Privacy coins are to cryptocurrency, what chocolate is to peanut butter. They’re similar but ultimately serve very different functions. In the case of digital assets, a privacy coin provides the anonymity that traditional cryptocurrencies lack. Bitcoin, after all, is a public ledger, and some traders might not want their transaction details to be traceable. Privacy coins exist for that purpose.
Why should you use a privacy coin?
While Bitcoin and traditional cryptocurrencies don’t necessarily expose personal information, they make it possible to trace transaction data. Bitcoin can be traced back to its first spend, which can draw some unwanted attention. This reveals a variety of wallet addresses and other information some traders might not want public. That’s not to mention the know-your-customer and anti-money-laundering policies in place at most exchanges, which force users to reveal their information to trade there.
Privacy coins circumvent that issue, anonymizing both parties involved in a transaction. Utilizing technologies such as zk-SNARKS, the transaction is still recorded on the blockchain for history’s sake without revealing wallet addresses. Of course, these transactions can be more expensive or take a little longer due to this extra process, but the effort is worth it for those who care to make transactions completely anonymously.
What are the top privacy coins?
1. Monero
Monero is usually considered in any list of top privacy coins. This is partly because Monero was an early privacy coin, often sitting in the top 20 cryptocurrencies regarding market cap. This proof-of-work blockchain is a fork of Bytecoin and utilizes ring signatures and stealth addresses to provide anonymous trades to all.
Unlike other privacy coins, Monero’s anonymity features are a default. The network requires each transaction to default private so users don’t accidentally publicize their information. Also, Monero tokens are fungible, meaning you can substitute one token for another, which is impossible on Bitcoin and other assets with traceable histories.
That said, Monero’s popularity has drawn some negative attention as well. Like some think of Bitcoin, critics claim Monero is an asset criminals utilize due to its privacy.
Pros
- Entirely anonymous thanks to fungibility
- Defaults to private transactions
- Stealth addresses ensure the safeguarding of both the recipients’ and senders’ privacy
Cons
- There is a bit of a stigma surrounding Monero
- There can be storage issues concerning this cryptocurrency
2. Zcash
Zcash provides two types of transactions: private and transparent, which it breaks down into z-addresses for the former and t-addresses for the latter.
Transactions between z-addresses are fully shielded, keeping details like sender, receiver, and amount confidential. However, in transactions from a z-address to a t-address, known as “deshielding,” the transaction becomes visible on the blockchain, although the sender’s z-address remains private.
Conversely, “shielding” transactions, moving from a t-address to a z-address, enhances privacy by hiding transaction details. Despite these privacy options, the network sees a mix of transaction types, with complete privacy less widely used than expected. The flexibility between shielded and transparent transactions allows users to balance privacy needs with transparency.
Pros
- Optional privacy
- Shielded transactions
- One of the most trusted protocols for preserving anonymity and protecting privacy
Cons
- A mainly centralized team can put off some users
3. DASH
DASH is another privacy coin often in the top 20 assets regarding market cap. This asset built itself up to offer instantaneous transactions, hence its name, which means digital cash. However, it also offers a PrivateSend feature that mixes assets to keep transactions anonymous.
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PrivateSend is entirely optional, and it’s possible thanks to the network’s dividing of transactions into intervals. However, DASH must be turned private ahead of time, and these transactions cost a little extra due to the additional effort.
Also, DASH is more available worldwide than most assets on this list. The asset has ATMs littered around the United States and Europe, some in South America and some in Australia, among other places. It’s also one of the only privacy coins available for trading on Coinbase – one of the most popular cryptocurrency exchanges. Additionally, in 2020, DASH reached 1 million users in Venezuela.
Pros
- A dedicated community of developers and users actively working to improve and promote the cryptocurrency
- Lower transaction fees than Bitcoin make it more attractive for small transactions
- Increased privacy through its “PrivateSend” feature
Cons
- May be volatile and its value can fluctuate significantly in a short period of time
- Private transactions can cost more than traditional ones
4. Oasis Network (ROSE)
Oasis Network (ROSE) notably ensures secure and anonymous transactions. Additionally, this network empowers its users, giving them autonomy over their data. Consequently, users can decide which information they wish to share, fostering a decentralized approach to privacy. This approach empowers individuals and creates a reliable and secure environment for conducting financial transactions.
One of the pivotal features of Oasis Network is its commitment to privacy through its innovative architecture. Importantly, the network incorporates sophisticated techniques such as homomorphic encryption and secure enclaves. These technologies play a crucial role in safeguarding user data and preserving the confidentiality of transactions.
Pros
- Integration of new partnerships could lead to a high demand for the ROSE token
- The Oasis Network emphasizes privacy and data confidentiality
- Offers a highly scalable and secure consensus algorithm managed by validator nodes
Cons
- Price is subject to market volatility
5. Decred
Decred (DCR) holds a prominent position among the preferred privacy-focused cryptocurrencies for enthusiasts. It utilizes sophisticated cryptographic methods and features that enhance privacy, ensuring the anonymity of users’ identities and the confidentiality of transactional data.
The platform adopts a decentralized approach to governance, enabling its crypto community to take an active role in shaping decisions and contributing to its evolution.
This fusion of privacy protection and participatory governance positions Decred as a leading choice for future privacy coins, as several cryptocurrency experts view it. Decred is an ideal choice for individuals prioritizing privacy and collective input.
Pros
- Fully decentralized platform
- Low transaction fees
- Users can customize the signature algorithm
Cons
- Tokens cannot be bought with fiat currencies
6. Aleph Zero
Aleph Zero (AZERO) emerges as a significant contender in privacy-oriented cryptocurrencies, warranting its place on any list dedicated to privacy coins.
Centered on delivering robust security and maintaining user anonymity, Aleph Zero leverages sophisticated cryptographic methods, including zero-knowledge proofs, to ensure the privacy of user identities and the secrecy of their transactions.
As navigating privacy in the web3 environment presents complexities, Aleph Zero positions itself as a reliable solution for those facing these challenges. By adopting cutting-edge technology, Aleph Zero enables users to engage in transactions with the assurance of keeping their data shielded from unauthorized eyes.
Pros
- Decentralized
- Affordable for the general public
- Operates independently of external vendors
Cons
- No recovery for info required to withdraw
- Unable to seed a new account with $AZERO
7. Beldex
Beldex ensures the privacy of your financial transactions. It uses sophisticated cryptographic methods such as ring signatures and stealth addresses to secure the details of your transactions. Hence, by concealing the identities of both the sender and receiver, Beldex promises to deliver superior privacy and anonymity.
What distinguishes Beldex from other privacy coins is its straightforward, easy-to-use interface, designed specifically to be user-friendly for those new to cryptocurrencies. The team behind Beldex has made the platform accessible to all, regardless of their technical know-how.
This approach has made BDX a strong candidate for leading the future of privacy-focused cryptocurrencies.
Pros
- Advanced trading tools such as stop-loss and limit orders
- Margin trading with high leverage which may be useful for experienced traders
- Running a Masternode can create a stable stream of passive income for the Masternode operator
Cons
- It may require technical knowledge
What is the most private cryptocurrency?
There is no “best privacy coin” simply because each project utilizes a different form of anonymity. DASH’s private transactions work great thanks to its PrivateSend feature, but some users might want the protection offered on Aleph Zero or the community-driven nature of Decred. BeInCrypto recommends that users choose the privacy coin they believe and resonate with the most rather than the one with the highest market cap or best marketing campaign.
Frequently asked questions
What is a privacy coin?
What are some examples of privacy coins?
How do Monero and Zcash ensure the anonymity of transactions compared to traditional cryptocurrencies?
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