Bitcoin was created due to the need for a decentralized and anonymous P2P cash system, it did achieve all it was intended to achieve except for anonymity and privacy which many believe is an essential characteristic of a decentralized P2P electronic cash system.
Financial services built on the blockchain are a break away from the traditional financial system and as such should mirror the traditional financial system but with better upgrades and options, this gave way to the advent of Privacy Coins whose sole purpose is providing its users an option to carry out anonymous transactions thereby granting them privacy amongst other benefits.
An evangelist of the theme of decentralization, privacy coins were largely based on the shortcomings of the Bitcoin network and would effectively tackle most of the shortcomings over the years.
- Usecase of privacy coins being primarily dedicated to anonymity which is unarguably a key component of a decentralized P2P cash system.
- An overview of the top 5 privacy coins using metrics such as market capitalization and technological infrastructure, other uses asides being a privacy token and user adoption.
- The top 5 in this article with Dash coming first due to its flexibility, easy usage and unique "mixer" features, Monero having the largest market capitalization among privacy coins, its ring signatures and stealth address features giving it an edge in privacy amongst others, ByteCoin also using ring signatures and stealth addresses just like Monero with nothing so unique about it, Horizen, unique amongst privacy tokens due to its technological infrastructure which offers a suite of tools for blockchain developers and also its use of ring signatures and stealth addresses for privacy measures, Verge, last but not least with its unique blockchain structure supporting up to 5 PoW algorithms and its extra privacy feature which hides IP address.
- About Pontem.
Privacy Coins and Tokens
From the word "privacy" it becomes obvious that usecases of these coins and tokens are primarily dedicated to anonymity, a key component of a Decentralized electronic P2P cash system.
The blockchain is a Decentralized and open source ledger, which means everything done on the blockchain is public and can be seen by many, every activity carried out on the blockchain can be seen and traced back to the origin.
Privacy Coins brought about a whole new meta to the world of Decentralization by bringing the option to carry out transactions with anonymity without compromising network security.
TOP 5 PRIVACY COINS
Widely recognized amongst privacy coins due to differences in technological structures, ease of usage and cost of operations are the following privacy coins.
These ratings are based on their different modes of operations and structure, most privacy coins are based on the CryptoNote whitepaper.
This privacy coin was introduced to the crypto ecosystem in 2014, known as XCoin first, it was later renamed to DarkCoin then finally called Dash which is a fork of Bitcoin as later privacy coins would turn out to be.
Its main difference is the consensus mechanism of it's network, Dash operates on the PoW consensus mechanism but also has an extra layer that hosts masternodes that are powered by a PoS consensus mechanism.
Dash as a privacy coin offered more flexibility when it comes to use, it's optional feature to make transactions anonymous, it's higher transaction speed due its extra layer of masternodes powered by a PoS consensus mechanism make Dash an easy to use privacy coin.
Dash as a privacy coin didn't offer natively anonymous transactions, there is an option to make transactions anonymous called the PrivateSend button.
Something interesting happens when using the PrivateSend option, adding to its uniqueness amongst privacy coins Dash has a feature that "mixes" coins. The mixer works by depositing coins from senders into a pool of other coins, that way it's impossible to know who exactly owns the coins but there's a proof of amount of coins owned by each sender, further boosting privacy, coins can be "mixed" up to 16 times with Dash.
Monero had its mainnet deployed in 2014, it was based on a concept described in a whitepaper written by Nicolas van Saverhagen(believed to be a pseudonym) in 2013 called CryptoNote. The main aim of this whitepaper was to solve a host of problems with the Bitcoin blockchain highlighted by the author which included the traceability of transactions, fixed block size to mention a few on the Bitcoin blockchain.
Monero's anonymous creator would then single out the problem of transaction traceability and fixed block size to go ahead and create a fork of Bitcoin called Monero.
Monero, one of the most successful privacy tokens gave its users private and seamless transactions on its chain and also sported a flexible block size which greatly improved transaction throughput though it's not as fast as Dash with its layer of masternodes.
Monero's privacy technology involves the use of ring signatures to prevent tracking history, stealth addresses which is a default privacy system.
Ring signatures are a form of digital signatures that can be signed by any member of a "ring".
Members of the "ring" all possess keys and it's therefore computationally impossible to decipher which of the keys in the ring was used to provide the signature used in signing a transaction.
Monero's ring signature system uses the signer's keys and random keys pulled from the blockchain to create possible members of a "ring", overtime past possible ring participants that have been previously used to form a ring can be used to form a pattern of possible signer's in a signature group.
This literally makes it impossible to determine which of the signer's keys was used in signing transactions, using this alongside Moneros' stealth address system which generates new addresses for each transaction carried out by its users making it impossible to link transactions to a particular account.
Each transaction looks to go into different receivers accounts when they all go into one particular address creating a form of mirage obscuring the recipient's address.
With a transaction speed of 1700tps at full capacity, natively anonymous transactions, Monero is arguably the best privacy coin with its wonderful features.
As every privacy coin or token is based on the CryptoNote whitepaper highlighting the shortcomings of the Bitcoin network so also is ByteCoin.
Anonymous transactions and privacy are also what ByteCoin offers its users in a style similar to Monero. ByteCoin uses ring signatures just like Moneros' and also uses stealth addresses (which are one time addresses generated for every transaction making it impossible to link a particular transaction to an account) as a measure of privacy for its users, it's not as widely accepted as Monero but its privacy methods are also safe and secure.
Operating a PoW consensus mechanism, nothing can be found on how fast its blockchain is and the absence of that doesn't exactly depict it as trustworthy.
ByteCoin doesn't top the list when it comes to user adoption and market cap amongst privacy tokens and it's mode of operations is quite similar to Moneros'.
Unique among privacy tokens with its blockchain infrastructure, framework and zero knowledge proofing methods Horizen claims to be beyond just a privacy token but also an internet of blockchains.
Founded by Robert Viglione in May 2017 Horizen stands out among privacy tokens and claims to not just offer privacy to its users but also a host of products aimed at boosting adoption.
The core chain which is Horizens' mainchain operating the Bitcoin PoW consensus mechanism acts as a "truth engine" for its sidechains.
Horizens' Bitcoin based PoW mechanism is augmented with a delayed block penalty, a tweak from just an ordinary PoW chain which adds to the network's security and discourages block rearrangement. Its infrastructure also supports a sidechain platform that provides fully functional and customizable developer tools that take away the complexities of blockchain construction, deployment and maintenance allowing developers to focus heavily on application logic. Horizens' base layer simply acts as a "truth engine" for the numerous applications on sidechains whose consensus is entirely decoupled from the core chain, stressing functionality, asides that the base layer also has no limits to what could be built, developed and extended on it.
Horizen claims an impressive transaction speed of 1000 tps per second on a single blockchain and up to 10,000,000 tps on 10,000 of its sidechains, these claims haven't been tested but it is without doubt that Horizen has a robust infrastructure.
Horizen as a privacy coin makes use of zk-SNARKs to offer its users privacy and anonymity. zk-SNARKs stand for Zero Knowledge Succinct Non-Interactive Argument of Knowledge.
This system allows users to prove they have a particular piece of information without giving up that information. Instead of handing over wallet addresses or information that's necessary for either withdrawal or receival, zk-SNARK will prove through a series of complex mathematical equations that you possess the required information to complete the transaction.
Horizen isn't just a privacy blockchain offering anonymous means of payments just like most privacy blockchains, Horizen offers its technology to developers to build their own customizable blockchains on, it offers two major toolkits on their website namely Blaze and Latus, Blaze allows you to build fast and decentralized blockchains while the latter gives developers the option to build fully decentralized blockchains.
Verge was launched in 2016 by Justin Valo though it was first launched in 2014 as DogecoinDark which was a then fork of Peercoin, it was later rebranded as verge in 2016.
Verge is a privacy focused payment system with a blockchain structure almost similar to that of the Bitcoin network, but with a multiple consensus algorithm, Verge network supports 5 different PoW algorithms allowing different people with different mining devices an equal chance to earn coins as miners on the network. It is one of the few cryptocurrency networks that support multi algorithm consensus mechanisms.
Based on the shortcomings of the Bitcoin blockchain as a method of payment, Verge also gives its users the option of anonymous transactions and privacy.
It uses stealth addresses just like some other privacy coins, generating new addresses for each transaction, it also uses Ring signatures like Monero and further boosts privacy by obscuring the IP address of its users.
Verge does this by routing transactions through the TOR network, this is an additional privacy measure for its users.
Verge supposedly can handle up to 100 transactions per second, which is not as fast as some privacy blockchains but it's still very secure and offers better privacy.
Privacy coins were created for the sole purpose of boosting the anonymity and privacy a peerless cash system should supposedly have according to the CryptoNote whitepaper, over time it has been used for both good and bad purposes alike which has somewhat formed a general misconception about privacy coins.
This is inevitable as every innovation will have its advantages and disadvantages, it is without doubt that privacy coins are a great and useful innovation
Creating solutions to problems has and will be the driving force which continues to push mankind.
The famous Blockchain Trilemma by Vitalik Buterin which consists of the issues of Scalability, Security and Decentralization is something most Blockchains have failed to fully achieve single handedly.
Focusing on the Security aspect, Pontem Network with it's primary language being Move focuses more on the security aspect though it sacrifices a little bit of it's scalability but then what use is a scalable network if it's not secure?.
Beyond building a wallet for the Aptos Ecosystem, Pontem Network seeks to develop the Aptos Ecosystem, increase developer interest in Move language and also increase user adoption.
Further speaking on Security, despite Move being a security based language Pontem Network has not only gone through one but two audits and will undergo a third.These audits were carried out by top security firms already familiar with Move Language OtterSec and Halborn.
Security is a crucial ingredient to adoption and Pontem Network fully grasps this.