Bitcoin created a new transparent financial system since it went live in 2009. The new financial system is still being built on blockchain technology. Anyone with an internet connection can see the entire transactions and blocks on the Bitcoin blockchain. Most blockchains adopted the same way, and blockchain gained popularity among the decentralized new financial system enthusiasts.
There are websites called block explorer. Individuals can scan and screen all transactions with details, including the sender’s and receiver’s wallet addresses, the amount of the funds, time, and date. Privacy coins stand out with their privacy features. Users can completely or partly hide information about their actions on the blockchain.
Since the post-pandemic crypto market boom, all eyes have turned on the regulators. Many countries took steps to adapt or limit blockchain technology. El Salvador is the first country to accept Bitcoin as a legal tender. Bitcoin can be used as a legal currency in El Salvador now. Other countries are planning to adopt or legalize Bitcoin as a legal tender.
Some other countries are also trying to ban or limit Bitcoin use. China’s ban on cryptocurrencies let crypto markets crash in 2021. While some countries ban or restrict Bitcoin use, some countries are trying to regulate the crypto market because policymakers are aware of the blockchain technology’s inevitable success. Regulating crypto markets became a hot topic, especially after the Russian invasion of Ukraine. Western countries promptly started working on cryptocurrency regulations. Thus privacy coins gained popularity in 2022.
Privacy coins are cryptocurrencies built on a blockchain that provides anonymity with transactions. Privacy Coins obscure and obfuscate details of transactions on the blockchain, unlike others. Transactions are untraceable. Anonym transactions allow users to hide their wallet addresses and other information. Sender’s and receiver’s information stay anonymous when using privacy coins.
Monero and Zcash are good examples of privacy coins. The major difference between them is the ability to have options to turn on and off privacy options. Zcash allows users to make a transaction in full confidentiality and provides options to unveil some details depending on user preference. Monero blockchain doesn’t have optional privacy futures and runs on complete privacy. Zcash blockchain uses zero knowledge proof method to comply with full privacy.
Privacy coins are a big matter of debate nowadays. Regulators don’t want individuals to use privacy coins because it is almost impossible to track records on privacy coin blockchains. Some countries, including Australia and South Korea, have already banned centralized exchanges for listing privacy coins. Japanese authorities banned privacy coins completely.
The direct answer to this question is «NO». Bitcoin and Ethereum use distributed ledgers, and their blockchains are entirely transparent. Anyone with an internet connection can see the entire transactions on the blockchain with the details of the receiver’s and sender’s wallet addresses because transactions are traceable. Users can not stay anonymous, especially when they want to exchange their Bitcoin or Ethereum for fiat currency.
Privacy coin networks and blockchains use different methods to sustain privacy. Using stealth addresses is a way to hide the sender’s information. This method allows senders to generate a new wallet public address for each transaction. By using this feature, the sender’s identity can stay hidden. Monero uses the stealth addresses feature in a little improved way. It is called dual-key stealth address protocol.
Another method that privacy coins use is CoinJoin. CoinJoin method works like a mixer. CoinJoin creates a bundle from different transactions and merges them into one. Multiple parties must sign a smart contract to build a new transaction. For example, ten different users send Bitcoin to ten different receivers. Senders send to the privacy protocol’s wallet, and then funds are distributed from the protocol’s wallet.
Zk-Snarks is a scorching topic and an up-and-coming method for privacy coins. This method allows users to complete transactions without revealing any information. You can visit zero knowledge proof coins page to learn more about this method.
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