Privacy Coins: How Privacy Coins Could Take Over the Digital Currency World
John McAfee, the inventor of the first commercially available anti-virus software, went on Twitter last month to say “privacy coins will have the greatest future.”
Many experts in the field echo this sentiment, citing an increased need for privacy. Some predict it will be a big trend in 2018.
Similarly, Mark Zuckerberg, founder of Facebook, recently posted that, “with the rise of a small number of big tech companies — and governments using technology to watch their citizens — many people now believe technology only centralizes power rather than decentralizes it.” He then went on to state encryption and digital currencies help put power back it people’s hands.
Critics of privacy coins often protest when they hear about anonymous transactions. They fear that this will lead to an increase in criminality, even going as far to say it poses a threat to public safety.
These ominous warnings, though, may not fully see the bigger picture. Privacy is an essential need for most legitimate businesses.
The need for privacy in business sectors
Currencies like Bitcoin use a ledger which is public. It is semi-anonymous, not fully anonymous. Although transactions are visible on the ledger, the owner of an address is private. That being said, anyone who has your public address could look up all transactions and their associated balances.
In order to receive payments, businesses will have to post a public address. Anyone could take that public address and easily check the ledger to see the transactions going in and out of that address.
There are aspects of a business, though, that require additional privacy or security, like where supplies sources or supplier pay rates. Having public transactions would cause most businesses to lose their competitive edge. This is just one example of the many reasons a business would not want its transactions public.
If payments are made with privacy coins, these vulnerabilities are no longer an issue.
Privacy is a concern for consumers as well
In the near future, your work may choose to pay you in a digital currency. If the currency is not private, then anyone who digs deep enough could see what wage you earn.
Similarly, prying eyes could see all of your transactions, like how much you pay for your mortgage. Even trivial things like how much you spend on lattes becomes public, raising concerns for some consumers.
What are the major privacy coins?
Digital currencies and the blockchain were invented by cryptographers, so obviously the field is going to have dedicated privacy coins.
Monero is one of the first on everyone’s mind when they think of privacy. The coin is cryptographically private by default. It uses a number of privacy features like stealth addresses to protect consumers. This technology creates a new random address each time a transaction occurs. The transaction is then routed through the random address, making it next to impossible to track.
Aeon is a new privacy coin, which is based on Monero. Unlike Monero, Aeon is mobile-friendly and has improved scalability. It also has an option to send non-private transactions, which are faster and have lower fees.
Zcash, which gets the Z in its name from its underlying technology zk-SNARKS, is an advanced form of cryptography. zk-SNARKS use something called ‘zero-knowledge proofs’ to confirm transactions. Mathematically speaking, this is a way to verify the correctness of a computation without having to execute it. This is basically just a complex way of saying “no one will know how much you paid for that latte.”
ZenCash is based on the code of Zcash. Which is very similar to Zcash but has some interesting upgrades, like private messaging. This feature allows you to send encrypted messages like “here is your payment for zee microfilm.”
While not a privacy coin yet, Ethereum plans to borrow zk-SNARK technology from Zcash and implement it in the near future. This integration will give users the ability to choose between standard or private transactions, the latter having higher fees.
The future is bulletproof
One recent announcement to enter the digital currency sphere is a technology called ‘bulletproofs.’
This new privacy layer simply conceals the amount sent in a transaction and does not hide the sender or receivers address. This will be a great step forward for those wanting privacy, without complete anonymity.
Originally designed for Bitcoin, there are plans to implement bulletproofs into Litecoin and Monero, with many other coins expected to follow.
So anyone snooping into your life could see that you receive funds from your work, but they would not be able to see what your wage is. More importantly, they will never know how much you spent on lattes.
The mainstream adoption of digital currency is coming whether they like it or not. As we integrate the technology into our lives it is important to be mindful of your privacy.
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