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Hackernoon logoCan Privacy Wallets Really Keep Your Cryptocurrency Safe in 2020? by@ks.shilov

Can Privacy Wallets Really Keep Your Cryptocurrency Safe in 2020?

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@ks.shilovKirill

Blockchain enthusiast developer and writer. My telegram: ksshilov

You can’t possibly use the Internet without using Incognito mode every now and again. You’re not using it to get better content; the web pages you’re accessing are still the same, regardless of how you’re reaching them. You’re mainly doing it because you don’t want certain searches to remain in your browser history. More importantly, you’re doing it because you value your privacy.

Maybe you aren’t applying the same strict protection measures when you’re checking your Facebook feed, but you do mind if someone is deliberately trying to peep over your shoulder. But, again, even if it bothers you, you won’t close the Facebook app just because there’s someone else there. You’ll let them be because you don’t see those Facebook posts, even if they are personal to your account, as sensitive information.

How about checking your bank statement? Are you easily opening your banking app in public, letting everyone see your monthly salary that just came in? The answer is most likely no. You would do everything possible to keep your financial transactions confidential. And I’m not talking about security here; security-wise, you are already trusting (more or less) the underlying banking system. I’m talking about the transaction history, the data itself. Even if nobody would be able to access your account or do anything with this data, you are still doing everything possible to keep it secret. In fact, studies have shown that 48% of millennial couples are keeping their finances private from each other.

The same principle applies to cryptocurrency. You have trust in the underlying system, the blockchain, to keep your funds secure. Anyway, when it comes to transaction privacy, you are simply reusing the same wallet address that you created in 2017 when you bought your first BTC.

But by doing this you are not only hurting your privacy, you’re affecting the privacy of everyone who’s receiving funds from you. By definition, “Address reuse [...] is an unintended practice, abusing the privacy and security of the participants of the transactions as well as future holders of their value.”

If you think nobody has the time to track down your transactions, think again. Software solutions have been built specifically to track cryptocurrency addresses, and, at this stage, they are either available publicly for anyone to use or used by certain companies and governments for undisclosed reasons. Just by reading about the advancement of the transaction surveillance companies and it makes you not want to move your coins anymore.

Luckily, there are solutions available to manage your cryptocurrencies confidentially. In the search of replacing my ordinary wallet, I found many services claiming complete anonymity. However, after trying them, most wallets have very bad usability or even outright glaring security flaws. It was a struggle, but I narrowed my list down to four wallets. I consider them all up to 2020 standards while offering several confidentiality features. But as always, it’s up to you to choose the one that fits your needs.

1. Going Incognito

Not the browser mode but the Incognito wallet - a cryptocurrency wallet that offers privacy in transactions for multiple popular currencies, such as Bitcoin, Ethereum, USDT, and DAI. Also, all ERC20 tokens are supported plus privacy coins like Monero

At the user level, the Incognito wallet is not so different from other wallets with multi-currency, multi-activity functionality. You can deposit, store, and send your coins. You hold your own keys and sign transactions locally. And you can even access DeFi platforms like Kyber and swap coins across blockchains within the wallet. Imagine exchanging Bitcoin to Monero with the click of a button. That’s possible with Incognito.

The extra privacy features work behind the scenes to protect your information and identity. The magic happens under the hood where zero-knowledge proof technology has been implemented to obfuscate your transactions as well as your blockchain-powered financial history. Maybe you’ve heard of zero-knowledge proofs in the context of Zcash or other privacy-oriented coins. The solution developed by the Incognito team is rewritten from scratch, optimized for mobile, and combined with other technologies such as ring signatures and stealth addresses, also utilized by Monero. What more can I say about this? As of today, there are no proven ways to track transactions coming from this wallet. If you are the type who handles many coins at the same time and wants a wallet that does more than just HODL, this may be the one for you.

2. Are you a samurai?

Similar to the medieval Japanese warriors, Samourai is a Bitcoin wallet that claims to offer military-grade encryption. With a focus on privacy and high-security, the wallet manages to impose on its users the main principles on which Bitcoin was founded. We are talking about decentralization (you are owning your own keys), transparency (open source), and privacy (anonymity features).

While the first two features are not new to cryptocurrency users, privacy features are a great addition and our main focus today. For each Bitcoin transaction, as default behavior, Samourai generates a new address every time. But if a private payment channel can be created using the BIP-47 protocol, where the transaction can be done without disclosing addresses, the wallet opts for that. If neither of these works for you, Ricochet transactions are available which prevents your coins from being traced by confusing algorithms who spy on the blockchain.

These are features that are existent within the Bitcoin protocol and, with Samourai they can be easily accessed without any technical knowledge. Unfortunately, the wallet only supports Bitcoin. If you are all about the “kind of crypto,” then this may be the wallet for you.

3. As spicy as wasabi!

If you’ve ever had sushi before then you know that wasabi can spice up your food in the same way that the Wasabi wallet can spice up your coins with its privacy features. This wallet is desktop-focused, easy to use, and not all that different from other popular Bitcoin wallets. Yep, that’s right, Wasabi is yet another Bitcoin-only wallet. If you’re looking to store more than BTC you should consider Incognito presented above.

For starters, each new transaction is assigned a new address. The basics are covered. Anyway, when sending funds, you can add an extra layer of privacy by using Coinjoin (the wallet will do all the work for you) to mask your coins by mixing them with other network transactions. Your coins are always safe and they will always reach their destination (as long as the transaction is mined) so you shouldn’t worry about its security. The more users, the more private your transactions will be. Wasabi already has a growing community of libertarians, so I wouldn’t worry about its efficiency either.

The wallet makes good use of the latest privacy standards, brought by Coinjoin, and it makes it so easy for anyone to access it on a click of a button. If you want your BTC transactions hidden from the public eye, this may be the wallet for you.

4. Stacking on Electrum

In Ancient Greek times “elektron” was golden liquid, and today Electrum is a cryptocurrency wallet. Bitcoin-only, open source, and available on desktop and mobile, Electrum seems to be accessible from any possible devices or platforms. It’s one of the oldest wallets, and many blockchain developers contributed to its source code over time, adding to its security. At the same time, many eyes have been on its code during this time, which makes it one of the most trusted software solutions in the space.

Open source is great for transparency, but what about privacy? Electrum wallet doesn’t market itself as a private-oriented wallet, but it includes features that help you stay anonymous yet secure by default. You can generate new addresses and store your own keys, but what makes it truly unique is its ability to integrate with a few of the most popular hardware wallets such as TREZOR, KeepKey, or Ledger Nano S. By extension, the wallet is inheriting all the features and privacy settings of these wallets. If you have one of these, this may be the wallet for you.

Based on my research and a few hours of generating wallets for various currencies, these are the four wallets that stood up to my privacy standards. Feel free to try them by yourself, let me know how it went, and if you get to encounter any solution that seems better than the ones listed here, don’t hesitate to share that one as well. A new cryptocurrency wave is on the verge and this will bring attention to the market again (as well as some unwanted attention from governments and bad actors as well). Better safe than sorry, now might be the time to consolidate your cryptocurrency holdings into a wallet that can keep your financial history as private as it can be!

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