Why Go Anonymous?
A very complex question which has most definitely got through any crypto trader’s head at least once. There are a plethora of reasons why one would want to go anonymous, some simple, some ethically questionable while others much less so.
Even though cryptocurrencies are often associated with privacy and anonymity, it’s important to note that most cryptos have open-source ledgers and blockchains. For example, Bitcoin transactions can be anonymous (since there’s no sensitive data involved such as real name, ID, etc.). On the other hand, anyone can download the Bitcoin blockchain and with a bit of work and technical resourcefulness figure out the links between various Bitcoin addresses. In short, every Bitcoin can be traced to see where it came from.
Because of that, a new breed of cryptocurrencies was born. Dubbed privacy coins, their sole mission is to provide a fully anonymous way of trading for its holders. And, as far as privacy coins go, there are none better than Zcash and Monero.
They both aim to put people in control of their money, making government intervention or any type of third-party intervention almost impossible.
Officially launched in 2014 (and formerly known as BitMonero), Monero is actually a fork of an older cryptocurrency dubbed Bytecoin. Monero is powered by a unique protocol called CryptoNote which obfuscates transactions amounts and sending and receiving addresses, thus ensuring total privacy and no way of linking real-world identity with any transaction.
Zcash is a slightly newer cryptocurrency standing abides by the same moral principles. Launched in October 2016 (and formerly known as Zerocoin), Zcash is, in fact, a fork of Bitcoin. This might sound contradictory, but Zcash has added a zero-knowledge proof algorithm, also called zk-SNAR to ensure total privacy (by concealing sending and receiving addresses).
It’s somewhat different from Monero because users have to opt between the options of publicly or privately sending payments.
How does Monero ensure privacy?
Besides the CryptoNote protocol previously mentioned, Monero uses ring signatures, ring confidential transactions, and stealth addresses to obfuscate all the transaction-related details including the start and end points.
With Monero, every blockchain transaction has to be signed by a public key. This means that every ring signature contains a group of public keys which can authorize the transaction in question. In short, the transaction gets signed without the public key identifying the user.
Monero also uses multiple transaction inputs and outputs to hide transactions. Another feature used by Monero is ringCT, which ensures that double spending never occurs (it encrypts the amount being sent from one account to another). RingCT is also responsible for ensuring that the sum of the transaction is always greater than 0, thus eliminating the risk of extra coin creation.
Finally, Monero makes use of random, one-time address (also called Stealth addresses) created for every transaction. The system ensures that the transactions are kept hidden apart from the receiver and the sender.
How does Zcash ensure privacy?
As mentioned earlier, Zcash uses a protocol called Zk-SNARK. It allows nodes to ensure the integrity of the network. These nodes use hashes to check the accuracy of the information without revealing it.
Another worth mentioning technology that Zcash uses is something called homomorphic encryption. This technology allows the prover/sender to prove his piece of the equation without showing the value itself. In addition, it also uses polynomial equations and something called “trusted setup,” as Zcash is constantly trying to increase its security.
Advantages and Disadvantages of Monero
One of the main advantages of Monero is the fact that each XMR coin is the same, ensuring the end goal of the platform: no coin can be traced back to its origin. The network is designed in such a way that if many transactions take place, the layers of obfuscation actually increase in number. This ensures Monero’s security growth over time. It also means that with mass adoption Monero can potentially become increasingly more private and more secure.
As remarkable as Monero is for some, it’s not perfect. Monero currently suffers from a lack of public trust since it has become the de-facto cryptocurrency for hackers, cybercriminals and other types of criminals (for obvious reasons). Another big disadvantage comes from the fact that Monero is incredibly private and secure. There less wallet support for Monero than when compared to other cryptos.
Advantages and Disadvantages of Zcash
Zcash has a lead over Monero regarding wallet support, with both Ledger Nano S and Trezor offering support for it. This ensures a somewhat wider adoption rate. Because its base encryption engine can prove that transactions are accurate without supplying the data in a public way, it is a very secure platform, probably even more so than Monero.
In terms of drawbacks, Zcash uses two different types of addresses. As mentioned before it allows users to choose if they want private or public transactions. The “z” transactions are private, and the “t” transactions are transparent. Unfortunately, most exchanges only use the latter type.
Monero vs Zcash: Which is most private?
At least, in theory, Zcash has the potential of becoming the more secure platform of the two. However, in practice, Zcash struggles with mass adoption. Another struggle for Zcash is the fact that its unique privacy elements are not actually used in all the transactions. This is not something that happens on Monero where all transactions (without exception are private by default). Sure, there are various compromises in the way Monero achieves its privacy, as it uses far more complex elements, but, at the end of the day, Monero is more secure and more private than Zcash.
In spite of Monero’s lack of mass adoption and wide support from wallet providers, it manages to cling on to 10th place on CoinMarketCap, eight places higher than Zcash at the time of writing. For the user’s perspective, this is not an issue. However, from an investor’s perspective, that means quite a lot. It means that Monero, regardless of it being better or worse than Zcash in terms of privacy, is a coin that’s doing better in the current market.