Choosing The Best Privacy Focused Crypto! by@aryu124

Choosing The Best Privacy Focused Crypto!

May 18th 2022 1,041 reads
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In 2009, Bitcoin was launched making it the first-ever peer-to-peer digital money; the first financial application built on blockchain technology. With decentralized finance on the blockchain, you can do anything that you are currently doing with your traditional finance system, without giving a commission or the requirement to go through middlemen or brokers. But DeFi lacks one important feature which is often overlooked: privacy. FinFarm brings you a detailed comparison between top privacy-focused cryptocurrencies, Dash and Bytecoin.
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In 2009, Bitcoin was launched making it the first-ever peer-to-peer digital money; the first financial application built on blockchain technology. One could argue that DeFi (Decentralized Finance) started with BTC in 2009.


DeFi is a growing ecosystem of actual, working protocols and applications, which are delivering value to several thousands of users, and transacting the equivalent of hundreds of millions of dollars in digital assets, every day.


The very foundations of a new global financial system are being laid with applications that enable everything from making simple money transfers and payments to lending, borrowing, trading, portfolio management, and even insurance contracts. With decentralized finance on the blockchain, you can do anything that you are currently doing with your traditional finance system, without giving a commission or the requirement to go through middlemen or brokers.


Sounds exciting, doesn’t it? But DeFi lacks one important feature which is often overlooked. PRIVACY!

But wait….. Why is privacy important?

Privacy is necessary for ensuring freedom on the internet. When your transactions are being watched — or when your transaction history is available to be known — a person isn't totally free to make their own decisions.


Just by knowing your account number or receiving address, one can check your entire history of transactions and even what crypto assets you hold.


To save you from this tragedy, FinFarm brings you a detailed comparison between top privacy-focused cryptocurrencies.


  1. Bytecoin (BCN)


Launched back in 2012, Bytecoin (BCN) described itself as a private, decentralized cryptocurrency with an open-source code and was the first cryptocurrency designed to protect user privacy. It is a cryptocurrency that works on the blockchain operated by a multitude of nodes around the world and uses Ring signatures, which have since also been incorporated into other similar coins (see below), to mix different outputs of similar value into one transaction, making it almost impossible to deduce where the money came from. On the Bytecoin blockchain, all addresses are obscured.

Bytecoin allows users to generate numerous unlinkable one-time addresses from a single set of keys. This makes it nearly impossible to establish a connection between transactions or addresses.

Bytecoin does not support smart contracts, and the high risk of user privacy being attacked is still prevalent, even though it adopts a decentralized mixed currency technology.


  1. Dash (DASH)


Dash, whose name is derived from the term "digital cash," was launched in January 2014 as a fork of Litecoin (LTC). Dash utilizes a centralized currency mixing scheme where users simply transfer sums of money to multiple addresses several times; to mix and obfuscate transactional history.

The centralized currency mixing scheme has high applicability in various cryptocurrency systems; however, the existing solution requires the sender and receiver to mix coins online. If the sender and receiver can't reach an agreement on the amount of mixed currency, the transaction must be postponed. There is a common delay problem with Dash and the currency mixer is centrally deployed.


Dash does not support smart contracts, and the third-party mixed-currency provider mechanism relies on the credibility of the third party, which encounters unpredictable risks. In recent years, Dash's development has focused on attempting to make Dash a payment tool with strong circulation value instead of the emphasis on privacy protection.


  1. Verge (XVG)


Verge was first launched in October 2014 as ‘DogeCoinDark’, a fork of Peercoin (PPC). In February 2016, it was renamed Verge in order to rebrand for easier mass-market adoption and to distinguish itself from Dogecoin (DOGE), with which it has no direct connection. Verge Currency uses the Proof of Work (POW) mining principle. It is also one of a few cryptocurrencies to have multi-algorithm support. Verge has 5 different hash functions: Scrypt, X17, Lyra2rev2, myr-groestl, and blake2s. Such design is intended to allow for more equal access to the mining ecosystem.

Verge’s Dual-Key Stealth Addressing allows senders to create an unlimited number of one-time destination addresses on behalf of the recipient without any interaction between the parties.


Stealth addresses are a method by which additional obfuscation can be implemented to further protect the receiving party when transacting with Verge. When multiple users send funds to a stealth address, rather than these transactions appearing on the blockchain as multiple payments to the same address, they instead appear as multiple payments going to different addresses. Smart Contracts on Verge are under development.


  1. Monero (XMR)


Monero was launched in April 2014 and features the “proof of work” (POW) consensus mechanism to enable the creation or minting of the XMR asset. Proof of work is often also called ‘mining’ and Monero’s mining algorithm; RandomX, is an AES intensive and memory-consuming operation; which is designed to encourage mining with the central processing unit (CPU) of a computer.

Monero uses the Ring Confidential Transactions algorithm for its privacy encryption method. The method mixes the signer's public key with another public key set and then signs the message, making it impossible for intruders to distinguish which public key corresponds to the actual signer; therefore, protecting the user's real identity.


Monero's mixed-currency participating users do not need to communicate with other participating nodes, they can participate in mixed-currency by themselves, providing effective protection measures for commonly distributed denial-of-service (DDOS) attacks and information disclosure in the decentralized mixed-currency mechanism.


Monero does not support smart contracts, and the high risk of a user’s privacy being attacked is still present, even though it adopts its decentralized mixed currency technology. Users need to rely on the public key of other users when using Ring Confidential Transactions technology. If other users are malicious, the problem of users’ privacy disclosure may arise. There are a few cases that claim to trace transactions on the Monero network but we neither confirm nor contradict those claims.


  1. Zcash (ZEC)


Zcash was launched in October 2016 and was originally based on Bitcoin’s codebase. It is a cryptocurrency that uses encryption technology to provide users with optional privacy protection. Originally named ZeroCoin, using the ZeroCash protocol in November 2013, this was forked into Zcash cryptocurrency in 2016 with the specific purpose to add a development fund that is taken from block rewards.


Zcash payments are published on the blockchain and users can utilize optional privacy functions to hide the sender, receiver, and amount of transactions on the blockchain. Only those who have the key can see the contents of the transaction. The user has full control and can choose to provide the key to others to prove payment for auditing purposes.


Zcash now uses a ZeroKnowledge Proof technology called zk-SNARKs to encrypt user information. Zk-SNARKs is an encryption method based on pure mathematical theory. The encryption method is self-contained, it has the advantage of not depending on an external operating environment; therefore, has a wider range of application scenarios.


Since Zcash uses the same underlying architecture as Bitcoin's network, it can only support simple transactions, similar to the Bitcoin network with a pre-set privacy protection mechanism.


  1. Beam (BEAM)


Beam is a scalable, privacy-oriented cryptocurrency based on the elegant breakthroughs of the mimblewimble protocol, which completely conceals the values and metadata of transactions in a printable way, which also reduces bloating on the blockchain. In addition to enhanced privacy and fungibility, this allows for much greater scalability. In layman’s terms - Beam takes up far less disk space than other privacy-oriented cryptocurrencies.


The cryptographic protocols used in Beam require no trusted setup and Beam uses the BeamHashIII Proof-of-Work algorithm; a memory-hard mathematical challenge that is designed to encourage GPU miners. Like Bitcoin, scarcity is ensured by periodic halving. Complex transactions are possible, such as escrows, time-locked transactions, atomic swaps, and much more. Beam has further evolved from the mimblewimble protocol to solidify best-in-class privacy-preserving mechanisms with dandelion++ and lelantus-MW.


Beam supports in-wallet decentralized applications (DAPPS) and smart contract deployment, which are named ‘Shaders’. Anyone can create their own privacy tokens on Beam, and even mint Confidential NFT’s. My Hackernoon profile image is an NFT that I bought on Beam and by this NFT you can neither track my assets nor other NFTs in my portfolio.


And one of the most underrated features of Beam is that you do not have to pay gas fees on failed transactions! YES, No gas fees for failed transactions.


Recently, an NFT public sale on Ethereum went horribly wrong and users accumulated more than $145million in failed transaction fees. This would never happen on Beam as failed transactions do not incur gas fees.


Here is a Detailed Comparision for you:

Parameters

ByteCoin

Dash

Zcash

Monero

Verge

Beam

Algorithm

Cryptonight

X11

Equihash

RandomX

Scrypt, X17, Lyra2rev2, MYR groestl, and Blake2S

Beam Hash III

Scalability

Better in terms of Blockchain size

May implement PoS to improve scalability

Blockchain is heavier than Bitcoin

Worst Scalability in terms of blockchain size

Better than other privacy coins

Excellent scalability, lighter than Bitcoin

Auditability

Can be done but with restrictions

Can be done but with restrictions

Can be done but with restrictions

Not useful

Can be done

Can be done and optional for a user

Smart Contracts Support

No

No

No

No

Under Development

Yes

Dapps

No

No

No

No

Upcoming

Yes

Gas Fees for failed transactions

Yes

Yes

Yes

Yes

Yes

No

DeFi Ecosystem (DEX, Lending & Borrowing ,etc)

No

No

No

No

Upcoming

Upcoming

Create your own privacy tokens

No

No

No

No

Upcoming

Yes

NFTs

No

No

No

No

No

Yes


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