If you’re looking to take advantage of cryptocurrency’s anonymity, there are a number of options on the market. In this article, we’ll be exploring the best privacy coins in 2021, while also clearing up the difference between pseudonymous and anonymous transactions - a common misconception in the industry.
Pseudonymous vs Anonymous Crypto Transactions
When Satoshi Nakamoto launched Bitcoin in 2009, the revolutionary payment system was able to allow people from around the world to transfer funds without having to go through a bank or any government institution. This was a first at the time, and the digital currency garnered a lot of attention for allowing anonymous transactions.
Due to the nature of blockchain technology, this isn’t entirely true. More accurately, Bitcoin transactions are pseudonymous. Let us explain.
Blockchain technology allows for a transparent, immutable public ledger that is maintained by a large number of nodes (computers) around the world. Transactions are executed and added to a block, which is then chronologically added to the blockchain. No one can go back and edit these transactions, and anyone can view them.
As cryptocurrency does not require any personal information to set up a wallet, all transactions are listed as [sender’s wallet address] sent x amount to [recipient’s wallet address]. On the Bitcoin blockchain, the wallet addresses are 26 character alphanumeric codes, so a transaction will look something like this:
Now, while wallet addresses do not hold or are not linked to any personal information (like name, country, address, etc) you cannot see who the person behind the wallet address is. However, should you know the wallet address of someone, you can pull up a history of all the transactions they’ve ever made on that blockchain as well as their current balance. This makes the network pseudonymous.
Networks that provide anonymous transactions obscure the origin and destination of the funds and often mix several transactions together when recording the “transaction”. Each network differs slightly in how they implement this process, however, they all achieve the desired result.
Best Privacy Coins in 2021
If you’re looking to stay under the radar and engage in entirely anonymous transactions, you’re in luck. Over the years, a number of privacy-focused coins have entered the market, and provide a means for someone to remain “off the chain”. Below we’ve outlined the best privacy coins in 2021.
1. Zcash (ZEC)
Launched in 2016, Zcash is a well-known privacy coin in the crypto space. The project describes itself as “if Bitcoin is like http for money, Zcash is https." The network uses a cryptographic tool called zk-SNARK Zero-Knowledge Proof which offers users the option to conceal their wallet address and obscure the transaction amount.
2. Dash (DASH)
Also offering users the choice between anonymous or standard transactions, Dash charges a slightly higher fee for private transactions. Using a mixing protocol and an innovative decentralized network of master nodes, Dash is able to obscure the origin of your funds.
3. Monero (XMR)
The Monero network uses technology called ring signatures and stealth wallet addresses to execute their anonymous transactions. When recorded on the blockchain, the transactions hide the sender and receivers’ wallet addresses as well as the transaction amount. The project was launched in 2014 and is the “biggest” privacy coin based on market cap.
4. Verge (XVG)
Verge uses a different set of technology to provide private transactions to their uses, namely The Onion Router (TOR) and the Invisible Internet Project (I2P). The users’ identity is hidden through the TOR element, where users’ transactions are ricocheted across a distributed network of tunnels and relays while the I2P technology encrypts the data before sending the information to the network. Location and IP addresses are hidden in the process.
5. Beam (BEAM)
Beam provides a security-focused platform that facilitates anonymous transactions and gives users complete control over their privacy. No addresses are stored on the blockchain, and due to this (and the compact nature of the blocks) the network has a large potential for scalability.
No matter the reason for seeking out privacy coins, ensure that you are doing so with legal intentions. Due to the nature of private transactions, the niche space has garnered a lot of attention from people engaging in criminal activities. If you’re more interested in investing in a privacy coin than engaging in private transactions, you can buy Zcash and Dash with your credit or debit card (or several other convenient payment options) directly through Oobit.