There are no doubt a number of you that have heard of Bitcoin.
You perhaps think of it as one of the most safe and secure forms of money that you can easily spend without anyone knowing what you are buying.
This is the common perception in today’s world and unfortunatly it is quite far from the truth. Bitcoin is only pseudo-anonymous. This means that although the address that you have does not have a name on it, all transactions can be tracked.
This means that with a concerted effort, a determined bad actor, be it a government or other individual, can get the better of you if they can attach your name to that address. This could be dangerous especially given the number of reports of Bitcoin kidnappings.
However, there are a currently quite a few cryptocurrencies that have addressed this issue head on and are trying to be the alternative that is completely secure and 100% private.
We will talk about these in this post.
Why Is Bitcoin Public?
This is probably one of the most important questions that needs to be addressed as it is fundamental to the need for privacy coins.
Bitcoin is public in the sense that it was designed to be completely open and decentralised. Everyone could confirm that the transaction has indeed taken place thanks to this public ledger called the blockchain.
These transactions have to be public in order for the cryptocurrrency miners to validate the transaction. Unlike centralised banks and financial institutions that will manage your account, miners are decentralised and will only examine the blockchain.
Something that is even more important about the blockchain is that these transactions can be tracked and verified. All transactions that have entered or left a wallet of yours can be tracked.
What Are Privacy Coins?
The main way that a privacy coin will differ from the likes of Bitcoin is because they are able to hide their transaction from the public blockchain.
When you send a transaction, the protocol makes use of advanced cryptography that is able to most appropriately hide the inputs and outputs of the transaction. With this, no external actor is able to look into the blockchain and identify your transaction.
There are a number of privacy coins that are currently on the market but one that is the indisputable leader is Monero (XMR). This is a cryptocurrency that was created in 2014 and has since emerged as the dominant privacy coin.
Before we delve into the technology that underpins Monero, let’s take you through the steps that are required in order to purchase your first Monero.
If you are going to be buying Monero, you will have to make sure that you are getting it from a secure location. There are only a few brokers and exchanges that will offer you Monero in exchange for Fiat Money.
One of the most recognisable brokers in the industry is IQ option. They are a fully regulated broker in Europe and currently offer their clients at least 16 different cryptocurrencies to buy.
If you wante d more information on how to use them as well as how to make the most of their platform then you should take a look at reviews of IQ Option.
There are other larger exchanges that you can use in Europe such as Bitstamp. The only issue with this is that they do not offer Monero. You will have to buy the Monero for yourself on an external exchange like Binance etc.
Why is Monero Secure
Monero is secure because they make use of three very important pieces of technology in their protocol. These are stealth addresses, key images and ring signatures.
Stealth addresses are created in order to hide your actual address from the public blockchain. These are one time addresses that are created at the time of the transaction in order to receive your funds. Given that they are one time, no one can trace the transactions that you have embarked on.
Key images are a way in which you can check the public blockchain to confirm that you have a transaction without actually having your address exposed. Each key image will scan the blockchain to try and identify all of the transactions that were destined for you.
The final piece of technology is the ring signature. These are essentially the manner in which Monero obfuscates the transaction and creates plausible deniability. What the ring signatures do is to use “dummy” transactions as part of the actual transaction.
By doing this, no one can actually artibute a particular transaction hash that has occurred to a particular address. They cannot say with certainty that a transaction that took place was merely reserved for you or whether it could be one of the dummies.
Monero used to have a default ring signature setting of 4 rings but in the recent network upgrade, they moved this to 7 rings minimum. This increased the robustness of the protocol and made sure that it would adequately hide the actual transaction.
So what does this mean for the future of cryptocurrencies and privacy coins?
Well, clearly Bitcoin cannot be seen as the most secure and private means to make a payment anymore. As more people use, so too does the technology evolve to the point at which identifying transactions becomes that much easier.
Monero and other privacy coins, on the other hand, are at the forefront of the digital revolution. There developers are some of the smartest people alive and the community is just as dedicated as the leaders.
As more people begin to realise that their Bitcoin transactions are being logged and tracked, the more likely they are to search for alternatives. When the benefits of Monero and other privacy coins becomes abundantly clear, demand will skyrocket.
As this happens, your investment in the coins will also increase in value and no one will know anymore or any less about the hidden millions sitting in your addresses.
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