One of the biggest original appeals of Bitcoin was its anonymous nature. Designed by Sataoshi Nakamoto in the wake of the 2008 financial crisis, Bitcoin appealed to many as electronic, decentralized, untraceable payment system. But as Bitcoin grew, some users found out the hard way it wasn’t quite as secure as they wanted. Fortunately, a variety of alternative cryptocurrencies have sprung up to fill the niche of truly anonymous cryptocurrency. Monero, Dash, and ZCash are three of the leading contenders on the market.
Bitcoin: More Public Than you Think
Initially, many believed Bitcoin was completely anonymous. Although all transactions are logged on the blockchain, only addresses are recorded, not names. However, people found ways to isolate specific addresses and track down people’s identities. A paper published by a joint team of scientists from University of California San Diego and George Mason University, concluded Bitcoin wasn’t as discrete as users hoped.
“Clustering” methods involve grouping thousands of addresses together and manipulating known addresses to track transactions down. Bitcoin users can use “tumblers” like BitLaundry or BitMix, which take your coins and juggle them around, making it tough for someone to track them. The infamous The Silk Road employed a tumbler. However, tumblers can be sketchy, and a lot of users aren’t comfortable putting their coins in the hands of a third party. Fortunately, there are better options for true anonymity.
From A to ZCash
ZCash employs zero-knowledge proofs and shielded transactions to keep your money safe. Users can choose how private they want to make transactions, lending flexibility in case a transaction needs to be witnessed or audited. Encrypted memo fields allow for sending a text message to someone with a transaction. That’s handy if you need to send instructions to a business partner, or you just want to say hi to your grandma. Not all ZCash transactions are shielded because the process is memory-intense. However, the team is working to improve this, and the future is bright for ZCash.
The Fastest Currency on The Market
Dash doesn’t just have a claim to being one of the best anonymous cryptocurrencies; its devoted user base will tell you it’s on track to supersede Bitcoin as the best cryptocurrency, period. Dash prides itself on speedy transactions and prioritizing privacy. Dash is governed by its masternode setup, which reduces lag, although some have argued masternode owners have too much influence on the network. Dash is the largest of the three coins covered here by market cap, and with its option for instantaneous transactions, may be the one best suited to the real world.
Monero and Ring Signatures
Last but not least is Monero. On a normal blockchain, you can easily see which address sent what funds. On Monero’s blockchain, the system generates one-time “stealth addresses,” which are like disposable email addresses. Monero also employs what the team calls “a ring signature.” Similar to a tumbler, user Monero transactions are commingled and jumbled around with others, to make them difficult to trace. Similar to ZCash, Monero allows users to choose who can view transactions if needed.
Bitcoin may not be truly anonymous, but the second wave of cryptocurrencies is well on their way to solving that problem. Monero, ZCash, and Dash are all great options for users who value their privacy. Cryptocurrency is seeing novel new applications daily, but there will always be a desire for a truly anonymous payment system. And with multiple coins pushing each otherfor the title, users are the true winner in the competition.
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