Bitcoin, as good as it is as a cryptocurrency, is not a very good currency if you want privacy. Transactions are all public, which makes it easy to trace the identity back to a wallet with a little work.
Fortunately, there are cryptocurrencies that focus on privacy. This article will cover some of the best privacy coins.
The best privacy coins
Here’s our list of the best privacy coins. There are more privacy coins than listed, but we’ve omitted these privacy coins because they’re simply not as popular and are simply a spin-off of the more popular privacy coins.
Monero (XMR)
Monero is the most popular privacy coin. It has a market cap of $1.5 billion, making it the 15th largest by market cap.
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Both features make it extremely difficult to track.
In other words, Monero uses RingCT to hide the value in a transaction and add an extra layer of security.
In terms of security, Monero (XRM) is the most popular and well-known privacy coin. It's not perfect, no privacy coin is perfect, but your privacy is guaranteed against all but the most persistent trackers.
DASH (DASH)
DASH is a fairly standard cryptocurrency, but it has a privacy feature that allows senders to send transactions anonymously.
This is done by splitting a transaction into separate sending wallets for added security. Of course, a private transaction costs a bit more in fees because it uses more resources, but the extra expense is worth it for the added privacy.
Dash has the 33rd largest market cap of any cryptocurrency, with a market cap of $1.2 billion.
ZCash (ZEC)
ZCash is another privacy coin. The difference with ZCash is that it uses a different method than other privacy coins to promise privacy.
This method is a crypto strategy called Zero-Knowledge Proof. Basically, it means that miners and the blockchain do not need to know the real wallet address to confirm a transaction.
This obviously obfuscates the wallet address, making it nearly impossible to trace. Many have compared this type of cryptocurrency to an SSL certificate on a website.
ZCash has a slightly smaller market cap than DASH at $1.13 billion and a market cap ranking of 35th. However, ZCash is a little more popular and widespread than DASH because ZCash focuses exclusively on privacy, similar to Monero.
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VERGE
Verge is another privacy coin. But it’s not particularly popular with a market cap of $104 million and a market cap ranking of 111.
We’re including Verge, however, because it relies on Tor to keep users anonymous. It’s very creative of Verge to use an existing technology to promise user privacy.
Of course, there are many questions about Tor's privacy because anyone, including governments, can set up a Tor node and sniff incoming and outgoing traffic.
That said, Verge is still a decent privacy coin. It's a little too small and I ignore it to be useful.
Privacy Coins – FAQ: Frequently Asked Questions
Why use privacy coins?
People associate privacy coins with illicit transactions. And that's true, privacy coins are often used for illicit transactions.
In fact, this is probably the most general reason for someone to use a privacy coin.
However, this isn’t the only use for a privacy coin. Many people use privacy coins because they don’t like the idea of their transactions being tracked.
We like to think of privacy coins as money, while public coins like Bitcoin are more like a credit card with the amount of tracking they offer.
Will privacy coins be banned?
A general concern with cryptocurrencies regarding privacy coins is that they will become illegal at some point in the future.
This is a valid concern – privacy coins are difficult to track and tax, so governments have an incentive to ban them.
The problem with banning privacy coins?
They are private, which makes them difficult to track.
That said, privacy coins will likely face more regulation as they become increasingly popular. It's difficult to regulate anything that focuses on privacy.
Are privacy coins really private?
Another general concern for anyone using privacy coins is how private privacy coins are.
The simple answer is that everything can be tracked with enough resources. But privacy coins make tracking so difficult that it's not worth tracking except for the most serious reasons.
There is also an easy way to make yourself harder to track when using privacy coins. Simply send the coins to a few different wallets.
This works because privacy increases with more transactions under the guise of how the blockchain works for these privacy coins. For example, Monero users often send their coins to a few new and different wallets to make the transaction virtually untraceable.
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It’s an easy way to make your privacy coin usage even more private. And it’s the strategy that most privacy coin users use, so it’s what we recommend.
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Can Bitcoin be private?
Bitcoin can be made private with something called a bitcoin mixer. A bitcoin mixer is basically an automated program that mixes bitcoin from unrelated wallets with the intention of making it difficult to trace.
The problem with bitcoin mixers is that they are expensive, can still be traced, and can even be scams.
We do not recommend using a bitcoin mixer to anonymize bitcoin for these reasons, but it is possible for a good bitcoin mixer to anonymize your bitcoin.
Summary
Privacy coins are an increasingly popular section of cryptocurrency. Unfortunately, they are often associated with illegal activities, which attracts the attention of regulators and law enforcement officials.
That said, privacy coins follow the principles of a decentralized and anonymous currency much better than more popular cryptocurrencies like Bitcoin, Litecoin, and Ethereum.
Overall, if privacy is important to you for any reason, using a privacy coin is the only option.