When Satoshi Nakamoto created Bitcoin, he spoke highly of the potential of "digital, electronic cash." But the first real use of Bitcoin in the early days after its launch was the purchase of illegal goods on the Internet. Of course, it later turned out that Bitcoin is not actually anonymous. The identity of the sender can be traced by analyzing transaction records on the public blockchain. The accompanying risks have spurred the creation of a range of anonymous coins that enable secure and confidential transactions between users.
However, if a coin declares his “confidentiality”, this does not necessarily mean that he is one. The best anonymous proxies are based on true innovations in the field of cryptography, such as ring signatures and evidence with zero disclosure. The worst of anonymous Coin call themselves as such, but are unable to provide the necessary functionality.
In this article we will help you to separate the wheat from the chaff, presenting your recommendations on the best confidential rules and how to use them safely.
Best Anonymous Coin: Monero
Monero has earned the title of the best anonymous coin in our rating due to a combination of cryptographic guarantees and ease of use, as well as widespread use on the darknet.
A member of the team Coinbase and 1confirmation founder Nick Tomaino says "Monero (XMR) is the leader among digital currencies today."
Every transaction on the Bitcoin network is public. This means that from a public blockchain you can find out the balance of an address and get access to its entire transaction history. In Monero, you can check whether an address exists, but you cannot find out its balance or access the transaction history with its participation without the corresponding secret key.
This is ensured by two main cryptographic functions:
- Stealth addresses. Unlike Bitcoin, where coins are sent from one address to another, in Monero each transaction creates a stealth address: the sender deposits funds to a secret address that only the recipient has access to. Such addresses are visible only to participants in the transaction.
- Ring Signatures. If you use only stealth-addresses, then the sender of the transaction will still be able to know when the funds arrived at the recipient. And here ring signatures come into play. In essence, ring signatures mix transactions in the Monero network. Each transaction randomly selects funds from other transactions in a single unit. Thus, no network user will be able to determine the real address of the source of the transaction.
If it's hard for you to understand, then this Stack Exchange forum thread (English) provides a clear analogy. BUT here is another good and simple explanation (eng.) Monero versus Bitcoin.
Anonymity is, of course, wonderful, but do not forget about the convenience for the average user. Monero in this regard at the height. First of all, Monero is the only one on our list, all transactions with which are confidential by default. All other Coins require the inclusion of a specific function or a certain configuration process for anonymous transactions.
Monero is a vibrant ecosystem with many different wallets and tools that make it easy to send, receive and exchange Monero Coin (XMR).
The picture above shows the synchronization of the Monero wallet with a remote node. The ring size value is set to 7. This means that for this transaction, one input will belong to the shown wallet and the other 6 will be taken from the Monero blockchain.
There are several different wallet options for managing your XMR:
- Monero wallet on full knot. The safest way to use the Monero network is to launch a full-fledged host on your computer and use the Monero wallet. However, the Monero blockchain now weighs more than 60 gigabyte, so this is not the most convenient option. Here (Eng.) You can find a useful guide to running a Monero wallet on a full Monero node.
- Monero Wallet on a remote site. If you have limited hard disk space or you do not want to run your own full site, then you can manage Monero Wallet using a remote site. This means that you synchronize your wallet with someone else's copy of the blockchain. The main risk here is that the remote node operator may track the transaction by IP address. It is recommended to use VPN if you are using a remote site. Here There is a list of remote Monero nodes to which you can connect.
- My monero wallet: If you send and receive a small amount of Monero and convenience is more important to you than security, then a web wallet is suitable for you My Monero, supported by the main developer of Monero Ricardo Spagni.
Monero also enjoys strong support for crypto-ope - at the moment XMR is trading on 98 various exchanges. At the same time, tools such as XMR.to and ShapeShift allow you to anonymously exchange your XMR for other cryptocurrencies without having to log into your account on the exchange.
Although we consider Monero to be the best anonymous coin, it is important to remember that perfect anonymity is unattainable. As said Monero CEO Ricardo Spagni in Wired interview: “Confidentiality is not something that can be achieved definitively, it is a permanent job and improvement of its security methods.”
There is a possibility that there are still undetected errors in the Monero codebase that can be used to de-anonymize the network. In addition, Monero is based on the proof-of-work protocol, which means that it is vulnerable to an 51% attack. The approximate cost of such an attack would be about 1,51 billion, which seems quite a reasonable amount for such actors as, say, the state.
Despite these shortcomings, Monero is the best option for anonymous Coin for most users.
Second place: Bitcoin
Although Bitcoin can not be called completely anonymous, there are ways to make your transactions confidential, with a little effort. Bitcoin is the most widely accepted cryptocurrency in our rating, which provided it with second place.
As business angel Nawal Ravikant wrote,
“Bitcoin takes power from centralized entities and returns it to sellers and consumers, depositors and borrowers. Due to pseudonymity, Bitcoin provides some degree of transaction confidentiality. They can be traded like any currency. And finally, Bitcoin pointed the way to a single global currency - the fact that we have several global currencies with intermediaries and commissions for transfers between users is a mistake, not an advantage. ”
Bitcoin is often called pseudonymous cryptocurrency. This means that, although Bitcoin addresses are not tied to a real person, transactions on the Bitcoin network are recorded in a public blockchain and are publicly available. If someone can establish a connection between your identity and your Bitcoin address, he will be able to see every transaction you have already performed on the network, as well as see transactions involving this address in the future.
There are two options for using Bitcoin as an anonymous coin.
The first is to buy bitcoins anonymously.. Most people buy Bitcoin on centralized exchanges like Coinbase. These exchanges require users to provide real names and addresses - it's like writing your real name on the Bitcoin address with a marker.
Fortunately, there are many peer-to-peer services like Paxful, BitQuick and LocalBitcoinsthat allow you to buy bitcoins without telling your real name. These services bring together buyers and sellers of bitcoins and often offer anonymous payment methods, such as Amazon gift cards or even cash in person.
Remember that this method also has its drawbacks. A centralized service can store your IP address, allowing law enforcement to find you through it.
The second option is to buy bitcoin on a centralized exchange, and then use the so-called bitcoin mixer, to mask the connection between the address from which you bought the bitcoins, and the address to which you send them.
If you are sending bitcoins from a Coinbase wallet to a merchant on the darknet, then the transaction is not confidential because anyone with your Coinbase wallet address can look into the public ledger and see that you sent money to the merchant on the darknet. The way the mixers work is pretty simple: instead of sending your bitcoins directly to the recipient, you send them from your wallet to the address of the mixing service. Your bitcoins go to the general bitcoin pool served by the service. The amount you sent - minus the 1-3% commission - is replaced with the corresponding bitcoin amount from random sources and sent to the final recipient.
Since the bitcoins arriving at the recipient's address are no longer associated with the original address, the connection between the sender and the recipient is broken.
If you are looking to use a Bitcoin mixer, it is important to do your own research and check the mixer you choose carefully. The Bitblender website has the most helpful guide we could find on the internet regarding Bitcoin mixers; The site itself also offers mixing services. Unlike Monero, our privacy champion, anonymous use of Bitcoin usually involves using a trusted third party to secure your transactions. While not ideal, it is suitable for those willing to take some risks for the sake of ease of use.
For the crypto fanatic: Zcash
We do not recommend Zcash for most people who need sensitive transactions. This is because while Zcash crypto may be the most secure of all the coins on our list, the limited toolbox makes it difficult for the average user to send anonymous transactions. Users don't use Zcash's anonymous transaction feature very often. In addition, none of the seven darknet markets we reviewed accept this currency.
If you are interested in the latest developments in the field of cryptography, then Zcash can be an ideal coin for you.
As Vitalik Buterin said:
"If I wanted real privacy, I would most likely use Zcash."
But first of all, you should find out that not all transactions in Zcash are confidential by default. Anonymous transactions must be sent from a special "z-address", and the network commission for such transactions is higher.
Z-addresses intended for anonymous transactions are encrypted so that they become invisible to the blockchain. Balances associated with z-addresses are also encrypted, and therefore the only way to check a balance for a z-address is to own the corresponding private key. If both the address and the balances are hidden from the network, then there must be a way for the protocol to verify that the sender has enough ZEC (Zcash Coin) to send a transaction, and also make sure that these funds were delivered to the recipient. In this case, information on the addresses of the sender and recipient should not be disclosed.
Zcash solves this problem with zk-SNARK (or “rich non-interactive zero knowledge proofs”). Zk-SNARKs were developed by cryptographic scientists, and although they are built on complex mathematics, they do a fairly simple task in Zcash. Typically, if you need to prove that you have sufficient funds to complete a transaction, you disclose your balance either on the public blockchain or on a centralized server. In the case of zk-SNARK, instead of showing your funds, you provide cryptographic proof that you have funds available without disclosing any other information.
When you send an anonymous transaction to Zcash, zk-SNARk determines that the corresponding addresses exist and that the sender has enough funds to conduct the transaction. Then the relevant funds are “burned” and exchanged for metaphoric payment obligation, through which new coins are created for the recipient. The connection between the coins that were burned and created is impossible to establish.
Although the cryptography on the Zcash network is really cool, the biggest disadvantage of this cryptocurrency is the limited ability to actually use anonymous transactions.
For example, although several third-party wallets are available for Zcash, anonymous transactions only support two of them:
- Zcashd: Linux-based command line interface for creating and managing a Zcash wallet through a terminal shell.
- WinZec: wallet with a graphical interface for Windows.
If you are using a Mac, then you have almost no choice - you can either install Linux or use an unofficial community-developed application. Zcash-Applewhich audit was not conducted and in which there can be vulnerabilities.
So far, the limited distribution of Zcash and the lack of easy access to applications and wallets make it difficult to use this cryptocurrency on a daily basis, therefore, in terms of practical use, Zcash, in our opinion, is inferior to Monero and Bitcoin.
To be continued ...