networks broadcast every transaction and wallet balance publicly.
As a result, it is not a difficult task to track someone’s financial activity.
Privacy coins are designed to make their user’s financial activity untraceable by focusing on their transactions’ ability to remain anonymous and undetectable.
Privacy coins achieve these features through their use of encryption techniques and coin-mixing technology.
By being anonymous, your identity is no longer associated with your wallet and your specific transactions.
Through being untraceable, outside parties are prevented from being able to piece together your financial activities.
Privacy coins serve as an innovative financial tool for a person who wants to redeem their right to absolute control of privacy.
Top 3 Privacy Coins of 2020
1) Monero (XMR)
“Monero is the leading privacy coin by market cap. Its supply is inflationary. However, inflation reduces over time. Due t its private nature, more prominent exchanges do not have fiat on-ramps for Monero.“ – Sam Monac, Head of Research, Token Metrics
In a dominating performance, Monero comes in as the top privacy coin with a little over 62% of the vote.
This result comes as no surprise as Monero is widely considered as the most popular privacy coin in circulation today.
Monero was initially launched as Bitmonero in April of 2014 with a foundation in four central tenets.
The creators of Monero believe that their coin should focus on being secure, private, untraceable, and fungible.
For the most part, Monero has been very successful in their pursuit of these ideals through their use of ring signatures, ring transactions, and stealth addresses.
Ring signatures and transactions allow Monero to mask both the sender and the amount of the funds transferred.
The use of stealth addresses enables the receiver of the cryptocurrency to remain hidden.
While Monero is an exceedingly popular privacy coin, it may not be entirely as private as hoped.
Though Monero still has better privacy protections than Bitcoin, a recent study from researchers at institutions such as Princeton, MIT, and Boston University has revealed that it is quite possible to extract information on individual transactions from Monero.
“Dash leverages master nodes for instant and private transactions. Though Dash has some merchant adoption, it lags behind others in the currency department. The recent crackdown by the regulators against privacy coins remains an area of concern for further acceptance of Dash.” – Sam Monac, Head of Research
Coming in 2nd place is one of the oldest privacy coins in circulation, Dash.
Dash launched in January 2014 under the name of Xcoin.
Ten days after the launch of the cryptocurrency, Xcoin was rebranded as Darkcoin.
Darkcoin remained the name of the cryptocurrency for a year until it was rebranded again as Dash.
Dash operates as an offshoot of the Bitcoin source code with just a few changes to the rules of the Bitcoin network.
The specific component that qualifies Dash as a privacy coin is an optional feature known as PrivateSend.
PrivateSend can mask chosen transaction data through a coin-mixing service based on CoinJoin.
As an optional feature, PrivateSend does not have to be used for those who wish to conduct transactions involving Dash in a more open forum without an additional layer of privacy.
Despite its murky origin stories and early use in darknet markets, Dash has become one of the most prominent privacy coins with a market cap ranked in the top 20 of all cryptocurrencies.
According to Dash Core, CEO Ryan Taylor, Dash is the most used cryptocurrency in Venezuela and has not been used in any significant darknet markets since August of 2016.
3) Zcash (ZEC)
“In terms of competition, Monero is ahead of Zcash in privacy coins. We believe these pending issues are the primary reason for holding back the price. Other network parameters such as hash rate seem to extremely healthy at the moment.” – Saurabh Deshpande, Investment Analyst, Token Metrics
Rounding out our group of honorees is the privacy coin known as Zcash.
Zcash was launched in October of 2016 with a basis in the Zerocoin cryptocurrency protocol released in 2013.
Specifically, Zcash is an implementation of the Zerocash protocol based on zk-SNARKS.
The full name of zk-SNARKS is Zero-Knowledge Succinct Non-Interactive Argument of Knowledge and is obviously quite a mouthful.
Essentially, what zk-SNARKS allows users to do is confirm that a transaction is valid without revealing any details regarding the sender, receiver, or amount of the transaction.
Another unique feature of Zcash is that, like Dash, these enhanced privacy features are entirely optional for users.
So with Zcash, there are two types of trading: one that happens on the public ledger and one that keeps individual addresses masked.
Honorable Mention: Zcoin (XZC)
“Zcoin has a significant amount of volume in comparison to its market cap. It is an untraceable anonymous cryptocurrency built on the fundamentals of the zero coin paper. It uses zero-knowledge proofs to be anonymous. This coin has a high degree of competition, and it is not leading the pack.” – Ian Balina, CEO of Token Metrics
It’s hard to create a privacy coin list that mentions Zcash without mentioning the innovations of Zcoin.
Released in September of 2016, Zcoin initially implemented privacy ideas from the same Zerocoin project whitepaper that Zcash uses.
But in 2019, Zcoin left behind the Zerocoin privacy protocol and became the first full implementation of the Sigma Protocol.
The Sigma Protocol has become an exclusive and crucial facet of Zcoin’s privacy features for its cryptocurrency.
Sigma Protocol is unique in that it allows users to remain anonymous by minting a coin found on the public ledger into a private one.
This action effectively breaks any transactional links and ensures the user’s privacy.
Zcoin also safeguards the user’s privacy through its combination of Tor and Dandelion++.
The integration of Tor in transactions hides the user’s IP address, while the addition of Dandelion++ further conceals the IP address when a transaction broadcasts on the network.
The last key protocol involved in the Zcoin privacy coin is the MTP Mining Algorithm.
MTP stands for Merkle Tree of Proof, and Zcoin is the first cryptocurrency to implement this protocol successfully.
MTP works as Zcoin’s unique Proof-of-Work algorithm that centers on decentralizing the mining process through a focus on ASIC-resistance.
By focusing on ASIC-resistance, MTP remedies the disparity between ordinary users and those who use botnets to gain a significant mining advantage.
The use of MTP helps ensure equal mining for all participants in Zcoin.
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