You have probably heard of the word "privacy coin". But, What are privacy coins? And how are they different from public coins?
What are privacy coins?
A class of cryptocurrencies offering anonymous blockchain transactions is a private cryptocurrency or privacy coin. In order to obscure the origin and destination of crypto currency transactions, some techniques used in trading cryptocurrency assets include hiding a user's real wallet balance and address, and mixing multiple transactions with each other to elude chain analysis.
Private cryptocurrencies, however, provide untraceability and anonymity. While untraceability renders it practically impossible for other parties to retrace the trail of transactions using services like blockchain analysis, obscurity obscures the identity behind a transaction.
How privacy coins are different from public coins?
The best-known cryptocurrencies like Bitcoin, Ether, Dogecoin, Shiba Inu, and others are public as their transactions are completely transparent. Although these cryptocurrencies offer some degree of anonymity to users as they allow them to operate under pseudonyms, all transactions on the blockchain can be viewed by any person who has access to it.
By design, transactions of these cryptocurrencies are linkable and traceable. Therefore, organizations dealing with sensitive information—like commercial contracts or individuals' personal information—prefer to join a private blockchain. Private blockchains include Monero, Particl, Dash, and ZCash. These platforms allow users to transact without making the data public.
While these "private" blockchains also have public open ledgers, they allow different levels of permissions for users. Thus, access can be restricted and transaction information can be encrypted to protect confidentiality.
What Are Privacy Coins? How Are Privacy Coins Different From Public Coins? Hopefully, this article can help you to get a better understanding of privacy coins.
