When Satoshi Nakamoto created Bitcoin, he spoke highly of the potential of “digital, electronic cash”. But the first real use of Bitcoin in the first days after its launch was the purchase of illegal goods on the Internet. Of course, it later turned out that Bitcoin is not really anonymous. The identity of the sender can be traced by analyzing the transaction records in the public blockchain. The attendant risks have led to the creation of a number of anonymous coins, which provide 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.
Coinbase team member and founder of 1confirmation Nick Tomaino says that “Monero (XMR) is currently the leader among anonymous digital currencies.”
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 if a particular 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. These 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 find out 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.
Anonymity is, of course, wonderful, but do not forget about the convenience for the average user. Monero in this regard at the height. Firstly, 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 the remote node. The ring size is set to 7. This means that for this transaction one entry will belong to the wallet shown, 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 gigabytes, 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 do not want to run your own full site, then you can manage the 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 for you than security, then a web wallet is suitable for you My moneroSupported by the main developer of Monero Ricardo Spagni.
Monero also enjoys great support for crypto-ope - at the moment XMR is trading on 98 different 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 attack of 51%. The approximate cost of such an attack would be about 1.51 billion dollars, 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 subjects 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 world 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, such as Paxful, Bitquick and Localbitcoinsthat allow you to buy bitcoins without telling the 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 send bitcoins from a Coinbase wallet to a merchant on a darknet, then such a transaction is not confidential, because anyone who has the address of your Coinbase wallet can look into the public registry and see that you sent money to the merchant on a darknet. The way of working mixers is quite simple: instead of sending your bitcoins directly to the recipient, you send them from the wallet to the address of the mixing service. Your bitcoins arrive in the general pool of bitcoins serviced by the service. The amount that you sent - minus the commission of 1-3% - is replaced by the corresponding amount in bitcoins 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 want to use a bitcoin mixer, it is important to conduct your own research and carefully check the selected mixer. On the Bitblender website, the most useful guide (English) has been posted, which we could find on the Internet on the topic of bitcoin mixers; The site also offers mixing services. Unlike Monero, our privacy champion, the anonymous use of Bitcoin usually involves using trusted third party services to protect your transactions. Although this is not ideal, it is suitable for those who are willing to take some risk for the sake of ease of use.
For fans of cryptography: Zcash
We do not recommend Zcash for most people who need confidential transactions. This is due to the fact that, although Zcash cryptography may be the most reliable among all the coins in our list, limited tools make it difficult to send anonymous transactions to the average user. Users do not often use the anonymous transaction feature in Zcash. In addition, this currency is not accepted by any of the seven darknet markets we have examined.
If you are interested in the latest developments in the field of cryptography, then Zcash can be an ideal coin for you.
As Vitaly Buterin said:
"If I needed 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 the 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 ZEC (Zcash Coins) is enough to send a transaction, and also make sure that these funds have been delivered to the recipient. At the same time, information on addresses of the sender and recipient should not be disclosed.
Zcash solves this problem with zk-SNARK (or "capacious non-interactive evidence with zero disclosure"). Zk-SNARK were developed by cryptographic scientists, and although they are built on sophisticated mathematics, they perform a fairly simple task in Zcash. As a rule, if you need to prove that you have enough funds to complete a transaction, you disclose your balance either on a public blockchain or on a centralized server. In the case of zk-SNARK, instead of showing your funds, you provide cryptographic evidence confirming that you have available means 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 obligationthrough which new coins are created for the recipient. It is impossible to establish a connection between the Coin who were burned and created.
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, 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…