Cryptocurrency Anonymity
In the early years of the Bitcoin network, cryptocurrency was considered to provide complete user anonymity. However, over time, technology experts learned to track and deanonymize Bitcoin transaction participants. In response, developers of several new cryptocurrencies implemented mechanisms that enable truly anonymous transactions.
Currently, the most popular anonymous cryptocurrencies inсlude Dash, ZCash, and Monero. Let’s examine how each of them ensures privacy.
Dash and the CoinJoin Method
Dash offers two types of transactions: standard and enhanced anonymity transactions, implemented via an optional feature called “PrivateSend.” This feature is based on the CoinJoin method, which involves breaking a single transaction into many parts and mixing them together.
It should be noted that in the Bitcoin ecosystem, there are third-party mixer services performing similar functions, but in Dash, this mechanism is built into the protocol, reducing the risk of fraud.
Nevertheless, CoinJoin only obscures the paths of funds and makes tracking more difficult but does not guarantee complete anonymity.
Zcash and Zero-Knowledge Proof Protocol
Zcash was the first cryptocurrency to not just enhance transaction privacy but truly anonymize payments: transactions are published on a public blockchain, but details about the sender, receiver, and amount are hidden.
This is achieved using the zk-SNARK protocol based on zero-knowledge proofs, which means the blockchain does not store full transaction details, making it nearly impossible to extract this information.
Zcash supports two types of addresses:
- z-addresses — protected by the zk-SNARK protocol;
- t-addresses — public and similar to Bitcoin addresses.
Transactions can be sent between these address types in any direction, which creates potential vulnerabilities and lowers anonymity. When coins move from unshielded to shielded addresses and back, anonymity decreases by approximately 69%. Behavioral analysis of users allows identification even of z-addresses.
Monero and the CryptoNote Protocol
Monero uses the CryptoNote protocol, which ensures complete concealment of the sender, receiver, and transaction amount.
This is achieved through technologies such as Ring Signatures, Stealth Addresses, and the fungibility of Monero coins.
Transactions are confirmed using private keys, making Monero one of the most anonymous cryptocurrencies available today.
Despite this, some researchers point out weaknesses in mixing algorithms and suggest that some Monero transactions could potentially be decrypted.
A distinctive feature of Monero is the absence of public, non-anonymous transactions — all transfers are hidden.
Conclusion
Currently, Monero is the most advanced cryptocurrency in terms of anonymity. It is the only one among those reviewed that does not allow for reduced privacy.
It should be noted that this article considers only the technological aspect without accounting for regulatory attitudes towards these currencies.
In addition to Dash, ZCash, and Monero, there are other cryptocurrencies focused on privacy and protecting personal data. The list of such projects is expected to grow over time.