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What is Privacy Coin (Altcoin)

Life And Crypto
3 min readOct 8, 2023

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Definition/Examples

  • Privacy coin is a type of cryptocurrency that work to prioritize anonymity and privacy of it’s user. So it’s simply work to make sure that you privacy is basically well protected.
  • Some of the most well known privacy coin is Monero (XMR) and Zcash (ZEC).

Usage

  • You might not know this but your transaction using most of the crypto that is available is pseudonymous by default.(In other words, people can see the details of your transaction directly from a certain blockchain)
  • So this is one of the major problem that privacy coin is helping to tackle in the crypto sphere. It basically help you in making sure that your transaction details such as wallet address and transaction balance stay hidden.
  • Privacy coins usually use the zero knowledge technology to allow any transaction happening without recording it in the blockchain.
  • Zero knowledge technology is a way for you to proof to the other person a statement or transactions is true, without giving them the detail of that statement or transactions. In some sense, it mean you just say that the transaction did happen and that people will believe you. (This one involved a lot of understanding in computer thing, so I can’t explain it in full details)

Pros and Cons

Pros:-

  • One of the benefits of using a privacy token is you transactions details is well hidden and you might become less vulnerable to hack. If the hacker don’t even know the details of your transaction such as your address, they will not have a chance to hacked into your wallet address.
  • This is great for business or company because it offer them with financial security and anonymity. You know business nowadays, it’s a about privacy and all things like that.

Cons:-

  • Privacy coin does have some problems involving it’s use case. One of that problem is chain hopping (moving asset from different blockchain to another in rapid succession).
  • You might ask why it is a problem, well let’s say a criminal do a chain hopping using two or more privacy coin to cover transactions of any asset that they get from criminal activity.
  • As I already stated, privacy coin give privacy to it’s user and transactions using only one privacy coin is already harder to trace compare to other crypto. Imagine doing chain hopping using two or more privacy coin, the asset that was move thought this way will be almost impossible to trace.
  • This is why some country ban privacy coin. It’s was use in a money laundering service by criminal to move asset without getting notice by law enforcement.
  • Other problems involving privacy coin is the high payment in using it. This one is kinda simple, the more extra feature that are available in a crypto the higher the payment that you need to pay.

Other/Conclusion

  • There was an argument about whether privacy coin is more vulnerable to criminal usage that the other coin. I think that argument stated that 90% of crypto wallet that were use in the dark web is a Bitcoin Wallet and only a small percentage of it is a privacy coin wallet.
  • I don’t think that argument is valid because not all criminal activity and transactions will happen on the dark web. I think they need to analyze it in a wider perspective of criminals activities to exactly know the full details.
  • I’m not saying that most criminals transactions will and should happen on any privacy coin blockchain, but the feature that its provide kinda make it an easy target for criminal to use. But let’s leave this sort of thing to the law enforcement and developer.

Feel free to read my other articles:-

  1. What is CBDC
  2. What is a Stablecoin
  3. What is IoT Token

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