Talk.26 Cryptocurrency Comparison: Privacy
One of the disadvantages of Bitcoin is in the lack of privacy. If you reveal your Bitcoin wallet address to your friend to receive or send Bitcoin, then your friend can see how much money you have in your Bitcoin wallet as well as your transaction histories since it is recorded on the public blockchain.
This privacy issue can be critical. For example, let’s assume that you are traveling in a dangerous country with a high crime rate and you made several transactions to buy something using Bitcoin. If someone makes a transaction with you, they can also check your Bitcoin wallet balance with negative purposes and you will not be able to guarantee your physical safety.
Unlike Bitcoin, coins such as Monero, Zcash, and Dash which are privacy-focused cryptocurrencies were developed to solve these kinds of privacy issues.
Let’s go over Monero among other privacy-focused cryptocurrencies in this episode.
Monero automatically applies privacy techniques to every single transaction made to solve issues of privacy.
Here are the main technological features of Monero;
- Stealth address
- Ring signature
- Ring Confidential Transaction
- Stealth address
First of all, a stealth address is an important part of Monero’s privacy techniques. Unlike Bitcoin’s blockchain, where all the transaction records including addresses and amounts of coins are publicly visible, the receiving address is not written down on the Monero Blockchain. In the case of Monero, a sender sends the amount to an automatically generated a one-time public key, known as the stealth address, rather than the recipient’s public address. Therefore, the output the recipient receives will not be associated with the receiver’s address publicly, which means the receiver’s privacy is secured.
2. Ring signature
The sender’s privacy can be protected with the use of a ring signature. The ring signature is a distinctive signature produced by a group of random other users fused together to authorize a transaction. When a sender makes a transaction, many other signers with the actual signer will co-sign the transaction, which makes it hard to identify who the true sender is. This feature is able to make the actual signer remain unknown and hide the origin of the transaction.
3. Ring Confidential Transaction
A Ring Confidential Transaction commonly refer to “Ring CT” is implemented to increase the privacy of both senders and recipients by hiding transaction amounts. The method of dispersing the transaction amount prevents any third parties from checking the initial transact amount.
Monero makes private details untraceable and financial transactions based on anonymity possible, but it is likely to be used as negative payment methods such as crime.