Regular cryptocurrencies are not entirely anonymous because blockchain transactions are recorded on a public ledger that anyone can access.

While such a system has advantages, users’ privacy and anonymity are compromised, and it becomes easier to link a person’s identity to their address. This is where privacy coins come into play.

This subcategory of cryptocurrencies combines anonymity and decentralization. With privacy coins, investors can transfer funds without their private information becoming publicly known, as opposed to a public blockchain where all transaction data is visible to everyone.

The discretion provided by privacy coins has been abused in criminal contexts ranging from the dark web to wash trading and the exchange of nuclear secrets.

Despite widespread criticism, President Biden stated that privacy would be the top priority in any new regulation governing digital assets.

The US government may still impose restrictions on cryptocurrencies, but the President’s executive order indicates that privacy coins are here to stay.

This article explores the concept of “privacy coins” and highlights some of the top privacy coins of 2022.

What are Privacy Coins?

Privacy coins are a type of cryptocurrency that allows for anonymous and private blockchain transactions by concealing the source and destination of each transaction.

To circumvent chain analysis, these anonymous cryptocurrencies employ a variety of strategies, including masking a user’s actual wallet balance and address and combining numerous transactions.

It is quite easy to view someone’s crypto deposits and withdrawals because Bitcoin and other public blockchains allow anyone to view public addresses and transactions on their network.

However, privacy coins provide different levels of anonymity and untraceability. Untraceability makes it difficult for others to track a transaction’s path using tools such as blockchain analysis. Anonymity makes it hard to figure out who is behind a transaction.

How Privacy Coins Work

Privacy coins use different techniques to provide anonymity and untraceability. Monero (XMR), which was launched in 2014 as one of the first privacy coins, has since surpassed all the others in terms of market capitalization.

Monero partially accomplishes privacy through the use of stealth addresses; for each transaction, a unique wallet address is generated. This makes determining who is behind a transaction and tracking transactions nearly impossible.

Another technique Monero uses involves fragmenting the real transaction and using previous transactions as a ruse. For instance, if a user was sent 100 XMR, the transaction could be divided into two lots of 50 XMR each.

Tornado (TRON) takes a unique approach to ensuring anonymity. Even though users can deposit and withdraw tokens, they must use a “secret” or “note” to access these funds. Because these transactions are unrelated, no one knows which deposit corresponds to which withdrawal.

Shielded addresses are used in these TRON privacy coin transactions. Similarly to Monero, these addresses are created specifically for each transaction.

Strategies Employed by Privacy Coins

Most privacy coins use stealth addresses, ring signatures, CoinJoin, and zk-SNARKs to protect users’ privacy. This helps them achieve their objectives of anonymity and untraceability.

Stealth Addresses

Stealth addresses require a sender to create a new address for each transaction sent, so they can’t be linked to a recipient. The dual-key stealth address protocol (DKSAP) is a type of stealth address used by one of the most popular privacy coins, Monero (XMR).

CoinJoin

This is known as a “coin mixer” because it combines transactions from multiple users into a single transaction before distributing it to the appropriate recipients using new addresses.

Zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge)

This allows cryptocurrency owners to prove the legitimacy of a transaction without disclosing sensitive information, such as the parties involved or account balances.

Top 7 Privacy Coins in 2022

Dusk (DUSK)

Dusk is a private blockchain that aims to build a safe and private network for cryptocurrency investors and dealers. Dusk allows programmers to create decentralized apps that hide the user’s identity and all transactional data right from the start.

The three key objectives of Dusk are:

Increasing company confidentiality
Delivering a more complex method of decentralized finance
Addressing regulatory constraints in larger financial markets.

It’s important to note that Dusk will be the first blockchain to support natively running secretive smart contracts on a virtual machine called “Rusk,” a zero-knowledge virtual machine.

Monero (XMR)

Monero is an open-source cryptocurrency that was launched in 2014. It conceals the addresses, transaction information, and receipts of people who buy and use Monero by using zero-knowledge proofs, stealth addresses, and other methods.

Just like Bitcoin, it uses a Proof-of-Work consensus process to validate transactions. With its anonymous payment features, Monero has the potential to be used for illegal activities such as tax evasion, money laundering, and purchasing items on the dark web.

The US Internal Revenue Service and international security firms are searching for contractors to help investigate Monero transactions and develop tracing tools. Nonetheless, it is currently one of the best privacy coins on the market.

zCash (ZEC)

zCash operates on the same infrastructure as Bitcoin, but the primary difference between the two is that all zCash transactions are encrypted. Anyone who wants to view a user’s transaction details, address, and amount sent must first obtain permission from the user who initiated the transaction.

zCash actively hides important information about transactions between two parties from third parties. Unlike Monero, zCash gives users the option to control who can see their transactions. zCash refers to this as “selective discourse.”

Horizen

Horizen uses Zendoo technology to enable programmers or companies to build public or private blockchains. Shielded transactions, also called Z-Addresses, are entirely anonymous and private. T-Addresses are used to conduct Bitcoin-like transactions on the blockchain.

Verge

Verge conceals user identities using tried-and-true technologies such as The Onion Router (TOR) and the Invisible Internet Project (I2P) rather than cryptographic methods.

TOR conceals its users’ identities by routing their communications through a global network of volunteer-run tunnels and relays.

Oasis Network

The Oasis Network is a Layer 1 blockchain with a privacy-focused design created for open finance and a responsible data economy. This enables the Inter Blockchain Communication (IBC) Protocol from Oasis to communicate with the blockchain ecosystem enabled by Cosmos.

Rose (ROSE)

Rose is part of the Oasis Network. Owners of this privacy coin can bet on rewards, vote on how the network is run, and pay transaction fees.

Users on the Oasis Network can “tokenize” their data and create private smart contracts. People can now have far more control over their data and can even profit from it.

How to Buy Privacy Coins

Here are the steps to follow to buy privacy coins:

Choose your preferred exchange

Privacy coins can be purchased on a cryptocurrency exchange, depending on the user’s location. Monero may not be accepted as payment in some countries or listed on local cryptocurrency exchanges. If this is the case, the only places to buy Monero would be over-the-counter exchanges or decentralized exchanges like Uniswap.

Create a profile

The user must first create an account with the exchange they’ve chosen to be able to access its services. The user’s ID and contact information may be required for standard KYC procedure at this stage.

Deposit funds

The user must first deposit some funds into their exchange account to be used to buy privacy coins. This can be done via PayPal or a bank transfer using a debit or credit card.

Buy a privacy coin

The next step is to use the exchange’s search bar to find privacy coins. Once the preferred privacy coin has been selected, the user can then input the desired quantity of coins.

Confirm the transaction

Click the “Buy” button to complete the transaction. The coins will reflect in the user’s exchange wallet within a few seconds.

In Conclusion,

Anonymity is a highly desired feature in the virtual world, but it also has the potential to be used for criminal purposes.
Malicious actors frequently try to exploit cryptocurrency platforms and use anonymity services to cover up their tracks.
Because of several cases of fraud and theft involving anonymity services, regulators and law enforcement are more likely to suspect individuals who conduct large transactions using these services.
Because many people use Bitcoin to conceal their identities, law enforcement agencies constantly target and monitor transactions. They have become quite adept at tracking Bitcoin transactions, encouraging users to migrate to more private cryptocurrencies like those discussed in this article.

Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.

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