what defines a 'privacy coin'?
Privacy coins are a category of cryptocurrencies which offers anonymous peer-to-peer transactions within a decentralized networks. This means that the actual owners of wallets are unknown while transactions can not be tracked even though privacy coins work with an immutable ledger like all other conventional Blockchains. The following explains how this principle works out.
the benefits of 'privacy coins'
Privacy coins are a phenomenon existing since long time in cryptocurrencies. even though Bitcoin has anonymous wallet holder, all recorded transactions on the public ledger are publicly accessible for evryone. This leads to some pain points. Rich Bitcoin might be scared that their real identity is gonna pop-up threatening their wallets for hacker attacks. As well private enterprises and firms do not want to publicly make businesses and contracts visible for everyoe. Therefore privacy is an important and needed function for several reasons.
The most prominent examples of a privancy coin are Monero, Dash or ZCash. Monero was getting introduced in 2014 and is among the top cryptocurrencies in terms of market capitalization. It is offering a decentralized peer-to-peer (p2p) network especially focussing on the security and privacy protection of users by adding an additional security layer to the hayfork Bitcoin protocol. This security layer enables to obscure the sender’s and receiver’s address for the public and still allows decentralized, self-validating principles of a Blockchain.
issues of 'privacy coins'
Even though privacy coins continue to be in high demand, they are getting regularly criticized from financial authorities. Their argument is that strong user protection and anonymity creates an environment for illegal transactions like drug money. Even though financial regulators might not be in favor with privacy coins, the demand will probably never fade away as the need for secrete, anonymous transactions is unfractured in many legal and illegal industries.