As cryptocurrency adoption grows, so does awareness of the importance of privacy and anonymity for certain use cases. While all blockchain transactions are publicly viewable by default, some protocols offer improved privacy features. Let’s examine two leading “privacy coins” – Monero and Zcash.
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What is Monero?
Launched in 2014, Monero is a cryptocurrency focused on privacy, anonymity and decentralization. It uses stealth addresses, ring signatures and ring confidential transactions to obscure senders, recipients and amounts of transactions on its public ledger. This greater privacy is achieved without sacrificing transparency or security of the blockchain.
Monero Uses Ring Signatures
Instead of a regular cryptographic signature, Monero signatures involve multiple possible signers – forming a “ring” of plausible senders. This makes it computationally intensive to tell which ring member made the actual transaction. Transactions blend into the noise of other dummy ones.
Monero Adopts RingCT and Subaddresses
Ring confidential transactions (RingCT) hide transaction amounts, allowing only the sender and recipient to see values. Monero also employs subaddresses to generate an unlimited number of unique one-time addresses per main account. This further enhances user anonymity.
Privacy is Core to Monero Design
While giving up some transparency, Monero prioritizes private and censorship-resistant money that can be used freely without surveillance. Its open-source community focuses firmly on privacy as a civil right, pushing innovations to strengthen financial anonymity.
How Does Zcash Achieve Privacy?
Launched in 2016, Zcash improves on Bitcoin with its implementation of zk-SNARKs – a type of zero-knowledge cryptography allowing select “shielded” transactions on its blockchain.
Zcash Users Have Choice of Shielded or Public
Unlike Bitcoin or other transparent ledgers, Zcash users can opt for “shielded” transactions that hide sender, recipient and amount metadata or use regular transparent transactions. This provides a privacy option without disrupting transparency for regulatory purposes.
Zcash Transactions Use zk-SNARKs
Zero-knowledge succinct non-interactive arguments of knowledge (zk-SNARKs) allow complex computations to be proven without revealing input details. With zk-SNARKs, Zcash can independently verify shielded transactions while keeping parties and amounts private.
Founders Received Development Funds
Unlike Bitcoin, the Zcash founder team received 20% of the initial coin supply via a trust fund. Some critics argue this undermines decentralization, though others laud their transparency and work securing strong anonymous features.
Which is Best – Monero or Zcash?
Both Monero and Zcash excel at privacy on blockchains but use different technical approaches. Monero prioritizes full anonymity by default, while Zcash allows optional privacy via shielded transactions for regulatory compliance.
Monero transactions are more private but less transparent for auditability. Zcash strikes a balance for both private and public optionality. Investor needs, jurisdiction and intentions will determine which offers preferable functionality and risk profile. Overall, both advance financial privacy and open important discussions on its role in digital currencies.
Why is Privacy Important for Cryptocurrency?
Privacy is a core value for money as it enables free use, exchanges and ownership without surveillance or third party interference. Including privacy features helps cryptocurrencies function reliably as mediums of exchange, rather than just speculative assets.
Lack of privacy could curb usage if transactions need to pass “know your customer” checks. It also risks censorship resistance by enabling blocking of transactions to specific addresses. Privacy respects financial self-determination and prevents data exploitation or authoritarian control of individuals’ economic activities and properties.
In the future, personal financial data privacy will likely become more important as new digital identity systems emerge involving blockchains. Pioneering protocols Monero and Zcash address this need proactively to sustain cryptocurrency adoption and respect civil liberties as technologies progress. Overall privacy features expand the use cases cryptocurrencies can fulfill.
Conclusion
In conclusion, Monero and Zcash have advanced privacy on blockchains through technical innovation. Their privacy features help cryptocurrencies serve diverse needs of individuals and enterprises, while preserving core principles of self-sovereignty and censorship resistance that spawned cryptocurrencies originally. As digital money and identity systems converge, protocols respecting privacy will remain highly important and relevant going forward.
As a writer, Johnny is an advocate of blockchain technology and cryptocurrency in general. He writes about all things from cryptography to economics, with a focus on how it applies to cryptocurrencies. He is also passionate about writing about topics such as decentralization, open-sourced software development, and copyright law.
