The pseudonymous nature of Bitcoin addresses enables transactions without identifying personal information, but that doesn’t make it a completely anonymous cryptocurrency. Because the entire transaction history lives in public view on a blockchain, it can be possible for investigators and firms to piece together people's identities based on the movement of coins and details held within addresses.
That’s where so-called privacy coins come in. Cryptocurrencies like Monero (XMR), Zcash (ZEC), and Dash (DASH) use varying cryptographic techniques to obscure details around transactions and better shield users from prying eyes.
Advocates of privacy coins argue that they can be used for perfectly legal purposes by anyone eager to avoid potential oversight by external parties, enabling the user to control what information they choose to share with companies and organizations. Furthermore, privacy coins bring the level of transactional privacy already enjoyed by users of physical cash to the digital economy.
However, the flip side is that privacy coins have become popular for ransomware payments, criminal transactions on the dark web, and money laundering. As a result, they've attracted significant attention from law enforcement and regulators. Here’s a look at how privacy coins work and the most popular coins today.How do privacy coins work?
Varying privacy coins work in different ways, but the end goal is the same: they’re all designed to hide details like addresses and amounts transacted, so that it is extremely difficult if not impossible to piece together which parties participated in a transaction.
Some privacy coins create a new, single...