Do you recall the first time you learned about cryptocurrency? I do. I also remember how Bitcoin was the most secure form of currency in the world- untraceable even. Well, a lot has come to light over the last few years that, unfortunately, debunked those thoughts.
However, not all was a loss. With the understanding of Bitcoin’s privacy limitations, developers set out to set the bar a little higher while trying to reach the intended goal of the original crypto developers: to create a form of digital cash that wasn’t controlled by the man, no matter what country you lived in. And if you reside in a country with a tight grip on its people, Bitcoin will be the absolute last form of currency I would recommend.
While Bitcoin, and many other coins, have an open blockchain ledger, and it’s fantastic for transparency, it does little to protect the end-user, you. If I know the address to your crypto account and it has an open ledger, I can see exactly how much you have in a particular coin.
I can’t do that with your bank account number. So why would you want someone to see your balances in crypto?
Lucky for us, as mentioned above, some in the developers’ world thought the same thing; there’s no need to share with anyone how much we have in our accounts.
Enter the privacy coin. The gist of it is simple, using these coins should give you peace of mind that your privacy is assured. That is, nobody should know how many coins you have (thus, how much money you have).
While the technology behind many privacy coins is similar to the original blockchains, where the data is viewable by all, some of these projects (coin projects) work to blur the lines between where the money came from and, sometimes, where it’s going. Depending on the project, you may also still see the exact amount of moving funds; however, I think it’s rare that you’ll see that much anymore. The most common codebases used to hide the data are zk-SNARK, RingCT, and Coinjoin. While there are others, these, and variations of them, make up the more popular projects.
Projects such as Monero and Zcash use these algorithms in their offerings. PIVX is one of those that uses a customized version of the zk-SNARK Sapling protocol. As I’m trying to keep this particular post at the 50,000-foot level, I highly recommend checking out the page dedicated to their implementation of zk-SNARK and what it means for you and me.
Before we go, I want to share one question I get asked fairly often when I mention the likes of privacy-centric projects like PIVX, “what’s it matter if someone can see my coins… I have nothing to hide.” This statement/question has become the bane of any privacy advocate. My answer is simple, however. While you may indeed be a good citizen and have little to hide, those who don’t put a lock on their house will eventually receive an unwelcome stranger into their home. The same goes for your internet privacy- there is no reason an “anybody” needs to see that I’m on Reddit looking for cute kittens.
As far as pairing privacy and cryptocurrency, well, it can get a little more serious. Remember earlier when I mentioned that many crypto-projects have open ledgers that anyone can look at? The consequences of that can be dire. Let’s say Bryan, while a nice guy, makes a dumb decision to post his Ethereum crypto wallet address. Now I can see that Bryan has several hundred thousand dollars in that account. And while I’m not about to try to find where Bryan lives, who’s to say that someone else isn’t so nice.
Granted, you probably won’t go around flaunting your crypto address in public. However, a slip of the keyboard or a glance at your phone screen is all it takes, and your privacy could be lost. If you’re using the right coin project, it won’t matter (to a point, common sense is still a requirement).
If you’re looking for a deep dive into the world of privacy coins, might I suggest you look at What are privacy coins and how do they differ from Bitcoin?