Are there cryptocurrencies offering whole anonymity?
The narrative coined around cryptocurrencies during the launch of Bitcoin was that crypto is anonymous. This misguided school of thought must have stemmed from the fact that cryptocurrencies allow users to send, receive, and generally transfer value without providing personal information.
The norm in the banking services sector and the many online payment methods require that you provide at least a name and an address. Any alternative that makes these demands any lighter is automatically welcome; the reason crypto caught on fast!
Most Crypto Coins Are Pseudonymous
With time, processes revealed that transactions in the cryptocurrency space were only pseudonymous. A cryptocurrency transaction is recorded on a public ledger that can be accessed by anyone at any time. And, though the transaction does not contain personal information, it is possible to tie a transaction to the user with just a little poking.
Wholly Anonymous Cryptocurrencies
Further innovations and modifications on products and services that already existed created possibilities for wholly anonymous altcoins. So, despite most cryptocurrencies being only pseudonymous, there are a few that are now truly anonymous. Such coins include Monero, Dash, ZCash, Verge, and PIVX.
Here is a deeper look at each of these.
Monero guarantees its users complete anonymity by keeping the transaction information wholly anonymous within the blockchain. The cryptocurrency is by default cryptographically private. The privacy is enabled using the coin’s three key features that are ring confidential transactions, stealth addresses and ring signatures.
This Monero feature, also called RingCT, is a privacy attribute incorporated into the protocol to obscure the value of funds that a user is transferring. Before developing the feature, the Monero platform applied a technique that split the transaction amount into smaller bits before completing a transaction.
A stealth address refers to a cryptocurrency protocol’s security feature that addresses the privacy of the recipient of a transaction. This attribute is a privacy-heightening technology that requires the sender to make a random, one-time cryptocurrency address on the recipient’s behalf. The reasoning behind the process is to create a series of payments from the same payer to the same payee but that cannot be linked to either the payer nor the payee.
A ring signature is a sign or impression created by a group member where each member has a secret key. The purpose is to create anonymity because it is impossible to determine the member of the group that created the signature. Essentially, the feature allows anyone within the network to transfer value anonymously.
Combined, these three characteristics make Monero the most anonymous cryptocurrency.
Dash, originally known as Darkcoin, was launched in 2014 as a fork of Bitcoin. It came into the market with the aim of offering whole user privacy and anonymity, as such, addressing the major privacy flaws of Bitcoin as they were.
The cryptocurrency applies PrivateSend, a CoinJoin anonymization technique that pulls together every cryptocurrency transaction undertaken in the network at a particular time. The end result is one giant transaction from whence it is not possible to know who sent crypto to who.
In addition, Dash uses X11, an algorithm modified from the Proof of Stake. X11 combines 11 hash functions into a single algorithm, hence the name. When a user submits value, the first function acts to produce a hash, which is submitted to the next function to produce another hash. The confusion created as a result helps boost the users’ privacy.
Together, X11 and CoinJoin help ensure anonymity while also cutting down on the durations of transaction within the Dash network.
If you were to compare the web in its current state and its form a while back, then you end up with an analogy that compares ZCash to Bitcoin. The crypto was developed to address the privacy flaws that Bitcoin exhibit.
According to the founder Zooko Wilcox, ZCash is the blockchain platform and crypto coin that enables users to undertake private transactions while keeping their data private as well, all within a public blockchain.
It addresses the flaws of Bitcoin by enabling users to complete semi-transparent transactions. Simply put, this statement means that ZCash implements transactions a lot like Bitcoin does, only it tones down on the radical transparency of the latter by revealing user data selectively.
While most cryptocurrencies rely on cryptography to provide privacy, Verge protects its users’ identity using the combined abilities of TOR or the Onion Router and the Invisible Internet Project or I2P.
The process is two-part; I2P encrypts the user data, which it then sends to the TOR. TOR network obscures transactions and hides identity by bouncing user communications on top of a distributed network of tunnels and relays that are installed by volunteers across the globe.
When you use Verge, you end up with IP addresses that are completely obfuscated and wholly untraceable transactions.
Verge’s privacy features are so popular that one of the famous adult sites has adopted and approved it as a preferred payment method.
According to the legend on the coin’s official website, PIVX, or Private, Instant, and Verified Transaction is an open-source, decentralized blockchain-based cryptocurrency licensed by MIT with the aim of achieving fungibility, privacy of transactions, network scalability, community governance, and real-world utilization. In achieving all these, the developers of PIVX hope it becomes the most technically advanced and globally accepted cryptocurrency.
The coin employs an advanced privacy feature that was first launched as the Zerocoin protocol.
These five coins are your best bet when shopping for an anonymous cryptocurrency.
Using the Pseudonymous Cryptocurrencies Anonymously
While cryptocurrencies are going mainstream, only a few of them offer complete anonymity. This is despite the obvious flaws noticed in Bitcoin and the pioneer altcoins. Lack of a diverse selection of anonymous coins means that using the pseudonymous coins with heightened precaution remains a reasonable option.
Among the many measures in place include using a new cryptocurrency address every time you complete a transaction. In addition, you can prefer to undertake your transactions over the TOR network or ensure you cloud your IP address when transacting in the public. For the latter precaution, the combo of VPN and VPS works well.
The most effective method of attaining complete privacy when using pseudonymous coins, however, remains cryptocurrency mixing. There are many approaches to this strategy. The most common being sending your coins to a service provider who then mixes the coins in a huge pool of other cryptocurrencies, and then channels the clean coins into new and discreet cryptocurrency addresses that the user has set up.
Privacy is and will for a long time to come remain important when transacting online. When using cryptocurrencies, you can choose any of the available anonymous coins. Or, you can go the pseudonymous coins’ way but ensure you double that with increased caution.