Which cryptocurrencies are anonymous?
Cryptocurrencies are currently immensely popular among investors. Due to the high returns, it is often possible to earn a lot of money with them in a short time span. Cryptocurrencies come in all shapes and sizes. One of the possibilities to choose for is the anonymous digital currency. In this article we will show you some more about this unique kind of cryptocurrency.
Investing in anonymous cryptocurrencies
One of the most popular types of cryptocurrencies is still the anonymous cryptocurrency. As you can tell from the name, these are digital coins that allow you to make certain transactions anonymously. Since not everyone is familiar with the anonymous cryptocurrency yet, we decided to list the most important information in this article. We will show you what an anonymous cryptocurrency entails and which types of anonymous cryptocurrencies are currently available on the market.
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The anonymous cryptocurrency – what is it?
Before we can go into the best-known anonymous cryptocurrencies, it is useful to take a look at what is meant by anonymity when it comes to digital currencies. For this, we need to take a closer look at the technique behind cryptocurrencies. As you might already know, a cryptocurrency is a digital currency used as a medium of exchange. It is similar to real currency, but has no physical embodiment and uses cryptography. This ensures that it is almost impossible to counterfeit or pay twice. This is why it is different from a normal bank account. When you open a normal bank account, the bank registers your KYC data. This is an abbreviation that stands for Know Your Customer.
This data is important to ensure that banks do not deal with people who want to launder money, for example. However, this is not the case with cryptocurrencies. On the one hand, cryptocurrency is completely anonymous. You cannot simply see who is behind a transaction. On the other hand, it is completely transparent and traceable. This is because the data is stored on the blockchain. This blockchain is accessible to everyone on the network.
The addresses to and from which money is sent, the date and time and the value of each transaction are all recorded. The only thing that is not recorded is the identity of the people behind the addresses.
Is cryptocurrency anonymous?
Of course, the above still doesn’t make it clear whether cryptocurrency anonymous or not. The answer to this question is that it depends on what you mean by anonymous. It is anonymous in the sense that you can own a crypto address without revealing anything about your identity in that address. A person can own several addresses. In theory, there is nothing to link those addresses to. Sending and receiving virtual currency can be compared to writing under a pseudonym. If an author’s pseudonym is ever linked to his identity, everything he has ever written under that pseudonym will be linked to him.
The original Bitcoin white paper advised users to use a new address for each transaction to avoid being linked to a common owner. Thanks to the way the algorithm is structured, everything that happens in the Bitcoin world can be tracked. This leads to a level of transparency that does not always guarantee the best anonymity. Because all transactions are permanent and public, Bitcoin does not allow for true anonymity. As a result, Bitcoin itself is not really an anonymous cryptocurrency. Of course, there are many other coins besides Bitcoin. Some of them can be considered anonymous cryptocurrencies.
The advent of privacy tokens – anonymity and privacy at the heart of the issue
To overcome Bitcoin’s privacy problem, special cryptocurrencies have been created that use technology to guarantee a high degree of anonymity. We call these Privacy Tokens, digital currencies that put the user’s privacy first. Privacy Tokens are cryptocurrencies that specialize in keeping your identity and transactions hidden. These coins focus on keeping transactions anonymous and invisible. Anonymity disconnects your identity from your wallet and specific transactions, while untraced ability prevents external parties from mapping your blockchain activity.
The most well-known anonymous cryptocurrencies
The above should have given you a better idea about the anonymity of certain types of crypto projects. Now that you know this, it is time to look at the main types of anonymous cryptocurrencies that are currently available. We have made it a bit easier by listing the best-known anonymous cryptocurrencies for you:
Monero is without doubt the best-known anonymous cryptocurrency you can find at the moment. This project is so anonymous and private that you cannot even see how much is being sent between the different parties. Not even the police will be able to find out how much Monero you transfer to someone else via this project.
Monero uses complex technologies such as Ring signatures, RingCT, Kovri, and Stealth addresses to protect users’ privacy. Stealth addresses are probably the simplest way to ensure your privacy when making transactions. In their most basic form, these addresses create a new address when you receive cryptocurrency. This ensures that outside parties cannot link future payments to your wallet address.
Ring signatures connect you to other signatories in a ring to hide you as the sender. The more additional parties there are in the ring, the harder it is for someone to connect you to the transaction. How this works is something you don’t really need to know. The most important thing is that Monero can shield the transactions completely. Monero has been one of the bigger projects on the crypto market for a long time. The only disadvantage of this coin is its complicated technology. This causes the transactions to take a little longer.
Zcash is another well-known option to choose if you are looking for anonymous cryptocurrencies. The special thing about Zcash is that they have a different approach to provide anonymity when making transactions. Zcash operates on a SNARK protocol, also known as zero-knowledge proofs. This protocol means that no data is stored when paying. This means that nothing is actually known about the person making the transaction. It is as if a ghost has made a payment via this digital currency. The protocol allows you to prove that a transaction is valid without sharing the details of the transaction.
This mechanism not only improves privacy, but can also help with the scalability of a blockchain. However, Zcash has not yet implemented it as a standard. They still have an open blockchain similar to Bitcoin. To use this privacy feature on Zcash, you also need at least 4 gigabytes of RAM. This is quite a bit for older computers
PIVX is another project that has tried to ensure the privacy of its users in the best way possible. The project of PIVX is the first proof of stake cryptocurrency to implement the Zercoin protocol. This is a special protocol which, like the above project, ensures that data no longer needs to be kept for transactions. It has only recently been implemented, so it does not yet work as it should. However, the great development team is taking care of that. The fact that this project can allow for super-fast transactions while ensuring privacy makes this one of the better projects to invest in. Of course, the question is whether the team will be able to handle all the challenges they are currently facing.
Komodo is currently the real underdog in the cryptocurrency world. It is therefore not surprising if you have never heard of this project. The interesting thing is that this is a currency that really goes out of its way to make anonymous transactions possible. Komodo also uses the SNARK protocol of Zcash. They have actually taken over Zcash’s technology, only they have made the necessary adjustments to it. You can see it as a kind of little brother of Zcash.
This means that Komodo has similar disadvantages to Zcash in terms of private transactions. Komodo’s project is not only focused on private transactions. They are also working on setting up a decentralized exchange. This is a stock exchange that is not supervised by a company or group of people, but that really exists completely independently.
NAV Coin is one of the most undervalued anonymous cryptocurrencies at the moment. This is mainly due to the fact that this project has some major centralized problems that they have yet to solve. NAV Coin does not use cryptography to guarantee anonymity. Instead, they use complex technologies to create a different kind of blockchain. This is made possible by the NavTech servers setting up a new network. How this works exactly is simply too difficult to explain. The only thing that is important to know is that NAV Coin does not yet guarantee the exact anonymity that it promises. However, this may change in the future.
ZenCash is a project which is also very similar to Zcash. They again use the SNARK protocol to enable anonymity. They have used the familiar setup of Zcash. This means that they have some minimum RAM requirements for sending a protected transaction. Currently, you need to have at least 3.2 gigabytes of RAM to make the transactions. The team is trying to differentiate itself by focusing on supporting different types of wallets. This would make it possible to also send other cryptocurrencies using ZenCash. Although this does not work very well at the moment, there is a good chance that they will succeed in the future.
The last project you can invest in if you like to buy anonymous cryptocurrencies is Verge. Verge has taken a different approach compared to others to become private and anonymous. Unlike the coins above, this is a project that actually does not use a special technique to ensure anonymity for transactions. In fact, they only use Tor to secure the transactions. Tor uses a special kind of routing to wrap your IP address in encrypted layers. Although you can use Tor with any blockchain, some include it by default. Both Verge and Monero protect transactions with Tor or an alternative.
If all goes well, the information in this article has given you a better understanding of what anonymous cryptocurrencies are. Due to the high level of security these are the ideal coins to use if you like to make transactions in a completely anonymous way. We also showed you which cryptocurrencies with a high degree of anonymity are currently available. If you would like to get help when investing in these anonymous cryptocurrencies, you are in luck. Here on the site you can find many more articles which can help you as a beginning investor.