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Monero vs Bitcoin: Monero Adopted by Privacy Focused Crypto Users
Monero uses ring signatures, Ring Confidential Transactions (RingCT), and stealth addresses to achieve privacy.
Yes, Monero was the best performing cryptocurrency in 2020 and is a community favorite when it comes to privacy.
Yes, untraceable transactions and anonymity are baked into the Monero protocol.
Bitcoin gave the world digital cash. The ability to transact large sums of money across the globe, without needing to ask permission, and without the need to use middlemen is truly groundbreaking. But for all its advantages over national fiat currencies, Bitcoin now only seems to serve a limited set of use cases. It is not very private, transactions are generally slow and becoming costly. It’s becoming harder to upgrade and add new features to the protocol making it resistant to new innovations and technologies.
Then came Monero – private by default with untraceable transactions. It has an adaptive block size. It has its own codebase and is not simply another Bitcoin clone. Even its developers are mainly anonymous. Monero ticks most the permissionless digital cash boxes – is it all too good to be true?
In this Monero vs Bitcoin comparison, we’ll take a deeper look at Monero’s features that have helped it grow to a top 10 cryptocurrency.
Why Bitcoin lacks privacy and What Monero does about it.
Bitcoin is pseudonymous, meaning that users can transact without providing their identities. Instead of using real world identities as banks do, Bitcoin uses addresses to make transactions possible between wallets. The problem is that the addresses, along with the transaction information, all get stored on a public ledger. Although users can make transactions without attaching their personal identity, it is now widely known that the Bitcoin blockchain is being data mined by blockchain analysis companies. These companies are able to de-anonymize Bitcoin transactions with a high degree of accuracy.
Unlike Bitcoin, where you need to take extra steps to achieve anonymity, Monero has privacy turned on as a default setting. Untraceable transactions and anonymity are baked into the protocol.
As a side effect of anonymous and untraceable transactions, Monero is more fungible than Bitcoin. Fungible simply means that you can’t tell apart one coin from the next. Bitcoins are subject to being tainted. For instance, if a particular exchange has been hacked, or funds are stolen, the hacked or stolen Bitcoins can be tracked and subsequently blacklisted by exchanges or vendors. This can make a percentage of Bitcoins unspendable, which is not ideal for a digital representation of cash. Monero’s inherent untraceability makes this a non-issue.
How exactly does Monero achieve privacy?
Monero uses three different privacy innovations, namely, ring signatures, Ring Confidential transactions, and stealth addresses.
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Ring signatures hide information about the sender, using a technique where a group of users sign the transaction. This obscures who the actual sender was.
Next, by using a technique known as RingCT, which stands for Ring Confidential Transactions, Alice can send Bob some Monero, and the only people that will ever know the amount sent will be Alice and Bob. Although the transaction is visible on the blockchain, there is no way to determine the amount transacted.
Lastly, Monero uses stealth addresses which adds privacy to the receiver of a transaction. Stealth addresses use ‘spend keys’ to obscure the receiver’s address. A sender is required to generate a spend key address for the receiver and send the Monero through this address. A ‘view key’ is then used by the receiver to display incoming transactions. This method means that while a transaction is recorded on the blockchain, only the sender and the receiver can determine where the payment was actually sent.
Monero vs Bitcoin: Other Key Differences
|Launch Date||April 18th, 2020||January 3rd, 2009|
|Average Block Time|
|Max Total Coins||21,000,000|
Released in early 2020, it is understandable that Monero still has some catching up to do compared to Bitcoin which has been around since 2009. This is reflected in the two coin’s market cap differences, with Monero sitting in 9th place at the time of writing.
Bitcoin had a lot more time to build out its network, and it won’t be giving up its first mover advantage that easily. With Monero, however, the market cap comparison does not reflect the fact that Monero has a different use case than Bitcoin, a use case built around its privacy. Monero is now establishing itself as the ‘coin of choice’ for people that want privacy in their transactions or that want to use Dark Markets. Bitcoin lost flavor with Dark Market users who quickly switched loyalty when they realized that Monero took privacy a few steps further than Bitcoin ever could.
Monero is not a one-trick-pony either. Privacy aside, the Monero developers have been addressing some key issues that Bitcoin has found challenging.
Hard forks have proved dangerous in Bitcoin as they show major rifts in consensus and make protocol upgrades contentious. When it comes to upgrading the protocol, Monero has a policy of hard forking every 6 months. All users are given fair warning and are expected to upgrade their software, making upgrading a breeze.
Monero has a dynamic block size which can adapt to the network’s requirements, unlike Bitcoin’s hard capped limited block size. With dynamic block sizes, you also get dynamic fees. It takes an average of 2-minutes for the average Monero block to be mined, and for transactions to be confirmed – a clear advantage for retail like scenarios.
Miner centralization, due to the use of ASIC chips, is a problem that Bitcoin has not been able to avoid. Short of a contentious fork to change the Proof of Work algorithm, it looks like mining centralization is here to stay in Bitcoin. Monero uses mining algorithms that are ASIC resistant, meaning it can be mined using standard CPUs and GPUs, which keeps the mining decentralized.
How has the Market received Monero?
Monero saw incredible growth in 2020, where it was the best performing crypto for the year. It has a growing legion of fans. Many were originally Bitcoiners that became frustrated with Bitcoin’s inability to achieve consensus to add improvements. As data analysis firms started de-anonymizing Bitcoin users, privacy oriented coins became all the more appealing.
Eager to grow their community and see their currency gain use, Monero fans have organized and have even set up their own LocalBitcoins style exchange for Monero called LocalMonero.co where buyers can find local sellers for one-on-one trades.
The bottom line
Since its inception, Monero has forged ahead and carved its own path in cryptocurrency privacy innovation. When compared to Bitcoin, and despite early setbacks and engineering challenges, it clearly leads the way in terms of anonymity and untraceability. But it is not alone in the privacy niche. Hot on its heels are other privacy focused coins, like Dash, Zcash, PIVX and Verge among others.
But competition is good in the cryptocurrency space because a coin can adopt new and innovative techniques that other developers have found to be successful. It is more about keeping the protocol agile so it can implement improvements and upgrades. Monero devs have shown that this is something they consider to be very important.
Bitcoin has gone through its own upgrade recently with the activation of SegWit, providing the oldest blockchain with some much needed new capabilities. SegWit allows for second layer innovations to be built on top of Bitcoin’s protocol layer. The SegWit upgrade was hotly contested for a couple of years. This had the effect of stalling innovations like the Lightning Network for fast transactions, and Confidential Transactions which offer enhancements in user privacy.
With SegWit now activated, these innovations can be deployed. Any increased privacy and anonymity in Bitcoin transactions can erode some of the gains that privacy coins like Monero have made.
Other innovations are also in the pipeline, like MimbleWimbe and Atomic swaps, that can make cross-chain transactions possible, meaning you can send someone Monero, and they get the value in Bitcoin – or vice versa. Such developments can foster a sense of blockchains cooperating instead of directly competing to eat each other’s lunch. With that in mind, it is probably less about picking a winner between Monero and Bitcoin, and more about both coins growing independently and serving distinct use cases and markets.
Monero’s clear efforts in being distinctly different from Bitcoin are already paying off as it is clearly the leader in the privacy niche, and it is certainly here to stay.
LocalMonero: A P2P Network for Trading Local Currency for the Privacy-Focused Monero Cryptocurrency
In a Nutshell: Privacy and anonymity are important concerns for many people who use cryptocurrency. While mainstream coins like Bitcoin offer an alternative to traditional financial institutions, they are not truly anonymous because every transaction is easily viewable on the public blockchain ledger. Monero is a cryptocurrency that allays many of the privacy concerns surrounding Bitcoin. And LocalMonero provides a platform for users to trade local currency for Monero with its peer-to-peer network. The secure platform sidesteps centralized exchanges in favor of human interaction. LocalMonero is also helping to drive the adoption of Monero through education articles and the launch of its AgoraDesk service.
When the term cryptocurrency is tossed around, Bitcoin is likely what will come to mind for the average person. Yet, there is a wide range of other cryptocurrencies being mined, bought, sold, and traded in the decentralized blockchain ecosystem.
And while Bitcoin may be the most widely known crypto, a number of crypto enthusiasts don’t necessarily believe it is the best cryptocurrency out there. Some cryptocurrencies are capable of faster transactions than Bitcoin. Others are speculated to have more functionality in the long run. When it comes to identifying the preferred cryptocurrency, it really just depends on a user’s priorities.
Monero is a popular cryptocurrency for those who value privacy, security, and anonymity. Some folks may wonder why privacy is so important if the person conducting those transactions is not doing anything illegal. But consider this — would you want your personal checking account transactions available to be viewed by literally anyone who desired to? Me neither.
Beyond that, privacy is important for a number of practical reasons, including protecting crypto assets from hackers and thieves, private negotiations, and, in some countries, avoiding government censorship.
And, for those who find a privacy-focused coin like Monero appealing, they might be equally interested in LocalMonero. The company adds an extra layer of privacy on top of Monero by facilitating a P2P exchange system.
“We don’t distribute Monero — we just provide a platform for other people to trade Monero in a peer-to-peer manner,” said one of the Co-Founders of LocalMonero, who goes by the pseudonym, Alex.
How the Open-Source, Fungible, and Private Monero Differs from Other Cryptocurrencies
Alex explained that while most people know about Bitcoin, Monero is not nearly as well-known at this point. And while many people have called Monero a privacy coin, Alex said the term is a bit of a misnomer, as privacy should be an inherent component in digital currencies.
But that is not the case with Bitcoin because the Bitcoin blockchain runs on a public, transparent ledger that anyone can see. This is fine for some use cases, but other times, crypto users may prefer not to have all of their transactions publicly accessible.
And that’s one of the major differentiating factors of Monero.
“Monero is not the first iteration of a fully private ledger, but it’s certainly the best,” Alex said. “It’s the most developed, the most sophisticated, and the most supported.”
Monero offers more privacy features than do mainstream cryptocurrencies, such as Bitcoin.
He emphasized — for those who may be new to cryptocurrencies — the importance of understanding that if they transact with Bitcoin, it is not truly private, even if their real-life identity is not associated with their Bitcoin wallet or address.
“It’s still all public and traceable, and it’s forever recorded,” Alex said. “So, even if you’re confident in your ability to disassociate your real-life identity with your Bitcoin address, are you sure it can remain that way forever?”
He said that, with Monero, privacy can truly be achieved.
Another major component for a successful cryptocurrency is fungibility, Alex said.
“Fungibility is a concept in economics,” he said. “It means that one unit of currency is equal to every other unit of the same currency. For example, you know a $100 bill is equal in value to every other $100 bill. They’re all $100. You shouldn’t care which bill you’re holding.”
To further illustrate the example, he said one ounce of gold of a certain purity is always equal to another ounce of gold of the same purity.
But with certain cryptocurrencies, including Bitcoin, fungibility can be a concern.
“A Bitcoin that is freshly minted is more valuable than a Bitcoin that has exchanged a few hands already,” Alex said. “The reason why is because a particular Bitcoin may have a history in the criminal market. Maybe it has been used to fund illegal activities.”
So, even if a law-abiding citizen legally purchases and owns a Bitcoin, if that Bitcoin can be traced — through the public ledger — back to criminal activity, then the Bitcoin can become essentially worthless.
“You could be invested in Bitcoin and two years later, your Bitcoin gets added to a government blacklist and nobody will ever accept that Bitcoin, then you lost all your money, completely,” he said.
Again, because of the private and anonymous nature of Monero, the cryptocurrency maintains its fungibility.
The LocalMonero Platform is Based on Human Interaction, not Centralized Exchanges
“At LocalMonero, our goal is to establish a safe and easy-to-use person-to-person platform to allow anyone to trade their local currency for Monero, anywhere,” according to the company website.
This person-to-person transaction makes the already private Monero even more private.
LocalMonero users post advertisements to sell their Monero and specify their preferred method to receive payment, including cash, bank transfer, PayPal, gift cards, or other options. Interested buyers then reply to the advertisements.
“LocalMonero escrows the Monero from the user that is the Monero seller in a given trade and releases the Monero to the buyer when the seller confirms that they have received the payment from the buyer,” according to the website.
The company can also help mediate any disputes that may arise during transactions.
“On LocalMonero you are dealing with humans,” according to the website. “Unlike centralized cryptocurrency exchanges, you make a trade directly with another person. This makes the process lean and fast, as there is no corporate overhead.”
Alex said the preferred payment method of LocalMonero users varies from country to country. And, in some cases, it may be more about convenience than absolute privacy.
“Some methods obviously have a paper trail, like a bank transfer,” he said. “The bank transfer is, of course, recorded by the banking institutions. But if someone wants to send from their own Bank of America account to another person’s Bank of America account, it’s a very simple transfer they can do.”
This type of convenient transaction may be preferred over opening an account on a centralized exchange and going through various KYC and AML processes just to make one simple transaction, Alex said.
Driving Adoption Through Educational Resources and AgoraDesk, which Includes Bitcoin Trading
Alex said it’s extremely important to the LocalMonero team to help drive adoption of Monero and help it become more mainstream.
One tactic the platform has adopted to help raise awareness about Monero is simply to educate more people about the cryptocurrency.
“We’ve written a lot of guides and articles that we’ve placed on the website to make it easier for people to get into Monero,” Alex said. “We’ve also recently launched a newsletter that’s like a weekly report on what’s happening in the Monero space.”
AgoraDesk facilitates P2P trading for both Bitcoin and Monero.
LocalMonero has launched a new section on its website called Knowledge, where it will post a new article each week that highlights a particular aspect of Monero and how it compares to other cryptocurrencies.
The company has also added a service that incorporates Bitcoin trading, to help attract more users to the platform and expose them to Monero, Alex said.
“In October 2020, we launched AgoraDesk which expands our platform and adds Bitcoin,” he said. “Like it or not, Bitcoin is the mainstream cryptocurrency, so there are now two currencies available for peer-to-peer trading on AgoraDesk — Monero and Bitcoin.”
Alex said the idea behind this offering is that, by putting both cryptocurrencies on equal footing, the company can attract some people who are looking for services similar to LocalBitcoins, which now requires more stringent KYC verification measures than it did in the past.
“At AgoraDesk, our goal is to establish a safe and easy-to-use person-to-person platform to allow anyone to trade their local currency for cryptocurrency and to trade cryptocurrency option contracts, anywhere,” according to the AgoraDesk website.
Ultimately, LocalMonero takes the already secure Monero cryptocurrency and adds a layer of privacy to it that makes it more anonymous than perhaps most crypto coins available today.
Monero vs zcash vs dash: which is the most anonymous cryptocurrency?
Bitcoin has been praised for its improved security over traditional currencies. However, using bitcoin is definitely not the most private or anonymous way to carry out transactions. The creators of some altcoins have stepped up to attempt to provide a form of digital currency that offers more privacy and anonymity.
Dubbed ‘privacy coins,’ these altcoins are often associated with darknet markets and illegal activities, but there are plenty of legal reasons for wanting to maintain privacy. Whether you want to keep personal transactions private or you run a business and need to conceal transactions from prying eyes, anonymity is key.
With privacy coins becoming increasingly advanced, you have plenty of options. Monero, zcash, and dash are three of the most popular altcoins that offer superior anonymity to bitcoin. They each have their own pros and cons and there is debate about which is the most anonymous. In this post, we explore each of these altcoins and compare them to decide which offers the best option for those seeking more anonymity.
Anonymity of cryptocurrencies
Before we jump into the three altcoins, we’ll take a look at the meaning of anonymity in terms of cryptocurrencies. Since it’s the most widely known cryptocurrency, bitcoin serves as a good point of reference.
Bitcoin is lauded for providing improved security over fiat transactions. When we talk about security here, it essentially refers to the difficulty involved in someone stealing or copying coins. The improved security is due to the nature of blockchain technology. It would take a group of miners with at least 50% of the mining power to include a false transaction in a block.
Every block in the chain includes the hash of the last, which makes changing past blocks extremely difficult. So with each block that is added to the chain, every past transaction becomes increasingly secure. Even the latest block to be added to the chain would be difficult to tamper with and each one before it more so. Security has been improved upon with some altcoins but bitcoin is still considered solid from this standpoint.
Bitcoin lacks privacy and anonymity
On the other hand, it’s largely agreed upon that bitcoin isn’t all that private or anonymous. Every transaction, including the wallet addresses of the sender and recipient, amount, date, and time, is stored on a public ledger. It can be considered pseudonymous because names aren’t actually listed, but it would be fairly easy to trace most wallet addresses to their owner using clues like IP address and transaction history.
While it is possible to make bitcoin transactions more anonymous, it does require a fair amount of effort in the form of coin mixing. In the context of bitcoin, coin mixing is often referred to as coin tumbling or laundering. It involves mixing coins from multiple parties in order to break the connection between the sender and recipient. If done properly, it can make transactions virtually impossible to trace.
Bitcoin Blender is one popular service for mixing bitcoins.
To mix coins properly involves various steps including creating multiple fresh wallets with new burner email addresses. The process can be cumbersome and time-consuming, especially if you’re mixing on a regular basis.
For ongoing anonymity, it makes more sense to go with a cryptocurrency that provides an in-built option for anonymous transactions without the added fuss. Even with these, you likely still need to take additional precautions such as using an anonymizing browser like Tor.
Bitcoin isn’t fungible
One more problem with bitcoin we haven’t yet addressed is its lack of fungibility. When a coin is fungible, every unit is interchangeable and doesn’t have a particular history tied to it. Since every bitcoin is traceable (unless it has been mixed), some bitcoin could have a lower perceived value than others if it has been used in something illegal, for example, a theft, hack, or ransomware attack. This is known as ‘taint.’
Improvements made by the creators of some altcoins to make the cryptocurrency more anonymous also makes it fungible. This way, users don’t have to worry about tainted coins and subsequent loss of value or rejected transactions.
Why you might want anonymity
As mentioned earlier, privacy coins have been linked to criminal activity, from tax evasion to drug dealing, but there are plenty of legal reasons for wanting to keep transactions anonymous. You probably wouldn’t want the world to be able to view your bank statements and cryptocurrency transactions shouldn’t be any different.
A couple of specific cases in which you may want to go anonymous are when paying for a private medical procedure or service, such as cancer treatment or psychotherapy, or making an anonymous donation to charity.
There are also various general reasons you may want to maintain anonymity:
- Stop advertisers building a profile around your spending habits
- Keep your net worth under wraps
- Prevent malicious hackers and other cybercriminals accessing your information
- Simply prevent the world from seeing where you shop, eat, and vacation
And these are just on a personal level. The implications for businesses dealing with things like trade secrets or a private list of clients could be much broader.
Monero vs zcash vs dash
Now that we know what we’re looking for in terms of anonymity, let’s see what these three coins have to offer.
Dash is one of the older altcoins on this list, having been launched in 2020. It was originally named xcoin, then darkcoin, before becoming dash in 2020. It is known for its fast transactions speeds, a quick four seconds compared with bitcoin’s ten minutes. One might assume that’s where the name came from, but dash is simply short for ‘digital cash.’
Dash has other factors that differentiate it from the bitcoin network, including how decisions are made. Any changes to bitcoin require unanimous approval from members of the network. Dash instead uses a voting system which means that changes can be made quickly.
Another notable difference between this altcoin and bitcoin is the operation of the network. There are two main tiers, the miners and the ‘master nodes.’ The miners carry out similar functions to those in the bitcoin network. The master nodes are responsible for governance functions and for carrying out special transactions — InstantSend and PrivateSend.
InstantSend enables near-instantaneous transactions and is claimed to prevent double-spending, a potential problem with other cryptocurrencies. Regular block times are two and a half minutes whereas InstantSend transactions can be processed in under a second.
Dash is traded on various exchanges and is included in many cryptocurrency payment networks and debit cards. It can also be found in certain US ATMs and at post office branches in Austria. It’s the most widely adopted (mainstream) cryptocurrency of the three.
Dash privacy and anonymity
PrivateSend transactions are where dash gets its reputation for being one of the most anonymous altcoins available. This privacy initiative uses coin mixing to improve anonymity. As mentioned earlier, mixing bitcoin can be a bit of an inconvenience, especially if done regularly.
In the case of dash, when users take advantage of the PrivateSend function, the mixing is carried out for them and coins are deposited in new addresses. By the end of the process, the origin of the coins is obfuscated. This also makes the currency somewhat fungible, but only when PrivateSend is used.
PrivateSend can be initiated at the click of a button, but there are fees involved. (Source: Dash)The main questions here pertain to how reliable this service is and whether it will really help you remain anonymous. One of the main critiques is that you can still see the receiver of the coin. The whole network isn’t private, just the PrivateSend function. So if you send coins, you’re reliant on the recipient of the transaction using the PrivateSend feature if you want to break the connection. Basically, if anonymous transactions are connected to non-private ones, there’s potential they could be traced.
Monero was created in the same year as dash and origniated as a fork of bytecoin. There was some negative press surrounding bytecoin at the time, with critics dubbing it “shady.” This was mainly due to the fact that a large majority of coins were pre-mined and granted to an unknown group of creators and stakeholders.
Nonetheless, monero, which is based on the same CryptoNote protocol that bytecoin was, gained popularity fairly quickly, its market cap peaking (subject to the time of writing) at almost $7 billion at the beginning of 2020. In fact, it was the best performing cryptocurrency of 2020 in terms of market cap, although this has been attributed to its popular use in criminal activity.
The network is based on blockchain technology similar to that of bitcoin, with one of the main differences being that blocks are mined every two minutes. Although it has gained most of its fame from its privacy features, monero does address usability issues inherent in some networks. For example, instead of simply having a cap on block size, it issues penalties to prevent miners from trying to manipulate the system.
Monero is difficult to purchase with fiat currencies although it is traded for both EUR and USD on Kraken and for USD on Bitfinex. It can be found on multiple exchanges for purchase with other cryptocurrencies. Some merchants accept monero as a form of payment and it’s included in various coin payment platforms such as Binance and Evercoin. As mentioned, the place you’re most likely to see it accepted directly is within darknet marketplaces.
Monero privacy and anonymity
Confidential transactions were introduced to the monero network at the beginning of 2020 through the use of ring signatures as an optional part of the protocol. They became mandatory in September 2020.
A ring signature involves additional possible senders (mixins) for each transaction. This means that the actual sender could be one of two or more people. What’s more, transactions are broken up into separate amounts so that one transaction actually occurs as multiple, going to different ‘stealth addresses.’ This negates the possibility of someone tracing a sender or recipient based on personal details attached to their wallet address. However, critics have identified flaws in the system and claim that transactions can be traced.
A potential issue if you’re thinking about using monero is that it’s getting a bad reputation for increased popularity with criminals. It was reportedly the ransom currency of choice in the Wanna Cry ransomware attack of 2020 and has been a feature of other major attacks since. That being said, its widespread use in criminal activity is actually considered testament to its privacy and anonymity. Monero is fungible so tokens don’t lose their value if they’ve been used in shady transactions.
Bear in mind, similar negative press has been earned by bitcoin in past years. Plus, given the chance, a newer coin like zcash could be catapulted to notoriety within the criminal underground very soon. The point is, if something can be used for both good and bad, it likely will be.
Zcash is the youngest of these three privacy coins, having only been around since October 2020. Developed by a reputable team of scientists and cryptographers, it didn’t take long for this coin to join the wave of crypto success stories and reach a peak of more than $2.5 billion in market cap earlier this year.
It hasn’t exactly made its way into the mainstream just yet, but it can be exchanged for fiat currencies on a few exchanges including Kraken, Bitfinex, and CEX.io. It can be easily purchased with other cryptocurrencies on exchanges like Binance.
Zcash privacy and anonymity
Zcash claims to be more secure and private than bitcoin due to its “zero-knowledge” ledger. Instead of displaying the identities of senders and recipients along with amounts, the ledger only shows the time a transaction took place.
The network is based on zk-SNARKs, a form of cryptography that uses zero-knowledge proof. In the most basic terms, this means that transactions can be verified simply based only on true-false statements. Zcash was the first major cryptocurrency to use this protocol, although others including Ethereum have followed suit. Like dash and monero, zcash is fungible.
Overall, this cryptocurrency does seem to have the most promise when it comes to anonymity. Even privacy advocate Edward Snowden tweeted that:
“Zcash’s privacy tech makes it the most interesting Bitcoin alternative. Bitcoin is great, but “if it’s not private, it’s not safe.”
Zcash emphasizes in its FAQ section that there is more of a focus on privacy than anonymity per se. It mentions that while IP addresses aren’t protected, use of an anonymizing network like Tor can complement its privacy features.
In another FAQ answer, zcash alludes to the improved privacy it holds over dash PrivateSend transactions. While it doesn’t outright mention the other cryptocurrency, it compares a pool of 20 million senders to that of three (which happens to be the number involved in a dash transaction). Indeed, monero also appears to be hampered by a similar issue since its ring signatures contain a limited number of mixins. Zcash basically argues that a larger set size is better, which of course makes sense.
There has been a bit of skepticism regarding the strength of this altcoin’s underlying protocol, but without solid proof, it’s hard to determine if this is simple bias. There have been attempts to audit the system but even those are deemed to provide additional assurance rather than substantial evidence.
Dash vs monero vs zcash summary
All of these cryptocurrencies offer advantages over bitcoin when it comes to privacy and anonymity. So which one should you choose?
- Dash: This altcoin is more accessible and widely accepted (outside the darknet) than the others. But it only offers increased privacy and anonymity through its PrivateSend feature. This could be a more suitable option for those looking for something that is easy to spend and who need occasional anonymity.
- Monero: This coin is hampered by a bad reputation and accusations that transactions are traceable. Although, it has been in use for a relatively long period and has proven success in marketplaces (albeit some illegal ones).
- Zcash: This one provides increased privacy through its underlying protocol, meaning less traceability. If used properly, i.e. with an anonymizing browser, it appears to be the most anonymous option overall. But it doesn’t have experience on its side which may put some users off.
Your choice could depend on various factors, including your use case or even how much faith you have in the creators of each coin. It’s worth bearing in mind that the protocols and systems behind each coin are in constant development. As such, one that is missing the mark right now might be rolling out improvements very soon. Indeed, if you take a look at forums on the topic, you’ll find some ongoing debates about which offers the most privacy and anonymity.
Disclaimer: We do not condone the use of any fiat or cryptocurrency for the purposes of illegal activities. Additionally, the information in this article should not be interpreted as a recommendation to invest in cryptocurrencies. This is a risky and volatile market and anyone thinking about investing should complete their own due diligence beforehand.
Ensuring Bitcoin Fungibility in 2020 (And Beyond)
Ensuring Bitcoin Fungibility in 2020 (And Beyond)
David Vorick is a Bitcoin Core developer, former IBM software developer and the co-founder of decentralized cloud storage platform Sia.
In this CoinDesk 2020 in Review special feature, Vorick tells us why ensuring fungibility remains a top priority for bitcoin developers entering 2020, and how 2020 increased awareness of what he argues is a pivotal issue.
Fungibility, put simply, is the idea that every item in a set is worth exactly the same amount.
In bitcoin, fungibility means that all bitcoins have the same value, regardless of who owns them or what their history is – and fungibility is extremely important to the success of a decentralized network.
To understand why, we have to analyze how bitcoin’s current limited fungibility is creating real problems in the marketplace.
For example, it’s common for exchanges and merchants to discriminate between bitcoins based on the owner or their history. An example is that exchanges will attempt to block bitcoins that have been stolen, especially if the theft was well publicized.
Other points of discrimination can extend to include bitcoins associated with drugs, gambling and other societal vices. But it’s important to note, this can happen even in cases where the owner of those bitcoins hasn’t engaged in any such behavior.
In short, the problem can be summed up like this: bitcoins with clean history can be accepted everywhere, while coins with dirty history can only be accepted in places that aren’t performing strict background checks.
The problem is not that the merchants are rejecting bitcoins associated with unfavorable activities, the problem is the effect that it has on everyone else.
When performing a trade, dirty bitcoins are less valuable than clean coins. That means that everyone needs to know when they make a trade whether the bitcoins they will be receiving are dirty or clean, because that impacts whether they are getting a fair trade and whether they will be able to spend them or cash them out through the typical avenues.
The only way to know that your bitcoins are clean is to go to a centralized service and ask for a background check. Suddenly the value of your coins is being decided by a centralized party (something that many would argue runs directly against the core values of the bitcoin project).
Every platform accepting bitcoin could implement different policies for deciding which coins are clean or dirty. And exchanges in different legal jurisdictions (US, China, India, etc) are likely to have different policies.
The bitcoins worth the most money would then be the bitcoins accepted everywhere (which would only be a small subset of available bitcoins).
This means it’s not enough to just ask one exchange for a background check, you have to ask every major platform whether or not they think you have clean coins. And a platform doesn’t think that you have clean coins, their decision reduces the value of your holdings regardless of whether you actually use that platform – your coins cannot be traded with any of the platform’s users.
2020 has increasingly seen bitcoin fungibility come under attack.
Blockchain forensics startup Elliptic was able to raise $5m for the purposes of identifying illicit bitcoins, while exchanges like Coinbase have become increasingly strict about accepting coins with known fringe histories.
So fungibility has been damaged, though not yet enough that people feel like they need to consult blacklist services before accepting bitcoins.
That day is getting closer, though, and when it arrives it will be a massive blow to the whole bitcoin ecosystem – the need to consult a blacklist service is the need to ask permission to use bitcoin.
It will mean that bitcoin has become centralized.
Because any platform in any jurisdiction can damage fungibility by choosing to discriminate between coins, most fungibility improvements come down to privacy. The best way to protect fungibility is to ensure that there’s no way to tell the difference between two coins, regardless of the actual history of those coins.
2020 has seen a lot of momentum in this direction, with many of the improvements on track to become available to the general public in 2020.
Below is a list of the most exciting things happening with regards to fungibility.
Most transactions today in bitcoin go onto the permanent public ledger, available for anyone to scrutinize.
Lightning changes this equation by allowing strangers who have never met to transact without ever making a transaction on the ledger – instead doing everything off-chain through the Lightning Network.
The number of open-source Lightning implementations increased substantially in 2020, with the total number now somewhere between five and 10. This list includes implementations from Lightning, Blockstream and MIT.
Though no solution is yet ready for the masses, there has been major progress, and several implementations are promising basic releases in 2020.
Most of the existing code depends on Segregated Witness (SegWit) activation, however. Provided SegWit succeeds, 2020 should be the year that you are able to try out bitcoin’s Lightning Network for yourself.
A research paper for a new tumbling service was released in early 2020, TumbleBit is unlike existing tumbling services.
This was a big leap forward, as it provided tumbling service that could not scam its users, and also could not de-anonymize its users. In short, a major improvement to existing tumbling strategies.
More than just a paper, successful tumbling operations have been submitted over the live bitcoin network.
TumbleBit is not something that you can use today, however, but a command line release is expected in early 2020 and a user-friendly graphical release is expected mid year.
You can expect 2020 to be the first year where bitcoin can fully support large scale, anonymous, secure tumbling operations, and that’s exciting.
Long awaited, October 2020 finally saw the release of Zcash, a cryptocurrency in pursuit of the holy grail of fungibility.
zkSnarks, the technology behind Zcash, make it possible to achieve true fungibility, where every single coin looks identical to every other coin. The issue is that only recent computers are powerful enough to perform Zcash transactions, and there is uncertainty that the cryptography will hold up against further scrutiny.
Still, 2020 is likely to see improved performance, reduced computational requirements, and quite possibly improvements to the cryptographic protocols.
The progress that Zcash has made so far is a huge benefit to the cryptocurrency ecosystem.
Monero is a cryptocurrency with a core focus of fungibility, and its greatest strength is perhaps its philosophy, which holds that fungibility is strongest when everybody is forced to use private transactions.
Monero essentially acts as a giant on-chain coin mixer, with every single transaction participating in the mixing. This has a huge advantage over traditional mixers, as people tend to only mix their coins when they have something to hide (meaning that it’s often reasonable to assume that coins are dirty merely because they’ve been mixed).
With Monero, that assumption is invalid, because all transactions contain mixed coins. Due to this philosophy, and due to the large number of users, Monero is perhaps the most fungibile cryptocurrency in the ecosystem, outperforming even Zcash by this attribute.
2020 saw a huge rise in popularity for Monero (placing it as the most valuable privacy-focused cryptocurrency), and saw the creation of a new protocol, RingCT, which combines Monero’s traditional output mixing with the ability to disguise the value of the coins being spent.
A hard fork in early 2020 will introduce RingCT into Monero, further enhancing the privacy and fungibility of the cryptocurrency.
Elsewhere, 2020 has seen massive progress in the direction of privacy and fungibility.
JoinMarket, which has been under active development by multiple developers throughout 2020, is working to provide a decentralized tumbling service. Further, 2020 saw the introduction of the MimbleWimble protocol, which would allow historic transactions to be removed entirely from the blockchain.
Progress was also made on privacy-improving technologies like MAST and Schnorr signature aggregation.
It’s believed Schnorr signature aggregation will allow multiparty signatures to appear like single-party signatures, while MAST will allow highly complicated scripts to appear like less-complicated scripts.
Client-side validation is an off-chain scaling technique which improves both privacy and scalability, allowing both the blockchain history and the blockchain state to be pruned, exposing tiny pieces only to those who need to see them.
Each of these improvements is good for fungibility, and each is being actively researched or developed.
With this in mind, it’s safe to say that fungibility research is very active today, and is likely to produce exciting new technologies in 2020.
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The 6 Most Private Cryptocurrencies You Can Use Today
One of the most significant cryptocurrency talking points is anonymity. How anonymous does using a cryptocurrency make you? The answer lies in the tokens you use. Not all cryptocurrencies are equal, and some give more credence to privacy and anonymity than others.
Here are some of the most private cryptocurrencies you can use today.
1. Monero (XMR)
The first privacy orientated cryptocurrency for you to consider is Monero.
Monero uses several different techniques that drastically increase privacy. For instance, unlike most other Bitcoin-derivative cryptocurrencies, Monero uses the CryptoNight proof-of-work algorithm. Within that, Monero uses ring signatures, stealth addresses, and Ring Confidential Transactions to ensure that no one observing the Monero blockchain can discern where you send tokens or how much is resting in a single address.
The emphasis Monero puts on privacy, anonymity, and security means all manner of individuals use it, for all sorts of online activities. Monero is widely used on darknet markets, as the payment method for ransomware attacks, and as an easily minable but untraceable token in cryptojacking schemes.
Regardless, Monero remains one of the single-most private cryptocurrencies you can use. Check out Dan’s Monero Coin Study for more information.
2. Verge (XVG)
Most private cryptocurrencies rely on cryptographic techniques to secure the privacy of the user. Verge differs from the crowd in that it uses Tor and I2P to protect your identity.
“Verge uses multiple anonymity-centric networks such as TOR and I2P. The IP addresses of the users are fully obfuscated. The Core QT wallet has built-in TOR integration as well as SSL encryption which adds an extra level of security.”
Tor sends your communication across a distributed network of nodes and relays run by a global team of volunteers. I2P encrypts your data before sending it through an anonymous peer-to-peer distributed global network. Verge uses these technologies together to ensure that no one knows where a transaction originates.
To clarify, Verge does use an open ledger to verify transactions. However, there is no link between the transaction record to any IP addresses or other identifying information.
3. ZCash (ZEC)
ZCash uses something called “Zero-Knowledge Proofs” to protect your privacy, also referred to the zk-SNARK protocol. zk-SNARK stands for “zero-knowledge succinct non-interactive argument of knowledge.”
Zero-knowledge proofs, in this context, are a cryptographic technique that allows two users to transact without ever revealing their true identity or address. The ZCash blockchain doesn’t record send and receive addresses. Instead, ZCash shields those final addresses to obscure the genesis of any payments.
Also, ZCash uses an encrypted open ledger. While the blockchain ledger is open, only parties with the correct encryption key can view a given transaction. If only you and your recipient have keys to your transaction, then it remains out of view, protecting your privacy.
ZCash allows for “transparent transactions.” You can send a ZCash transparent transaction to wallets or exchanges that don’t support the privacy features of ZCash without exposing your identity.
4. Komodo (KMD)
Komodo is a hard fork of ZCash and the zk-SNARK protocol. As such, Komodo shares many similarities to the privacy-focused cryptocurrency, including zero-knowledge proofs.
However, Komodo has steadily built upon the ZCash foundation, making privacy-focused improvements such as purchasing new currencies via the Komodo blockchain and decentralized exchange while remaining anonymous, or severing the link between your coins and transactions before moving them on.
The Komodo platform is also one of the most innovative around, implementing and developing atomic swap technology, developing their BarterDEX decentralized exchange, as well as providing a dApp platform.
5. PIVX (PIVX)
PIVX stands for Private Instant Verified Transaction. It is another privacy-focused cryptocurrency that uses some features of zk-SNARKs (like ZCash and Komodo), albeit via the Zerocoin protocol developed by Prof. Matthew D. Green of John Hopkins University (in conjunction with graduate students Ian Miers and Christina Garman).
PIVX uses a decentralized and optionally anonymous proof of stake algorithm that lets you participate in the network while remaining private. (What is a proof of stake algorithm, anyway?) Also, the use of the Zerocoin protocol means users can stake their tokens anonymous, but also receive their stake-dividend anonymously. The PIVX wallet runs over Tor, for both staking and masternodes, further enhancing your privacy.
Another massive plus for the PIVX network is transaction speed. Aside from the outstanding security and privacy features, PIVX transactions rank amongst the fastest in the crypto-world. Another thing I like is that PIVX is eco-friendly, consuming a ridiculously small amount of energy compared to its direct competitors and especially Bitcoin.
Does PIVX sound good? Here’s how you stake PIVX to earn stake rewards, putting your crypto to work for you.
6. Bitcoin Private (BTCP)
Like Bitcoin, but with privacy enhancements. Sounds good, right?
In many ways, BTCP is the cryptocurrency many wish Bitcoin was. BTCP has an interesting origin story, too. Unique to the crypto-world, Bitcoin Private is the result of a “fork-merge” that saw a main Bitcoin blockchain fork instantly merge with privacy-orientated ZClassic (ZCL). ZClassic is itself a fork of ZCash, so the new cryptocurrency retains many of the same privacy features including the zk-SNARK protocol.
BTCP also increase the blocksize to enable a slightly faster network than standard Bitcoin.
What Is the Most Private Cryptocurrency?
For ease of use and ease of access, Monero still takes the privacy cryptocurrency crown. Other privacy-focused cryptocurrencies, like PIVX and Komodo, are making strong claims to that crown. It may make sense for you to use multiple cryptocurrencies that focus on privacy, rather than putting all of your privacy-crypto eggs in a single basket.
One of the best ways to get ahead of the curve with privacy-focused cryptocurrencies is by checking out ICOs before they hit the market. Here are the best ICO tracking sites for new and upcoming ICOs for you to consider!
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