Bitcoin may have made headlines more than any other cryptocurrency and essentially paved the way for the industry, but there are several other altcoins that are forging their own path. While some of the more high-profile ones, like Ethereum, Ripple, and Litecoin, are widely considered as the top competitors for Bitcoin, other altcoins focus on more niche markets and showcase features that are of paramount importance for some users – like anonymity. Anonymous cryptocurrencies have piqued the interest of investors and traders alike, with many underlining their increased potential for security. As cybercrime rates keep rising and hackers continue to target crypto exchanges and accounts, are anonymous cryptocurrencies a way to increase security with regard to your transactions?
Safeguarding your data when dealing with cryptocurrencies
One big concern in many industries as of late has been the ways in which companies can improve their data security. It is often said that data is the lifeblood of an organization and that also holds true for crypto exchanges. Individual user accounts hold a significant wealth of information, not least the altcoin tokens themselves. They also store and process personal data of users, which can be of use to hackers looking to commit identity theft or sell personal details on the black market. Sensitive information like banking details are very often included in this wealth of information, as crypto wallets are often linked to an actual bank account in fiat currency. Protecting all this valuable data from external threats, like cybercriminals, as well as internal threats, such as careless or negligent users, is the main objective of a sound data security policy. This includes deploying unified security policies across data hosted both on premises and in the cloud. While most of those security solutions are the responsibility of the crypto exchange, users can also take steps to make sure that their transactions are more secure – including examining the benefits of anonymous cryptocurrencies.
Anonymous altcoins take over: The case of Monero
When Bitcoin first started out in 2009, over 10 years ago, many people were under the mistaken impression that their transactions would be anonymous. But even though Bitcoin uses cryptography, its transactions can be traced – and this optional transparency is also one of the reasons why many regard Bitcoin as a very secure cryptocurrency. Once adopters realised that anonymity could be reversed in this case, they started looking elsewhere. Cryptocurrency developers were quick to catch on the appeal of complete anonymity, and anonymous altcoins started springing up. One of the most popular ones is Monero, which has been on the rise for a while now. But it really got a boost when it added the option to have confidential transactions, back in January 2017. Monero developers have incorporated ring signatures and transactions to hide both the sending and receiving addresses, as well as the amount of Monero exchanged. Furthermore, its network relies on decentralised and distributed consensus tech which makes it virtually impossible for intruders to find a convergence entry point in order to launch an attack. Last but not least, a Monero public address is not connected to the funds that are in your wallet, unlike other cryptocurrencies. So even if you send someone your public address details, they still won’t be able to tell how many tokens you have in your account – which minimises chances that hackers will get wind of your standing.
What users want: an increased focus on privacy
Dash is another anonymous cryptocurrency that is steadily gaining ground, with $1.4 billion in payment volume in Q4 2018, adopted by over 4,800 merchants and more than 90 exchanges in that same quarter, and featuring 42,500 active addresses on a daily basis with a median of 9,300 transactions per day during that same time. It offers a unique feature called PrivateSend which offers complete privacy and effectively conceals the origin of a transaction. It does so by breaking down the funds you wish to exchange into separate ‘inputs’ which are in turn broken down into smaller denominations like 0.1 or even 0.01 DASH. Then it mixes your inputs up with inputs of the same denominations from two other wallets, thus obscuring their origin without them ever leaving your account. It sounds fairly complicated and it is complemented by a decentralised approach which ensures that the cryptocurrency will remain mutually interchangeable so that this process can be repeated several times to offer even more privacy. However, Dash also offers double-send proof and immediate confirmation of transactions, keeping dealings secure. There are other coins, like Spectrecoin, which utilises OBFS4 intelligible protocol, or Zcash, the first cryptocurrency to implement the zk-SNARK zero-knowledge proof.
So, are anonymous cryptocurrencies more secure? Not necessarily, as security will also depend on how cautious and aware a user is – but they certainly offer a lot more potential for privacy. Depending on what your priorities are, anonymous cryptocurrencies can make it that much harder, if not impossible, for anyone to track down your activity. This is true not only for hackers, who are the main concern for private users, but also for anyone who might be interested in spying on you – like government agencies or competitors. If you really want to beef up your defences against prying eyes, looking into anonymous cryptocurrencies is certainly not a bad idea.