When Bitcoin first broke onto the scene it was hailed as an anonymous, online means of payment for goods or services. That initial impression, though now known to be off of the mark on the anonymous count, subsequently radiated throughout the public’s perception of Bitcoin, where it has remained to this day. Beyond Bitcoin, the very idea of cryptocurrency — undoubtedly thanks in no small part to its name — has become synonymous with untraceable, anonymous assets and, by extension, illicit economic activity. This is clearly at play when people like US Treasury secretary Steve Mnuchin label cryptocurrency a threat to national security.
The truth is, however, Bitcoin and most other cryptocurrencies are hardly untraceable. In fact, in many respects, transactions performed with most cryptocurrencies are just as traceable as more-traditional credit card and transfer service transactions. Looking specifically at Bitcoin, transactions are recorded on a public ledger that can be traced by law enforcement. Using data analysis tools, addresses tied to Bitcoin transactions can then be linked to the real people behind them.
This is the case with most blockchain assets, and, while anonymity and freedom from the traditional financial system were ideological bedrocks in the fledgling stages of the cryptocurrency industry, times have changed. Now movements in the industry are more often than not geared towards bridging the gap between the crypto industry and traditional finance.
However, not everyone has given up on privacy. There is still a subset in the crypto industry that views user privacy as key to the value of cryptocurrency and something that is becoming increasingly necessary in a world of almost complete surveillance. In this article we are going to look at a few of the major privacy coins in circulation today and briefly cover some of their advantages and drawbacks along with the crypto exchanges that support these coins.
The case for privacy
Zcash is arguably the privacy coin with the most name recognition. Zcash was developed in 2016 off of the Bitcoin model, but with an eye towards providing users with the ability to be the only one with access to their financial information. As previously mentioned, while many believed Bitcoin to be an anonymous payment tool, transactions done in Bitcoin are stored in a public ledger forever. The developers behind Zcash tried to make what many perceived Bitcoin to be, into a reality.
When Zcash was first launched it was met with a significant amount of blowback from critics who linked the desire to facilitate anonymous transactions with an attempt to profit from the enabling of illicit activity. This kind of criticism has remained at the heart of the debate around privacy coins to this day. All the coins in this space have had to face similar accusations and suspicions. But is it really warranted? Why do the developers of privacy coins want to shield transaction information from the public?
In a profile done by the New York Times around the release of Zcash, one of the founders offered an explanation of the motivation behind designing the asset. Matthew Green, an Associate Professor at Johns Hopkins University who designed Zcash with the help of his graduate students, portrayed the situation like this, “The basic story is that we have been gradually losing our privacy in a whole bunch of ways that people don’t appreciate. [Zcash] brings back a little bit of that privacy that computers have taken away from us. This technology gives us a defense against something that until now we have been defenseless against.”
Green’s words, spoken in 2016, only ring more true now, just over three years later. While people from around the world have in a certain sense become more closely bound to each other thanks to the advances brought about by the digital revolution, all of the progress we have made comes at an individual and, by extension, cultural price. That price is privacy. The digital world we communicate, work and live in is a world in which every action takes place in completely observable space.
Why are privacy coins necessary?
But is that exposure truly a bad thing? The general complacency around privacy issues in modern life suggests that to most people the cost of giving up their privacy is worth the benefits they receive in return. But what developers and advocates of privacy coins would point out is that at this rate, unless something is done soon to protect the rights of the individual, we will soon reach a point of no return. Like the proverbial frog who finds the warm water in the frying pan quite comfortable, by the time things really start boiling it will already be too late for us.
In a fascinating look at the need for privacy coins in modern digital economics, Max Hasselhoff, a privacy coin advocate, called for cryptocurrencies to play the role of what he termed, in a comparison with the biblical flood story, a “digital ark.” Hasselhoff writes, “What makes cryptocurrency so remarkable is the ability it has to serve as a ladder from the physical to the digital. Using blockchain and tokenization, value that exists in this world can be securely transposed onto that of the digital.”
In Hasselhoff’s conception, the privacy coin can serve as a vessel that can potentially save the individual and their property as the flood waters of digitization rise. Framed in this way, the privacy coin is a means for individuals to protect themselves and their value as we move from the physical world to the digital world. This cannot happen, according to Hasselhoff and others, if the individual does not have control over access to their information.
The dark side of privacy coins
In addition to Zcash there are a number of other privacy coins. The most prominent of them are probably Monero and Dash. Both of these coins have been called “dark coins” at various times due to their usage by people trafficking in forbidden goods on the darknet. Critics often point to the usage of privacy coins on the deep web as evidence of the risk these assets pose to society.
While the usage of these currencies for illegal activities has been acknowledged, advocates for privacy coins point out that the figures cited are often not given their proper context. Privacy coins are and have been used on the darknet, but so have regular, traceable cryptocurrencies. Defenders of privacy coins argue that the percentage of assets used for illicit purposes is relatively small, and that simply because some individuals use the assets to engage in illegal activities does not invalidate the potential benefits this technology has for society at large.
As with most things concerning crypto, there is a little bit of everything mixed into the privacy coin equation. It is hard to have an absolute position on the moral qualities of this nascent technology. Perhaps, if they are allowed to continue to prosper and develop, we will soon be able to see a clearer picture of what they bring to the table and why they may be an indispensable tool in the modern economy.
Where to find privacy coins
For now, if you are looking to invest in or trade privacy coins — Zcash, Monero, Dash and other rank among the most popular and widely traded coins on the market — there are a number of places where you can do that. The most important thing to keep in mind while determining where to trade is security, especially when it comes to transactions with this kind of asset.
The best place to trade privacy coins is on an exchange with established security and a healthy level of liquidity. This will ensure that you’re getting the assets you want at a fair price and that only you will have access to them. As it stands now, HitBTC is the most liquid exchange on the market and has kept a clean sheet throughout its time in operation in terms of security. That would be a good place to start if you’re looking for one. Additionally, most of the big exchanges like Binance and Kraken are safe bets, so depending on your location and other priorities, one of those may work for you.
As with any activity you undertake with digital assets, it is best to do so with caution. Read up as much as you can about privacy coins so you can determine what investment is right for you before you commit to anything.