On a scale of 1 to 10, how concerned should you be about your privacy when you transact on the blockchain? If you fall below 7, you are missing some of the most pressing threats to your crypto the industry faces today.
Here’s why: privacy has become a vital part of who we are in our daily interactions with the world around us. Your transactions are your private business, and yet blockchain as whole stores all of your financial data, often visible to those who know how to access it.
In this article we’ll cover the essentials of decentralized finance (DeFi) and privacy (PriFi) solutions, why they matter, and why they should be considered when you transact on the blockchain. We will also help you understand the three major privacy coins on the market and cover their unique offerings.
An Introduction To Private Finance And Why PriFi Matters
Blockchain technology has gained institutional acceptance, but with that should come a demand for privacy. Without it, both institutions and regulators will likely seek to extract as much information as possible from your data, using it for whatever means they deem necessary at the time.
Unfortunately, privacy isn’t even an option on most blockchains. The classics like Bitcoin and Ethereum fall short here as well. Furthermore, it unfortunately doesn’t seem to be the community’s priority to encourage or integrate privacy, as ironically growth, price, and technological developments take priority above all else.
The challenge is further compounded by the fact that the DeFi, non-fungible tokens or NFTs, and the metaverse communities have, for the most part, put privacy on the back burner as well. Again, maintaining the network required to participate in complicated transactions, while at the same time providing genuine privacy is tough.
This is where private finance (PriFi) enters the picture.
Protocols that allow for anonymous transactions are just now starting to progress beyond the most basic privacy coins.
Why use a privacy coin?
Monero, Dero, and Haven, are privacy coins that use UTXO-based chains to enable transaction secrecy in their native tokens. UTXO blockchain is accounting-based rather than account based (such as the Bitcoin and Litecoin blockchains). UTXO chains have no accounts or wallets. Instead, coins are a list of UTXOs.
This provides more privacy than your standard token.
While UTXO tokens are incompatible for DeFi at the moment, and make yield farming impossible, they are highly efficient for discreetly holding wealth, conducting payments, and in the case of Haven, allowing for privacy focused stable assets.
Rather than having your wallets and transactions viewable by anyone with the technical capability (think hackers, scammers, regulatory bodies, or even centralized companies), your assets and transactions are completely privatized.
How do privacy tokens work?
To protect the privacy of its users and the activity they engage in, privacy coins encrypt transactions on their blockchain.
The parties involved in a transaction will be aware of the money changing hands and the other parties. However, no outside observer will be able to get the same information. The protocols themselves, as is the case with Monero or Haven, can’t even view the transaction data without viewkeys that can only be provided by the sender.
In contrast, whenever a transaction is recorded on a public blockchain, the sender, receiver, and traded amount are visible.
Let’s look at how these three popular privacy coins on the market, Monero, Haven, and Dero, obscure this information in different ways.
A Review of Monero
What is the Monero Project about?
A group of anonymous developers launched Monero in April of 2014. Despite its privacy-focused features, Monero leverages the same underlying blockchain technology as Bitcoin (BTC) and Ethereum (ETH), known as the proof of work (poW/RandomX) algorithm, to validate transactions.
Monero’s blockchain hides all transaction details, including the identities of the senders and recipients and the amount of each transaction, by hiding the addresses used by participants.
Designed to function as an electronic form of currency, Monero’s native token, XMR, eliminates the need for wire transfers, check-clearing costs, multiple-day holding periods, and fraudulent chargebacks.
Features that make Monero different?
Users’ identities are kept secret by default by utilizing the following:
- Ring signatures.
- Stealth addresses.
- Ring confidential transactions (RingCT).
Anonymous digital signatures, also known as ring signatures, allow senders to remain anonymous to other group members. To protect the privacy of the recipient, each transaction is assigned a unique stealth address. To protect the Monero network’s privacy, all transactions must be conducted via ring confidential transactions (RingCT).
On average a new Monero block is mined every two minutes, and there is no maximum block size.
A Review of Dero
What is the Dero project about?
Dero says that their ultimate goal is to establish a unique blockchain technology ecosystem with privacy, so that private smart contracts can be created.
By combining both smart contracts and privacy, Dero aims to allow developers to build applications, but have users maintain control over their assets and transaction data.
Features that make the Dero project different?
Although recorded in a distributed public ledger, CryptoNote transactions are untraceable through the blockchain and do not reveal the identity of the sender or receiver.
- Privacy via CryptoNote technology
- Private Smart Contracts
A Review of the Haven Protocol
What is the Haven Protocol about?
Haven is built on a fork of the Monero code base mentioned above. Widely regarded as the most advanced privacy technology available in crypto today, Haven contains all of Monero’s privacy features with improvements.
Haven has also added stable assets to their privacy offerings, giving investors the ability to avoid the volatility of the market, while maintaining their privacy. It represents the world’s first and only private stable coin offering.
Features that make the Haven protocol different?
Haven offers complete anonymity and privacy, across a diverse range of assets. Leading the PriFi movement, Haven is the only privacy protocol to offer the world’s first privacy focused stable coin (xUSD), alongside other private currency options.
- The World’s first privacy stable coin offering
- Multiple private assets – xGBP, xEUR, xYEN, xAU (gold), and more.
Haven continues to push the boundaries of the PriFi movement forward, leading investors to the most privacy focused opportunities in the market.
The Future Of Privacy
Privacy is cryptocurrency’s most pressing challenge.
Most miss or ignore it, because the short term attraction of price movement is far more tantalizing. Yet as adoption grows, institutional players continue to enter the market, and governments around the world look to regulate the space, privacy will become the deciding factor of the industry moving forward.
There are PriFi solutions that exist in the space today, like Monero or Haven, who are pushing the boundaries of blockchain speed, transaction capability, and privacy all at the same time.
The question is: will you unwillingly give all of your financial data to companies and regulatory agencies, risking the hard earned wealth that you have built?
Or will you seek a different path? One that gives you the ability to choose your financial exposure. This is the ultimate question that you’ll need to answer. Thankfully there are resources and teams out there who are looking to help guide you.
Why not join the Haven community to learn more about PriFi and crypto privacy?
Author bio:
Rarecommons fell down the rabbit hole of blockchain technology in 2017, quickly realizing that the privacy aspects of the technology are still in its infancy. After looking into available alternatives, Rarecommons chose to support the Haven Protocol project and community, to help its Monero-based private stablecoin ecosystem develop and reach a broader audience. Convinced that innovations like Haven Protocol help us all to see what is possible and set the stage for a brighter future, Rarecommons helps push the Haven technology to new heights. Take a look and join the community by going here: https://havenprotocol.org/