At the heart of the crypto currency world, the aim is to be self-sovereign individuals who have full control over their finances or assets and true sovereignty can only be achieved by having a high level of privacy, so it is no surprise that the founder of first decentralized crypto currency - Bitcoin - Satoshi Nakamoto decided to remain anonymous for over a decade now.
Crypto currencies like Bitcoin, Ethereum and Bitcoin Cash have a level of anonymity because Bitcoin, Ethereum and Bitcoin Cash and other crypto currency addresses are not necessarily linked to a name or identity but it is not impossible to identify who a crypto currency address belongs to.
Anyone with an internet connection can view every single transaction made from a specific address and they can see how much money or an asset is stored there.
If you have ever shared your Bitcoin address with someone then they know who that address belongs to and they can actually view the addresses' transactions and its balance, and this is where the problem lies.
By having this information public, you can become a target. People could threaten you or blackmail you whether you have millions or not.
Privacy matters not only for security but for personal reasons as well. And this is where Privacy coins come in.
Privacy coin ensure privacy to a greater extent than your traditional crypto currency. In theory, private money is not new. It has been around for a while and this is known as cash.
Once you withdraw cash from an ATM, there is a record of what you do with the money. There is proof that you withdrew the cash, but after that, your dealings with it can be anonymous. You can actually buy what you need without your purchase being linked an identity. Also, if people pay you for your services in cash, only you yourself know how much cash you are holding.
Privacy coins are a digital version of cash' privacy feature.
Monero (XMR), ZCASH, ZCOIN and DASH are some of the most popular privacy coins in crypto market by market cap and they all work a little differently from one another.
Let's have an easy example for better understanding how these Privacy coins work:
Imagine a footstep on a sandy beach, Monero (XMR) essentially adds more footsteps, so the initial transaction trail is still there but it has added so many footprints that it has become impossible to distinguish between all of them. Monero (XMR) calls these footsteps decoy outputs.
Monero (XMR) also hides the addresses of the sender and the receiver by using what is called stealth addresses.
ZCOIN is a little to Monero (XMR). This project washes away the footsteps so that there are no signs of the initial transaction.
Zcash and Dash both have privacy as an option but privacy is not built in as a default feature the way it is Monero (XMR). With such high levels of anonymity, there are concerns that privacy coins can be banned in the future. But, if we agree that privacy coins really are just a digital version of cash, then we can assume that all the anti-money laundering procedures that are currently in place for cash, would just be used for privacy coins. But then again, privacy was just a by product of cash which at the time of its origin was the only way to transact money. Given the goal of privacy coins is to be just private, we have yet to see how governments take to them once crypto currency mass adoption finally kicks in.
Do privacy coins have a future?
Personally, I do believe that the features mentioned above and these Privacy coins will be one of most used and needed for everyone's security for their finances or assets. With the growth of popularity of crypto currencies in the world, the prone of unnecessary attacks from anonymous individual will also rise and because of that, we would be needing more high level of securities for the safety of our money or assets.
Final say
It is not impossible that these Privacy coins will be seen as the most important feature we can have in the future. We care about our security, and they are there and will be there, all we need is to see their importance and take a look of what they can offer for our finances.
