How Secure are Privacy Coins?
The whole reason for owning privacy coins is to keep them private. Take their privacy, and they will be none other than altcoins. Without privacy, it will be easy to deanonymize users and access their secret transactions. According to reports by various users, numerous privacy-related issues are running around the privacy features of the privacy coins such as Zcash and Monero.
Core technology at stake
When it comes to controversy about the privacy of private coins, Zcash always stands on the top list. Zcash declared a “founders reward” scheme where 20% of all the mined coined in the initial four years were presented to the stakeholders. Zcash uses the Zk-Snakrs technology to provide privacy to the private transactions. The same technology is used by Zcash’s other private coins too, such as Zclassic, Zencash and Bitcoin private. What troubles Zcash the most is that their claimed private transactions are not private by default. According to the fact, almost 85% of all Zcash are visible to the public, and private transactions do not support some of the wallets by Zcash.
Reduction in shielded Zcash transactions are gradually happening
Some people don’t know the Zcash private currency issue. As a result, most of the user keep mining privacy coin, thinking they are anonymous with Zcash. If only a few people use Private transaction feature, then it will be easier for a hacker or monitoring agency to deanonymize them. The more people use shielded transaction, the more it will be hard for someone to deanonymize a user. For example, Tor network comprises a large scale of users, as a result, it is more effective. As the hidden feature in Zcash is not applicable by default, only a few people voluntarily select the private option. With such a limited number of privacy user, it becomes effortless for a three-traffic agency to track it.
According to the recent Snowden leaks, it has come to notice that The NSA is involved in targeting and storing encrypted web traffics. NSA thinks that if a person is encrypting his/her email, then there is something for him/her to hide. If in future, Google will decide to encrypt Gmail by default, then the sub-sea cables will be automatically tapped by the NSA to remove all the suspicious elements. Zcash has stated the privacy issues and declared that they would eventually shield all their transactions by default in coming days. However, their statement suggests that they are not doing it soon.
Providing optional anonymity is far from real anonymity
According to data, most users are using the default setting in Zcash. It’s not only a matter of concern that 85% of all Zcash are public, but also 69% of all Zclassic transactions are also don’t have shielded feature. The privacy issue also lies with Verge, a privacy coin platform. In Verge, the privacy feature of the coins is always in controversy cycle. As a consequence, only a small number of users use Verge.
Z-cash family of coins is reliable on technology is known as Zk-Snarks, whose setup is based on the fact that the creator of the coins has not retained a private master key. One can merely agree that cryptocurrencies itself are trustless and one doesn’t need to rely on the goodwill of some other person. If anyone wants a transact in a robust anonymous platform, then he/she can opt for Monero. Even through Monero provides privacy by default, it is still on the radar of controversy.
Monero is also not a haven for privacy
The image of Monero may not be that questionable as Zcash, but some new research papers have raised some concerns about the privacy issue of Monero too. Monero currently uses the new Ring Confidential Transaction feature to provide privacy transactions. Researchers from various institutions such as MIT uses the Empirical Analysis of Traceability in the blockchain method of Monero. According to their report, before the use of new privacy feature, the transactions happened in Monero holds some kinds of vulnerability. The whole point of Monero is to mask a real coin transaction with the use spoof coins. However, even with new privacy feature, researchers can detect real coins about 45% of the time.
The core value of privacy
According to the revolution of Satoshi, the core purpose of blockchain was not just to be for the benefit of a Bitcoin user but allowing a person to enjoy full privacy. The whole point of privacy was to keep the true identity of a person hidden by an anonymous public key. In simple word, the entire point of privacy was to protect a real name by creating multiple personas of a person.
Satoshi further explains that with Bitcoin a person can see that a transaction has been made but he/she won’t find out about the parties involved in the transaction. The same applies to the transactions made in stock exchanges too. In the stock exchange, the size of the transaction is displayed to the public without revealing about the parties.
The core pseudonymity of Bitcoin did work at the initial stage. A user was able to separate his identity from his/her wallet. Things get worse with time as Bitcoin starts to become more regulated. Now to transact a person has to submit his/her email address and full name to create a KYC. Simultaneously, the development of blockchain mapping tool made it possible for law enforcement agencies to create virtual identities that lead to the arrest of computer programmer and founder of Silk Route, Ross William Ulbricht.
Riccardo Spagni, a core member of Monero, stated that achieving absolute privacy is impossible as it’s a cat and mouse battle. As of now, one can expect a pretty good level of privacy which could provide anonymity for the time being. Currently, the privacy of Monero is enough to ensure proper anonymity but assuming it to stop a three letter agency is still uncertain.
When it comes to privacy coins, Monero and Zcash may not be perfect, but it’s better to use a privacy transaction rather than not using any privacy at all. However, one can’t expect an exemplary level of privacy from them. The blockchain technology is going to stay but if someone finds a vulnerability of cryptocurrencies, but it may expose every transaction ever taken place.