Which cryptocurrencies are truly anonymous?
Anonymous cryptocurrencies
There is a growing trend for anonymity in the world. The number of users of the anonymous messengers Telegram and Signal is breaking records. The anonymous browser Brave is becoming more and more popular and is already firmly established in the market. Even such mastodons like Chrome, Opera, Safari have added advanced private modes.
We have anonymous messengers, we have anonymous browsers, but what about anonymous money?
There is a common perception that any cryptocurrency is anonymous because you are not required to disclose your identity. However, the ability to make transactions without proof of identity does not make cryptocurrency anonymous.
We have anonymous messengers, we have anonymous browsers, but what about anonymous money?
There is a common perception that any cryptocurrency is anonymous because you are not required to disclose your identity. However, the ability to make transactions without proof of identity does not make cryptocurrency anonymous.
The measure of anonymity is the availability of information about your transactions to other participants in the network. Consider the first cryptocurrency - Bitcoin. Within this blockchain, every member of the network has access to all of the information about the transactions made. This means that if you have the means, you can analyze the chain and find out who transferred to whom, when, and how much. It is hard to think of a more transparent currency than Bitcoin. As a result, the term "pseudo-anonymity" has emerged.
In turn, anonymous cryptocurrencies are blockchains where no one can know the address of the sender, the recipient, the exact time and amount of the transaction.
In turn, anonymous cryptocurrencies are blockchains where no one can know the address of the sender, the recipient, the exact time and amount of the transaction.
Such advantages are achieved mainly due to the following mechanisms:
- Address hidingA new address is created for each transaction.
- CoinJoinMixes up transactions. Several transactions are combined into one, and then distributed among the recipients using the new addresses.
- Zk-SNARKthe cryptocurrency holder proves the validity of the transaction without disclosing compromising information such as the parties to the transaction and account balance.
Pros of anonymity
Obviously - anonymity. No one will ever know to whom and how much money you transferred. The second advantage is confidentiality and protection of personal data.
Well and a bonus, which applies to any crypto, is the lack of a set of necessary documents?
Well and a bonus, which applies to any crypto, is the lack of a set of necessary documents?
Cons of anonymous cryptocurrencies
There is a downside as well. First, any anonymous blockchain requires higher fees, which means using it on a regular basis is quite costly. Second, anonymous transfers raise scrutiny from any regulator.
What are you doing that makes you willing to pay more and wait longer?
What are you doing that makes you willing to pay more and wait longer?
If you are worried about the legitimacy of your digital money or have already made anonymous transactions, contact the appropriate services that will help trace the digital footprint of your funds and bring it back into the legal field.
You can use the bitok.org platform.
You can use the bitok.org platform.
Top 3 anonymous cryptocurrencies, by capitalization
- 1Monero (XMR)The most popular anonymous cryptocurrency. The project has been in operation since 2014. Unlike other anonymous coins, where private transactions are optional, Monero is anonymous by default.
- 2Dash (DASH)Another credible project. Initially, the goal of the project was to create a BTC fork, with high throughput. Today, this blockchain is not completely anonymous, but only offers an additional "Private send" option.
- 3Zcash (ZEC)Project that has existed since 2016. The confidentiality of the Zcash blockchain is ensured by zk-SNARK, a zero-knowledge proof protocol. It allows users to make transactions without disclosing their addresses and amounts. Only the confirmation that the transaction took place and the time of its execution remain in the public domain.
How about the law?
The legality of anonymous cryptocurrency is set by a local regulator. Somewhere, like South Korea, it is banned. In China, all types of cryptocurrency are banned. Japan, on the other hand, has legalized Stablecoins, but anonymous coins are banned. In most countries, there is no prohibition, as well as recognition, respectively, cryptocurrency is in the gray zone.
Late last year, the U.S. Financial Crimes Enforcement Network (FinCEN) published regulatory proposals to regulate anonymous cryptocurrencies. FinCen wants banks, cryptocurrency exchanges and other financial enterprises to collect identifying information about any person who wants to transfer $3,000 or more from any crypto wallet. That said, the transfer cannot be made until the verification is complete.
Recently, large international, authorized exchanges have been actively delisting anonymous coins. It is reasonable, no one wants to get outlaw status. However, this has not greatly affected the rate of anonymous coins. Therefore, they can still be considered for investment.
But whether to use these blockchains or not, let everyone decide for himself.
Late last year, the U.S. Financial Crimes Enforcement Network (FinCEN) published regulatory proposals to regulate anonymous cryptocurrencies. FinCen wants banks, cryptocurrency exchanges and other financial enterprises to collect identifying information about any person who wants to transfer $3,000 or more from any crypto wallet. That said, the transfer cannot be made until the verification is complete.
Recently, large international, authorized exchanges have been actively delisting anonymous coins. It is reasonable, no one wants to get outlaw status. However, this has not greatly affected the rate of anonymous coins. Therefore, they can still be considered for investment.
But whether to use these blockchains or not, let everyone decide for himself.
