in this article, we will discuss the role of privacy in cryptocurrency in detail. Cryptocurrencies aim to achieve financial freedom by eliminating the need for banks and intermediaries.
The Bitcoin network plays a crucial role in this pursuit. However, the number one digital currency has yet to establish itself as a widely accepted form of payment, let alone other cryptocurrencies.
Numerous factors contribute to this lack of acceptance, such as volatility, acquisition barriers, skepticism, fear of losses, complexity, and a notable absence of privacy. Perhaps you should read more reasons why crypto privacy is so important in today’s world of digital assets.
#1 Protection Against Cybercriminals
Imagine having a substantial amount in your Bitcoin address, let’s say you own 100 BTC, which is valued at around $260,000 today.
Now, do you want others or potential criminals to be aware of this? It’s not an implausible theory that they could try anything to get their hands on that $260,000. That’s precisely why privacy matters. There’s no need for anyone to know that you possess 100 BTC in your address.
Let’s suppose you now have $260,000 in ARRR (Pirate), equivalent to approximately 16,000,000 ARRR. However, nobody except you knows about it unless you disclose it. Even better, no one can identify this money at your address. Pirate ensures complete anonymity by not revealing any metadata. Your funds remain invisible, providing you with the utmost privacy.
#2 Protection of Intellectual Property and Trade Secrets
The Commission on the Theft of American Intellectual Property estimated that in 2017, trade secret theft alone caused the United States to lose between $225 billion and $600 billion every year.
According to a recent trends report, federal trade secret disputes in 2020 resulted in only $3 billion in damages recovered, leaving the rest unclaimed. Notably, the study found that the plaintiffs prevailed in 68% of the cases analyzed.
Businesses that cryptocurrencies must prioritize transaction privacy to protect their trade secrets and sensitive information. Publicly visible transactions could potentially expose business relationships, financial strategies, and supplier details.
To maintain a competitive edge and protect intellectual property, consider using a VPN to buy crypto. With VPN for crypto trading, you can trade anonymously. So far, exchanges like Bybit offer KYC-free trading, but you will need a good VPN for that.
The flagship VPN is VeePN, which can hide your IP address so no one can link your wallet to your identity. This means that your transactions through VeePN, even with a limited limit on the exchange, will be untraceable.
#3 Storing or Trading Blacklisted Coins
Presently, even though central instances still exert control over cryptocurrencies, numerous exchanges allow for their purchase. What if one were to possess a publicly accessible coin that serves as a favored tool for criminals? A coin that attracts the scrutiny of authorities and remains under constant surveillance.
Let us contemplate a scenario where the coin becomes so tainted that a central authority introduces a blacklisting system for both the coin and its associated addresses. This idea may not seem far-fetched and could potentially materialize in the future.
#4 Bypassing Sanctions and Restrictions
Previously Edward Snowden received BTC as funds through the Edward Snowden Defense Fund. Despite the US government’s ban on donations to Snowden, the transfer of money still occurred. This incident sheds light on the capabilities of governments.
The transactions, although forbidden for US citizens, took place anyway. Snowden has garnered worldwide support as well as enemies. These adversaries engage in regular spying, censorship, and bans. They possess the ability to track every transaction.
If one uses Bitcoin without taking precautions to ensure privacy, they are essentially aiding a thief, facilitating illegal activities, and betraying their own country.
Foreign journalists coming from politically persecuted countries face similar risks. Privacy coins like Pirate can offer enhanced security and anonymity.
The US Treasury Department (OFAC) announced that two Iranian Bitcoin addresses were added to the “Specially Designated Nationals And Blocked Persons List (SDN) Human Readable Lists” in December of last year. This indicates that higher authorities have the power to associate crypto addresses with individuals or groups and impose sanctions.
The Japanese government has prohibited all cryptocurrencies that provide user anonymity, including privacy coins. However, a privacy coin cannot be linked to an individual if it lacks public options and was purchased through a KYC exchange unless other errors were committed.
It’s important to note that privacy coins like Pirate can offer benefits beyond criminal activities. Criminals utilize not only privacy coins but also the US dollar and the euro, as they have done for decades.
What are Privacy Coins and How Do They Work?
Privacy coins constitute a class of cryptocurrencies that prioritize privacy protection and robust data security. By leveraging the power of blockchain technology as a distributed ledger, privacy coins differentiate themselves from regular cryptocurrencies by making transaction connections more challenging.
These coins’ cryptographic techniques, such as stealing employee addresses, Zk-SNARKs, and ring signatures, safeguard user wallet balances, addresses, and transaction details. It is important to note that while coins enhance privacy, complete anonymity cannot be guaranteed, and compliance with local regulations is paramount.
Monero utilizes ring signatures to obscure transaction details, rendering it impossible to definitively determine which key signed the transaction.
Upon signature, the protocol randomly selects several previous signatures and includes them in the transaction. This allows nodes to validate the transaction, while the blockchain record contains excessive information, preventing traceability to specific addresses.
To mitigate the risk of double-spending, Monero generates a unique cryptographic key output known as a key image for every transaction. Since the output is encrypted, reverse-engineering the transaction from its key image becomes infeasible. In the event of a double-spend attack, the protocol detects it based on the key image and rejects the second transaction.
Additionally, Monero incorporates stealth addresses, generating one-time addresses for each sender and recipient in every transaction. This further enhances the difficulty of tracking payment flows.
Privacy coins utilize cutting-edge zero-knowledge technology to validate transactions without public blockchain records of the transaction details. This enabling technology, known as zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge), was developed by the Zcash team to facilitate private ZEC transactions.
Protocols like CoinJoin were initially devised to enhance transaction privacy in Bitcoin and Dash. These protocols achieve this by combining multiple payments from different senders into a single blockchain transaction, making it challenging to link inputs and outputs and identify the respective sender and recipient for each payment.
Cryptocurrency is still a young and poorly controlled area. It still offers anonymity and privacy, but it’s not offered by default. You need to go the extra mile to ensure no one can link you and your wallet. Quite frankly, privacy in the cryptocurrency sector can offer many benefits that are not available in any other sector of financial transactions.