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Amid the recent market downturn, gold spot price has reached new highs of $2,882. However, for those looking for alternative asset classes to preserve wealth, cryptocurrencies offer a wide range of coins and tokens. While some of them have declined in price and may not appear to be a sound investment in the medium term, some privacy tokens stand out as an optimal bridge between fiat currencies and other cryptocurrencies or as a payment method for goods and services.
Is it safe to store and transfer them? Can some be more secure than others? Let’s take a closer look.
Privacy tokens are cryptocurrencies designed to enhance user anonymity by reducing transaction traceability. They use multiple approaches to conceal transaction details, including inputs, outputs and wallet balances.
Privacy tokens emerged as a solution to address Bitcoin’s inherent lack of anonymity. Bitcoin transactions leave identifiable footprints, and while cryptocurrencies are generally considered pseudo-anonymous, blockchain networks record extensive data for each transaction, including:
- Sender and recipient addresses;
- Digital signature that authenticates the sender;
- Transaction date and time;
- Transaction amount;
- Associated fees.
The specifics vary depending on the blockchain protocol and the cryptocurrency. Depositing crypto into a CEX typically requires passing the AML procedures, and verifying the source of funds. It is generally true that transactions made after withdrawal from centralized exchanges (CEX) are easily traceable — except when using privacy tokens.
Top 3 Privacy Tokens
Monero (XMR) is the most well-known privacy token with an almost decade-long history. Being 100% untraceable, it leads the market, holding a $4.2 billion market cap and an all-time price growth of approximately 13,100%, from $1.72 to $228.
Launched in 2014 on the CryptoNode protocol, this open-source coin uses:
- Ring Confidential Transactions to hide the XMR amount sent;
- Automatic one-time addresses for every transaction;
- Ring signatures to obscure which participant in a group authorized a transaction;
- Transactions over Tor/I2P;
- Dandelion++ to prevent linking transactions to specific IP addresses.
Worldcoin (WLD), a layer-2 solution on the Ethereum blockchain, is a project founded by Sam Altman, well-known for OpenAI. Although it offers a degree of anonymity, every new user must verify their identity by scanning their eyes to obtain their World ID, and the purchase of WLD is an investment in World ID.
While every transaction on the blockchain is considered secure, concerns arise about the concept of identification in a privacy token and the global storage of user data.
Worldcoin’s market cap currently stands at $1.3 billion, and its all-time price drop was approximately 40%, from $2.16 to $1.32.
Zcash (ZEC) is another privacy coin that focuses on selective transaction transparency. Since its launch in 2016, it has gained recognition and currently has a market cap of approximately $534 million. Its all-time price drop is around 40%, from $55 to $33.
Built on the Zerocash protocol, Zcash offers:
- zk-SNARKs to encrypt sender, recipient, and transaction amount details;
- Transparent addresses, allowing users to choose between private and public transactions;
- Selective transparency, allowing users to disclose transaction details at their discretion while maintaining privacy;
- Optional shielding, protecting transaction data from third-party surveillance.
Legal Status and Outcomes
Restricted in jurisdictions such as South Korea, Japan, and Australia, privacy tokens are still widely used by crypto-enthusiasts and those who prioritize financial privacy. While some argue that these tokens should be heavily regulated, only 1% of all transactions involving privacy tokens are deemed illicit, suggesting that such strict measures may be an overreaction.
Anonymity and transparency often stand in opposition in the cryptocurrency space. It is totally up to you to choose a side. You can opt for different tokens for different purposes rather than committing to only one.
The primary objective of privacy tokens is to safeguard your data and ensure your security.
* Always verify the eligibility of tokens in your jurisdiction. Some may be prohibited in your area.
David Prior
David Prior is the editor of Today News, responsible for the overall editorial strategy. He is an NCTJ-qualified journalist with over 20 years’ experience, and is also editor of the award-winning hyperlocal news title Altrincham Today. His LinkedIn profile is here.
