Best Privacy coins are a term used for decentralized cryptocurrencies that aid anonymous transactions on the blockchain framework. It screens the origin and destination of the private transactions.
These are the result of a sincere urge to improve the anonymity of the transactions on the blockchain.
The concept of privacy coin is based on the two distinct yet crucial aspects of anonymity and untraceability. So, we can say that it conceals the identity behind the transactions.
It also makes it virtually difficult for third parties to misuse the blockchain analysis and other such functionality. As a result, the trail of transactions cannot be followed by any unauthorized party.
What is Best Privacy Coins
Despite the notorious reputation, privacy coins have managed to grab the neck of the cryptography. Seven prominent privacy coins have staked their marks as the cryptocurrency market namely:
- Z Cash
- Grin, etc.
Though there exist several other private coins, these remain the global choice of the majority of crypto enthusiasts. The wider acceptance of them depends on their policies, framework, and strategy framework.
Strategies adopted by the Best Privacy Coins
The monero privacy coin considers different strategies to ensure anonymity and untraceability in the blockchain cycle.
Amongst several strategy frameworks there stand few prominent ones such as Ring Signatures, CoinJoin, Stealth Addresses, and zk-SNARKs. So, let’s understand these prominent strategies now.
- Ring Signature: It is a form of digital signature that can be used by any member of the respective group, provided they have keys. Thus, ring signature allows endorsement of signature to a specific set of people.
- The ring signature ensures powerful security as it is not feasible to determine which of the group member used the key to produce signatures. Additionally, it allows any set of users to be used as a signing set without much setup formalities.
- Coin Join: It is generally considered a coin mixer as it facilitates the merging of transactions from diversified users and directs them into single transactions. This trustless method makes it difficult for third parties to trace and track the sender(s) and the recipient(s).
- Stealth Addresses: This functionality stays prominent as its emphasis is on generating a new address for every transaction. As a result, it avoids the interaction of transactions with an unauthorized receiver. Monero, the famous privacy coin uses the dual-key stealth address protocol (DKSAP).
- Zk-SNARKs: This is referred to as Zero-knowledge Succinct Non- Interactive Argument of Knowledge. This allows crypto holders to furnish the validity of the transactions without the requirement of critical identification information.
The popularity of Privacy Coins
They have gone through several ebbs and flow over the years yet they remain the popular cryptocurrency. But what makes them popular amongst crypto enthusiasts? Let’s figure it out.
- Anonymity: The crypto investors often prefer to conceal their transaction history and make them untraceable. The on-chain analysis feature of them provides the users with this perk. Thus, investors feel comfortable trading through privacy coins.
- Speculative demand: The periodic updates and guidelines from governments regarding cryptocurrency across the globe give rise to speculative demand. Thus, it always stays as the hot topic and gains popularity.
- Tax Evasion: With the intention of the global financial regulatory body the cryptocurrencies other than these may be subjected to tax. Owing to this decisive flow the crypto enthusiasts would focus on privacy coins to evade the tax liability.
- Darknet Markets: Though, darknet markets are not the ethical and right reason for the popularity of privacy coins. Yet we cannot deny the fact that they are hugely impacted by the existence of these markets.
Are the Best Privacy Coins Legal?
The legality of them is based on the individual jurisdictions of the country or the states. Some countries promote the use of privacy coins to create room for financial privacy whereas others completely ban it to avoid money laundering.
For instance, South Africa has banned the trading and investing in private coins whereas the US government is developing ways to remove the existing cloak on the private coin’s network to promote its use.
Alongside, the many well-known people such as Elon Musk, Edward Snowden, and Naval Rani Kant are supporting the privacy-focused applications.
The debate to ban or legalize the privacy coin is still on fire, the guidance of the FATF (Financial Action Task Force) and other such bodies is still awaited to conclude the matter.