How To Stay Private and Safe in Crypto Today?
Although blockchains provide a method of wealth transfer that is immune to censorship, its primary purpose was never to protect users’ anonymity. However, in the years that have passed since the introduction of Bitcoin, blockchains like Monero, Zcash, and Secret Network have established the infrastructure necessary to support private blockchain transactions. At the same time, coin mixing protocols such as CoinJoin and Tornado Cash provide users with the option to separate the cryptocurrency assets they possess from the identities they use in the real world.
Cryptocurrency is an open alternative to traditional finance. Blockchains like Bitcoin and Ethereum offer financial inclusion and openness, but not individual privacy. Several blockchain-based technologies let users stay private.
Monero is arguably the most successful privacy-focused blockchain still in use. BitMonero, launched in 2014, has persisted thanks to its best-in-class anonymity, privacy-preserving features, and active developer community.
Monero hides senders, receivers, and transaction amounts by masking participant addresses. Using ring signatures, zero-knowledge proofs, stealth addresses, and IP address concealing, the network hides transaction data.
In the eight years after its introduction, Monero has improved its security and privacy. In December 2019, the network switched from CryptoNight to RandomX to combat ASIC mining. The change made 51% network attacks harder and more expensive, improving network security.
Monero added ZK-SNARKs in May 2020. This boosted transaction speed, efficiency, and confirmations.
Monero’s fungible currencies maintain anonymity. Unlike Bitcoin, whose coins can be linked to every wallet they were in and when they were mined, Monero’s XMR coins are identical.
As Monero is the gold standard for crypto privacy and anonymity, crooks prefer it. Ransomware gangs, darknet marketplace users, and North Korean hackers have utilized Monero. The IRS has offered up to $625,000 for Monero tracking tools. Monero’s anonymity technology is why no bounties have been claimed.
Monero is the most popular privacy-protecting blockchain, but there are others. Privacy enthusiasts also like Zcash. Zcash employs zero-knowledge proofs to authenticate transactions without exposing sender, recipient, or amount.
Advanced cryptography allows participants to authenticate a transaction without giving information. ZK-proofs use a set of shared verifying keys to do this. These keys enable network members to cryptographically confirm ledger updates without exposing addresses or currency amounts.
Monero and Zcash are different. Zcash’s privacy features are optional, but Monero’s are required. While this mechanism makes it easy to broadcast transactions openly, it has compromised the privacy of individuals seeking to hide them.
Less than 20% of Zcash transactions employ complete privacy features. When a tiny percentage of users mask their transactions, it’s easier for an attacker to isolate them and impair their transactions’ privacy. All Monero transactions employ the network’s strict privacy scheme, so no transaction stands out and users keep absolute privacy.
Despite this flaw, Zcash’s technology is as secure as Monero’s. The system safeguarding Zcash transactions is theoretically unbreakable without network creation event keys. These keys might be used to attack the network by minting infinite new coins or fabricating transactions if they were not deleted.
Vitalik Buterin, co-founder of Ethereum, commended Zcash’s zero-knowledge cryptography as “cutting-edge privacy innovation.” He’s on the Zcash developer Electric Coin Company’s scientific advisory board.
Secret Network is a growing privacy-focused blockchain. Secret Network is Turing complete. It can handle smart contracts on Ethereum and Solana. The network is pioneering “Secret Finance,” DeFi apps using encrypted smart contracts.
Secret Contracts protect privacy by encrypting input, state, and output. Block height, time, chain ID, sender, address, transmitted money, and contract hash are not encrypted, unlike Monero and Zcash. Secret Network cares less about anonymity than other privacy-focused networks, but it still keeps user and smart contract interactions secret.
Private smart contracts are preferable than public ones. Secret Network transactions are immune to frontrunning since they’re never seen in the mempool. This means opportunists can’t use MEV, a common technique in which users pay to move blocks.
As encrypted “black boxes,” Secret Network’s smart contracts can handle sensitive data without broadcasting it. This assurance allows private blockchain networks to function on Secret Network, enabling compatibility with other apps.
Secret Network’s anonymity goes beyond its apps and tokens. Through “Secret Bridges,” users may bridge tokens from Ethereum or BNB Chain and leverage Secret Network’s privacy features. Bridged assets are only viewable to their owners or those with a viewing key. The Secret Network may employ bridged tokens.
Secret Network’s technology is untested, compared to Monero and Zcash. The network’s genesis block was coined in February 2020, although it has just recently begun enrolling members. According to Defi Llama, Secret Network has $40 million locked across its DeFi protocols, demonstrating its undeveloped ecology compared to other Layer 1 blockchains. Despite minimal use, SCRT’s market valuation is above $766.7 million.
While privacy-preserving blockchains offer excellent solutions to keep private, persons holding Bitcoin and Ethereum assets may also desire to retain privacy. Coin mixing services can break the trail of transactions between addresses, allowing users to keep their crypto wallets distinct from their real-life identities.
Coin mixing services have several uses. Security-minded people utilize mixers. Hackers, social engineering schemes, and even kidnapping target anyone with a lot of crypto money attached to their real-life identities. Wallets holding large sums of currency are visible on-chain and may be tracked to their owners with little effort. CoinJoins and Tornado Cash enable users to sever the link between high-value crypto wallets and their real-life identities, protecting them from being targeted.
CoinJoin exploits transaction privacy to hide the sources and destinations of Bitcoin transmitted between users. Users sign a digital smart contract to mix their funds in a new Bitcoin transaction, leaving participants with the same quantity of coins but mixing the addresses to make external monitoring impossible. Without a centralized operator, Bitcoin transactions are anonymous.
Greg Maxwell introduced CoinJoin in 2013, and it’s become a popular approach to protect Bitcoin privacy. The largest challenge in adopting CoinJoin was locating enough currency holders. Wasabi and Samourai have integrated CoinJoin, giving users a convenient method to join, mix currencies, and maintain anonymity.
While currency mixing protects Bitcoin privacy, CoinJoin may not be as safe as anticipated. Forbes journalist Laura Shin stated in February that Chainalysis “demixed” Bitcoins transmitted using CoinJoin to identify the 2016 Ethereum DAO hacker. Demixing CoinJoin is theoretically feasible, however it’s unclear if Chainalysis traced mixed Bitcoins or if the hacker made mistakes that betrayed his identity.
Read also: What are dApps?