Cryptocurrency avails users a way of bypassing the over-centralized nature of today’s banking industry and this has spurred its popularity, particularly in regions that are open to autonomous technologies. While Bitcoin continues to retain its position as the king of crypto, yet, there is no shortage of cryptocurrency with specialized features that looks to separate them from the horde of digital assets popping up in the crypto market.
In light of this, privacy-focused coins have taken the market by storm. Although they reinforce the anonymous functionality lacking in other popular cryptocurrencies, however, various controversies continue to taint their rise in the crypto market. Here, we will highlight the role of privacy-focused blockchains and misconceptions, as well as factors, that have cloaked their viability.
Not All Crypto Value Privacy
Privacy in crypto is a foggy subject and it comes as no surprise that users assume that all cryptocurrency enforce their anonymity. This assumption has proved to be detrimental to the growth of cryptocurrencies that essentially design their blockchain to offer their users privacy. Note that Bitcoin as a digital asset would only offer you a degree of privacy and even at that, there are ways to circumvent its anonymous features.
How do you think governments are tracking and investigating crypto holders that are guilty of evading tax or are using their crypto for money laundering activities? For one, companies like Chainalysis has tools that could trace the identity of individuals via their transaction history. The likes of Bitcoin, Ethereum and other top cryptocurrencies are public blockchains and the recorded transactions are immutable and accessible.
As such, do not mistake the identity cloaking feature of Bitcoin to true privacy. It does little to hide your financial activities from your government or other entities that could nefariously use your information. Since a majority of exchanges are complying with KYC and AML policies, it is very much possible to trace your transactions to your exchange account or identity.
Therefore, for the more privacy-conscious crypto enthusiasts, there are anonymity-focused cryptocurrencies that implement various protocols that will allow users to enjoy the benefit of holding and transacting with crypto under the radar.
The New Age Of Anonymous-Focused Cryptocurrencies
Already, we have a growing number of coins that value privacy and they have made it their point of duty to ensure that the activities on their blockchain are totally hidden from prying eyes. Popular in this category of cryptos are Dash, Monero, Zcash, Komodo and Verge. Each comes with unique protocols that function as cloaking features.
Cryptocurrencies such as Monero offer users tools to completely hide their identity, their transaction details as well as their account balance. On the other hand, the Zcash blockchain functions similar to that of the Bitcoin blockchain, however, additional features allow users that are privacy conscious to cloak their activities. With the advent of these innovative contributions to the privacy industry, it comes as no surprise that these technologies have attracted unwanted attention, particularly from regulators.
Why Are Privacy-Crypto Essential To The Crypto Space?
Apart from affording investors alternative coins to allocate a fraction of their portfolio to, privacy coins take a step further in establishing the anonymous benefits of using cryptocurrency. Unlike other cryptos, these coins push the limits of crypto as an alternative to centralized currencies and detach users’ financial activities from the privacy-dwindling financial industry.
In addition to this, it helps users avoid the risk of regulators tracing crypto affiliated with illegal activities to their wallets. Understand that blockchains merely allocate transacted coins to the address of their new owner, and in cases where such coins have at one time or the other funded illicit activities, this could spell doom for the new owner.
As such, users of privacy coins are not at risk of subjecting their financial record to the governments as a result of ownership of coins that illegal entities had once owned. While this feature as one of the most integral benefits of privacy coins, it also puts it in the bad books of regulators.
Regulators Vs Privacy Coins
The emergence of crypto regulations means that governments now can monitor the activities on public blockchains and privacy-focused blockchains are the only feasible ways crypto holders can escape this reality. As expected, this has multiplied the adoption of these coins and governments have made known their intention to look for ways to circumvent the various privacy-protocols on these blockchains.
In the US, the Department of Homeland Security (DHS) has put in place plans to extend their crypto tracking activities to anonymity-enabled blockchains. Similar to the situation in the US, regulators in other regions have reiterated that privacy coins now serve as the default currency of the dark web. And so, they have used this notion to justify their attempt to probe and trace transactions on privacy blockchains.
It is still unclear if this new surge of privacy-defying attempts by these entities would prove successful. However, from what we have learned so far- when it comes to financial restrictions and control, governments would go to lengths to achieve their goals.
There are coins that are championing crypto’s quest for absolute privacy. And although their functionality defies the status quo of the financial industry, yet, their future depends on how long they could resist regulators intrusive initiatives.