A Necessary Trend: Privacy-Protecting Cryptocurrencies
How to maintain financial freedom despite dystopian CBDCs.
A change in awareness of the importance of privacy is slowly but surely taking place. The planned CBDCs, which are already being developed by 98% of all central banks, are programmable money in every respect. Individual freedom will be completely lost, control and manipulation by those in power will be perfected.
Anyone who recognizes the seriousness of the situation will inevitably ask themselves how they can retain a remnant of freedom and independence despite these dystopian CBDCs. No wonder that non-monitorable, privacy-protecting cryptocurrencies are attracting more and more attention.
The order of the day is to remove a portion of personal assets from the state's view and thus from its grasp as long as this is still possible. The closer we get to the launch of the planned CBDCs, the more the state will try to prevent this.
Precious metals play an important role as an anonymous store of value, but are highly unsuitable as a daily means of payment and in an emergency, these can often only be exchanged for less than they are worth. Privacy-protecting cryptocurrencies are therefore the ideal complement.
As we are only at the very beginning of a slow, broad acceptance of non-monitorable, decentralized private cryptocurrencies, it is difficult to choose one cryptocurrency or another. They all have advantages and disadvantages that need to be known.
In the future, too, we will need many different cryptocurrencies, as it will be impossible for one alone to cover all the necessary transactions and needs. Individual preferences determine the choice of cryptocurrency used.
Monero, Zano, Firo, Epic Cash, Pirate Chain and Zcash, to name just a few, use different technologies to make transactions secure, confidential and efficient.
Monero, the oldest and best-known private cryptocurrency with the highest liquidity, is based on the CryptoNote protocol. Ring signatures, stealth addresses and bulletproofs conceal the sender, recipient and transaction amounts. The larger the ring size, the more untraceable and anonymous the transactions are.
Although a larger ring size means more data protection, it also means larger transaction data. This increases the load on the blockchain and the processing time, as the verification of signatures becomes more computationally intensive, which has a negative impact on the speed and efficiency of the network.
Privacy protection using ring signatures is not entirely unproblematic, as the “Black Marble attack” on Monero in April 2024 proves. The anonymity of ring signatures was undermined by a wave of spam. It turned out that with the current standard ring size of 16, the effective ring size drops to 4 from a block size of 500 kilobytes and to 2 from around 1000 kilobytes. Monero's “Full Chain Membership Proofs” concept is designed to prevent such attacks.
In Japan, 18 fraudsters were arrested in October 2024 by analyzing Monero transactions. It is not known how those involved were identified. Chainalysis appears to be able to track Monero transactions. An anonymous source states that a multiple approach is used, utilizing both on-chain and off-chain data. Poisoned nodes are used as well as analyzing transaction patterns.
Zano occupies a special position among all private cryptocurrencies, as it has implemented a hybrid consensus mechanism of PoW and PoS, which enables staking with simultaneous privacy protection, as well as the possibility of creating your own projects on the Zano blockchain that adopt its privacy-protecting properties.
Ease of use and high customizability make it an ideal platform for decentralized applications (dApps). Like Monero, it is based on the CryptoNote protocol, which has been further optimized by the developers in terms of scalability through flexible ring sizes, depending on the desired privacy protection. Ring signatures, stealth addresses and bulletproofs also conceal all confidential transaction data.
The areas of application range from simple money functions to business models such as online marketplaces, where data protection and secure payments are essential. The priorities are stability and privacy protection.
Zano is therefore often called the “private version of Ethereum”. The focus is not just on the monetary function, as with the other private cryptocurrencies mentioned, but on the creation of a comprehensive ecosystem. Despite optimized scalability, this comes at the price of a faster growing blockchain, which may lead to decreasing scalability and increasing centralization in the future, as with Ethereum.
Like all other cryptocurrencies that use the somewhat outdated CryptoNote protocol and rely on ring signatures, Zano must strike a balance between privacy and network performance.
ZCash offers the possibility to choose between shielded and transparent transactions. In shielded mode, all components of a transaction that violate privacy - the addresses of the sender and recipient as well as the amount - are encrypted. With the help of so-called “zk-SNARKs”, it is nevertheless possible to check whether the transaction is valid.
The structure is complicated and difficult to understand, so only a few cryptographers understand the math behind it, which makes the code prone to errors. Shielded transactions are also very computationally and memory intensive, which explains why less than 2% of all Zcash transactions are encrypted at all.
Although zk-SNARKs offer a high degree of anonymity as they completely remove the link between sender and receiver, their seldom use is problematic as shielded and unshielded transactions are processed in different pools, making them easier to attribute to individual users. Researchers claim that 99.9% of all Zcash transactions are traceable.
Pirate Chain also uses zk-SNARKs, but unlike ZCash it does not allow transparent transactions, which contributes to a high degree of anonymity. The high computational complexity and increased memory requirements make Pirate Chain somewhat slow and less scalable, but offer very good privacy protection.
Firo relies on its own development, Lelantus Spark, which offers a high level of anonymity thanks to proprietary zero-knowledge constructs. It allows users to “burn” their coins and “mint” them again. This method improves privacy enormously by completely decoupling transaction histories. Firo has introduced so-called EX-addresses, which allow exchanges not to touch anonymous transactions directly. This helps with MICAR compliance and allows an exchange to perform refunds without complicated tooling. Also planned are “Spark Assets”, which have similar features to Zano but are based on the more modern Spark privacy protocol and also support NFTs.
Easy-to-use wallets that make privacy features easily accessible even for less experienced users are a clear plus point. However, just like all the privacy-protecting protocols mentioned so far, it has to deal with lower scalability due to the increased storage requirements caused by the encryption used.
EPIC Cash is based on the Mimblewimble protocol, which was originally a proposal for better scalability of the Bitcoin blockchain. The unique approach of exchanging data between sender and receiver outside the blockchain makes it possible to completely dispense using addresses on the blockchain, which offers strong privacy protection as a side effect. In addition, bulletproofs provide cryptographic evidence of transaction amounts without disclosing them. The “cut through ” unique to Mimblewimble removes data no longer required from the blockchain, which frees a considerable amount of storage space and increases both privacy protection and scalability at the same time.
However, privacy protection combined with a small blockchain size and good scalability of EPIC Cash also come at a price: although the user-friendliness is constantly being improved, transactions sometimes get stuck and cannot be finalized because the sender or recipient wallet fails to send or receive the necessary response file. Although no coins can be lost during this process, the transaction has to be canceled and restarted. Once this transaction issue is resolved, which is imminent, EPIC Cash will become the crypto solution Bitcoin was intended to be.
The development work behind all these cryptocurrencies varies greatly. Monero, Firo, Pirate Chain and EPIC Cash are mainly supported by open source communities that rely heavily on donations and volunteer work. Zcash is supported by the Electric Coin Company, which is more commercially oriented. Zano, on the other hand, benefits from a professional development team that drives innovative features forward, the funding of which was secured through premining.
Conclusion:
The choice of private cryptocurrency depends on individual needs. For maximum liquidity, Monero is the first choice. Zano, on the other hand, offers versatility with an entire ecosystem. Firo combines a high level of data protection with user-friendliness and will offer similar versatility to Zano in the future with “Spark assets”. Pirate Chain has good privacy protection, but is very memory and computationally intensive. Zcash is only interesting for those who want to carry out anonymous transactions sporadically and do not attach any great importance to privacy. EPIC Cash should be seriously considered by all those who value scalability and efficiency and want to ensure that even the de-anonymization of confidential data with quantum computers is no longer possible in the future.
Bottom-line, one would be wise to become familiar with all privacy coin options. As they say, you can’t buy insurance AFTER the accident.
All of the above mentioned cryptocurrencies can be traded at tradeogre.com, a non-KYC exchange that focuses primarily on trading private cryptocurrencies. The user interface provided is intuitive and easy to use.