Due to the possibility of disclosure of personal data, developers began to create anonymous altcoins. Using anonymous altcoins as a means of payment is a good way to ensure the secrecy of financial transactions.
Each of these “altos” has its own system for conducting transactions, as well as methods that provide maximum secrecy of actions. Today there are over ten anonymous altcoins.
Let’s take a closer look at the top five anonymous cryptocurrencies.
1. Monero (Monero, XMR)
Monero is the most secure cryptocurrency created on the basis of the CryptoNote protocol in 2014. When using it, it is impossible to track the most important parameters of the transaction:
the sender;
the recipient;
the amount of the operation.
During an altcoin transaction, a secret Stealth address is created, to which the sender’s funds are received, and then they go to the recipient from it. In addition, ring signatures are used, which “mix” all transactions with each other. That is, a set of senders and recipients is created for each transaction.
The disadvantage of Monero is the increased attention from the authorities and financial regulators. Because it can be used for criminal purposes, due to the high level of confidentiality.
Today, Monero is considered a cryptocurrency that provides users with the maximum level of anonymity.
2. Zikash (Zcash, ZEC)
Zcash is a cryptocurrency created using the Zerocoin and zk-SNARK protocols in 2016. Two types of transactions are possible on the service:
Anonymous – using a z-address;
Open – using the t-address.
Moreover, open transactions account for more than 90%, that is, this currency is more often used as a transparent, freely available currency.
To make an anonymous transfer, you need to perform the following actions:
The sender switches to anonymous mode, that is, the transaction process is carried out from an encrypted z-address;
The sender transfers the amount of money to the blockchain. At the same time, the amount of the amount is also classified: only the time of the transaction is known;
The recipient applies a review key that protects the sent cash payment. The key helps to track and decrypt the transaction, after which the recipient gets access to the amount of money.
The disadvantage of Zcash is the high level of fees for conducting an anonymous transaction.
3. Dash (Dash, DASH)
Dash is a cryptocurrency that belongs to the first anonymous coins. Developed using the Private Send system in 2014.
Transactions occur in several levels using masternodes, which are the leading nodes.
👉 The transfer of funds is carried out as follows:
Senders turn to masternodes with a request for an anonymous transfer;
Coins from different senders sent to the masternode are divided into many constituent elements and mixed together;
Sending money to the recipient.
Coins can be shuffled up to eight times, which makes it impossible to track the true participants of the operation.
A significant drawback of Dash is the presence of masternodes in the translation process. Any operator who checks the security level of a transaction for a fee can be in place of the masternode. This means that he has access to information about who the sender and recipient are. Which casts doubt on the anonymity of the entire process.
4. Komodo (Komodo, KMD)
Komodo is an anonymous cryptocurrency that combines the features of Bitcoin and ZCash. It was created based on the dPoW algorithm in 2016.
As in Zcash, Komodo uses a zero-value proof, and there are also two options for conducting transactions:
open ones that are freely available;
anonymous, where the participants and the amount of transactions are hidden.
The disadvantage of Komodo is the high cost of mining.
5. Verge (Verge, XVG)
Verge is a cryptocurrency that works using the Tor and I2P networks. It was developed in 2014 under the name “Dogecoin Dark”, and in 2016 it was renamed “Verge”.
Using the Wraith protocol, two types of transactions are possible:
public;
anonymous (users’ IP addresses are hidden).
If users want to conduct anonymous transactions, they use stealth addresses, as well as for hidden transactions of the Monero cryptocurrency.
Disadvantages of Verge:
the ability to trace the sender;
low level of protection, as well as a large number of errors in the code base, compared to Monero and Bitcoin.
The Verge cryptocurrency has been attacked quite often.
What are the prospects for anonymous cryptocurrencies?
Cryptocurrencies open up huge opportunities for conducting monetary transactions around the world. In turn, anonymous cryptocurrencies allow transactions to be carried out covertly, without attracting unnecessary attention to the participants of the transaction, as well as to the size of the transactions themselves.
This gives users the opportunity to:
Circumvent state laws;
avoid paying taxes;
to make illegal purchases and transactions.
On the one hand, anonymous cryptocurrencies give financial freedom and independence to their owners. But on the other hand, they are pushing government agencies to seriously think about the potential danger of using this kind of untraceable transactions.
Therefore, every year financial regulators and heads of state introduce new measures to control cash flows in the cryptocurrency market.
Advantages and disadvantages
Anonymous cryptocurrencies have both positive and negative sides. Below is a list of the main ones.
Positive:
The ability to hide your own name and the history of all transactions;
Secrecy of transactions: neither the amounts nor the participants of the transaction are known;
Transfer funds anywhere in the world;
Minuses:
Maximum transaction speed;
Storage of large amounts.
Anonymous cryptocurrencies attract a lot of attention from regulators;
The ability to finance illegal activities completely anonymously;
They are often used as objects of illegal mining, because they reduce the risks of being caught;
High transaction fees due to the use of more powerful systems;
Some anonymous altcoins can be tracked to identify the participants in the transaction.
Thus, all the benefits apply to wallet owners. They are the ones who get all the privileges, not the state or financial regulators.
Conclusion and conclusions
Unfortunately, bitcoin is not a completely anonymous cryptocurrency. All transactions are openly reflected in the blockchain registry in real time. And anyone can find out:
the wallet numbers of the users who made the transaction, as well as the size of the transaction;
the history of all transactions of a particular wallet, its final balance, as well as the total amount of funds received and sent for any period.
If you want to ensure complete anonymity in the process of making transactions, then anonymous cryptocurrencies are the most reliable way.
Such altcoins will help to achieve the maximum level of secrecy, as well as hide the following parameters:
the numbers of the sender’s and recipient’s wallets;
the size of the completed transactions.
Of course, the use of funds that cannot be tracked is alarming to the state and financial regulators.