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Privacy coins or tokens are types of cryptocurrencies built especially for privacy and anonymity. It uses advanced cryptographic methods to obscure transaction details, helping users remain anonymous and keep their wallets and transactions private.
Transactions on blockchains are not entirely private and can be traced through wallet addresses and other transaction data. However, these are not possible with privacy coins. Privacy coins’ transactions are challenging to trace as details such as wallet balances, transaction amount, and transaction history of senders and receivers remain hidden.
Privacy coins run on decentralized blockchains, similar to other cryptocurrencies, and are maintained by anonymous validators. Privacy coins use advanced cryptographic methods such as stealth addresses, zk-SNARKs, and ring signatures to maintain users’ privacy and anonymity.
Stealth addresses enable creating a new address for every transaction to protect users’ privacy. Some privacy coins use a complex version known as dual-key stealth address protocol (DKSAP).
The zk-SNARKs method allows validators to validate a transaction without revealing the details of both sender and receiver. It confirms that a transaction has occurred on the blockchain, but doesn’t reveal any other details such as parties involved and amount.
Ring signatures offer privacy and anonymity by adding random signatures to prevent linking the transaction to an address. Thus, more ring signatures provide more privacy.
According to CoinMarketCap, there are over 90 privacy coins in the crypto market. The best privacy coins are Monero (XMR), Zcash (ZEC), Decred (DCR), Oasis Network (ROSE), and others.
Monero and Zcash are the top privacy coins. However, these are criticized by governments for their privacy features.
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