TOP-3 anonymous cryptocurrency: Monero, Dash, ZCash. Technologies and Alternatives

Anonymous cryptocurrencies are peer-to-peer payment systems with their own internal unit of account, aimed at ensuring complete privacy of financial transactions through cryptographic protocols, which significantly complicate or make it impossible to audit network data.

Among the largest market capitalization of anonymous digital currencies: Monero, Dash and ZCash.

Cryptocurrency Monero

Monero is a peer-to-peer payment system with the same unit of account based on the cryptographic protocol CryptoNote, which ensures anonymity of transactions through ring signatures and stealth addresses.

The CryptoNote protocol was created by a person or a group of people under the pseudonym Nicholas van Saberhagen and was first implemented in the Bytecoin cryptocurrency , of which Monero is a fork [April 2014].

Initially, obfuscation of data in the Monero network was carried out by mixing the transaction inputs of different senders, generating one-time addresses for each transaction and hiding the amount transferred.

In October 2018, Monero developers successfully implemented hardfork with the activation of the Bulletproofs protocol, aimed at significantly reducing the size of anonymous transactions and commissions by replacing the RingCT mechanism (circular confidential transactions), which required a large amount of computation on the full node.

The Monero network uses the Proof-Of-Work consensus algorithm , which focuses on GPU miners. In April 2018, the developers implemented hardfork aimed at opposing ASIC devices .

Despite the high level of privacy, if an attacker manages to seize control of most of the network as part of the attack, then transaction can be deanonymized.

Cryptocurrency ZCash

ZCash is an open source peer-to-peer payment system developed by the Zerocoin Electric Coin Company using the Zerocoin and ZeroCash protocols from cryptographers from Johns Hopkins University, focused on ensuring the confidentiality of transactions through an evidence protocol with zero zk-SNARK.

zk-SNARK allows users to verify the truth of so-called secure transactions without disclosing parties and amounts, leaving only time stamps public. Moreover, all the coins are interchangeable and it is impossible to trace the history of their origin.

Users can also carry out public transactions from public addresses if they want to save on commissions, but the balance information will be hidden if the recipient is a protected address.

Note that at the end of October , a hardfork Sapling took place in the ZCash network, aimed at a significant reduction in the size of transactions, their acceleration, the transition to the new address format and the achievement of privacy by default. The update allows users to perform secure transactions from lightweight clients.

The ZCash network uses the Proof-Of-Work consensus algorithm, which is focused on GPU miners , but the developers have not yet implemented protection against ASIC devices, although the corresponding software is being developed by the non-profit organization ZCash Foundation.

Cryptocurrency Dash

Dash is a peer-to-peer payment system with the same unit of account, which appeared under the name XCoin as a fork of the Bitcoin protocol in January 2014. Until March 2015 was also known as Darkcoin.

A distinctive feature of Dash is not only the anonymization of transactions, but also the use of masternodes , equally sharing with the miners the reward for servicing the network. Masternody owner must deposit a pledge of 1000 DASH so that he does not have the motivation to act hostile to the network.

To ensure the privacy of transactions in the Dash network, the “PrivateSend” mixing mechanism based on CoinJoin technology is involved. Mixing coins is carried out by random masters during a certain number of rounds, hiding the link between the sender and the recipient.

Dash users also have an “InstantSend” mechanism for making instant payments with a higher commission. Transaction inputs using InstantSend evaluate a quorum of 10 masternotes that decide whether to confirm or reject the transfer.

The Dash network uses the Proof-Of-Work consensus algorithm based on the X11 hashing algorithm and the special Dark Gravity Wave complexity calculation algorithm based on Moore's law .

Why anonymous cryptocurrencies are often criticized?

Developments in the field of web extensions and malware allow you to use the computing power of personal computers and mobile devices for mining anonymous cryptocurrencies, in the first place – Monero. Some of these tools also cause significant damage to exploited devices.

Anonymous cryptocurrencies allow attackers who attack trading platforms or extort funds using specialized software [for example, WannaCry] to hide the movement of stolen money. The Financial Services Agency of Japan (FSA) obliged the bitcoin exchanges to withdraw Monero, ZCash and Dash from the auction. They also spoke about countering anonymous cryptocurrency in the US Secret Service.

From the point of view of technology, criticism is mainly reduced to the size of anonymous transactions, which requires a large amount of memory from the full node, but the mentioned updates in Monero and ZCash networks gradually solve this problem.

What other cryptocurrencies allow anonymous transactions?

BitShares platform offers users confidential transactions in conjunction with stealth-addresses.

On the ZenCash or Horizen network, a branch of one of the forks of ZCash, the zk-SNARK protocol is also involved, with the ability to send private messages along with secure transactions. Note that ZenCash has become the target of a successful re-expenditure attack.

The Verge network uses the IP address anonymizer and the Wraith protocol to perform private transactions. The Dash fork of the PIVX network also uses the Zerocoin protocol to hide all transaction metadata.