Bitcoin was deemed a revolutionary idea that would change the idea of money forever. After its historical genesis block in January 2009, many internet techies started to look at Bitcoin as something that’s not just new in terms of technology but also in terms of finance. Yes, Bitcoin was the first technology that attempted to challenge the domination of fiat currency as a medium of exchange in our society.
Since Bitcoin became popular, some crypto enthusiasts started to see its shortfalls. They believed that Bitcoin lacked the privacy features to be truly considered as “currency”. Yes, as everybody knows, most people want to be as discreet as possible when it comes to their money transactions. And they want to use the same logic when it comes to blockchain transactions.
And then, some developers started to develop privacy coins to solve this issue. Unlike Bitcoin, these privacy coins prioritize privacy as their main feature. They still have decentralization and immutability, but they also believe that everybody has the right to remain discreet with their transactions. The concept was widely accepted and these privacy coins quickly became very popular among the crypto fans.
Among all privacy coins, there are only two of them that have been able to truly caught the public’s attention. What are these privacy coins and why do they matter? Let’s take a look.
The most popular privacy coin is Monero (XMR). It was created because they thought a good cryptocurrency must fulfill three different aspects: privacy, security, and decentralization. While Bitcoin and some top altcoins at the time fulfilled the decentralization and security aspects, most of them seemed to ignore the privacy part. That’s how Monero could easily steal everybody’s attention with their privacy feature.
Monero’s privacy technology is called Ring Signature. It’s basically a digital signature anonymizer. Whenever you decide to sign a transaction, your signature will be mixed with non-signers inside the same ring for transaction authorization— the non-signers act as the decoy to help the signer cover his track from the public.
Monero has a unique key image for every transaction where the miners can verify if the transaction is being double-spent or not. Because of this feature, Monero can still verify each transaction while at the same time cover tracks of the transaction signers.
Monero is often seen as the public face of privacy-centric coins. Whenever regulators all over the world are concerned about privacy coins, they always point their finger to Monero to prove their points. At the moment, Monero is one of the most used cryptocurrencies in the darknet due to its privacy feature.
Another popular privacy-centric coin is ZCash. It’s almost as popular as Monero and some privacy coin enthusiasts label it as the superior crypto to Monero. The biggest difference between ZCash and Monero is that ZCash’s privacy feature is optional and not forced. Zcash core developers believe that it’s crucial to let the users choose whether they want their transactions to be public or private.
ZCash’s main feature is called zk-SNARKS, which is based on zero-knowledge proofs. In short, zero-knowledge proofs is basically the concept of verifying without having to prove it. For example, Andy goes into Bard’s room and Andy unlocks Bard’s deposit box. Bard doesn’t see the whole process of Andy unlocking his deposit box. Then, Andy tells Bard to check his deposit box and now Bard realizes that the deposit box is unlocked. In this case, Bard knows Andy has the key to unlock his deposit box because Andy was the only one going into his room.
This is zero-knowledge proof. You verify someone has the ability to do X without having to see that same individual doing X.
In zk-SNARKS, it’s a similar concept but it’s applied to the blockchain. In standard blockchain like Bitcoin, a transaction is considered valid when the input and output values are proven in the network. There’s always a link that connects the receiver and the sender. With zk-SNARKS, the transaction amount and wallet addresses can be concealed while the sender can still prove the input/output values of the transaction.
With this zk-SNARKS, ZCash has two addresses, t-address (public) and z-address (concealed). When the user opts to use z-address, the transaction can be hidden from public eyes. While ZCash is the first one that implements zk-SNARKS, many other blockchain platforms try to implement the same technology, such as Loopring and even Ethereum developers are experimenting with it.
Which One Is Better?
Between Monero and ZCash, it’s been a never-ending debate which one is better. Both of them have loyal supporters, and both of them try to prove a point in which one has more standout features. Monero has more adoption among privacy lovers because its privacy feature is turned on by default while Zcash is not. However, Zcash’s zk-SNARKS has received worldwide attention and will be implemented in other blockchains. It’s hard to tell who will come out as the ultimate winner in the privacy coin space.