Privacy coins are simply coins that let you transact privately. Peer-to-peer transactions (transactions without an intermediary) are not always private. Blockchain transactions had a connotation of being anonymous. But is that always true?
With a public ledger like Bitcoin or Ethereum, transactions are open for the world to see. Anyone who knows your public address knows how much crypto you hold and where you’ve sent them. Privacy coins help address this problem by hiding 3 key information: the sender address, the receiver address, and the amount of transaction.
But it doesn’t stop there. As technology advances to provide greater security and privacy, so do the threats to privacy. And the corporate world is not helpful either. Major corporations have built their businesses centered around user data as they greatly benefit from them. Governments have laws in place to protect the privacy of their subjects, but only to a certain extent. When it comes to finances, these laws only take away whatever privacy is left for the user. Thus, there is a growing need for an ecosystem that focuses on privacy.
Ethereum’s announcement of implementing a second privacy layer using zk-rollups has also resulted in a lot of attention to privacy. Ethereum, the second-largest coin in terms of market cap, is looking to apply the zk-SNARKS protocol by way of a second layer. This is a strategic move to make the coin more scalable, fungible, and private.
Beldex’s Privacy Architecture
Beldex privacy coin utilises the Cryptonote privacy protocol to anonymize transactions. It uses three key elements of cryptonote namely,
Ring Signatures: Ring signatures are used to obfuscate the sender, where the sender’s input is mixed with inputs from many others. Thus the sender’s identity is obfuscated.
RingCT: Ring Confidential Transactions make it possible to verify the inputs and outputs in a ring transaction. Thus, the amount sent by the sender is obfuscated.
Stealth Addresses: Stealth addresses protect the identity of the receiver. The stealth address is an integrated address that can be shared with the sender to receive funds, but doesn’t compromise the receiver’s identity. Funds sent to the stealth address are received at the main address.
How does privacy add fungibility?
Fungibility is the property of any fiat currency that maintains the same value between all of its equal denominations. In cryptocurrency, fungibility is termed as the ability of a coin to maintain the same value between all of its fractions, that is, 0.1 BTC = 0.1 BTC, regardless of market dynamics. No one coin or fraction of a coin will value less than their counterparts. However, Bitcoin and other digital currencies run the risk of an individual coin losing its value over being ‘tainted’ – coins that are stolen or used in illegal activities. But privacy coins are inherently fungible, meaning, no single coin or their units will lose their value against their counterparts within the same network. This is because there is no history that can be traced back to the coin’s origin.
No matter the era, threats to privacy have always been toe-to-toe with developments in privacy-preserving technologies. Beldex’s blockchain-based private ecosystem is aimed at providing absolute privacy to its users. Join our community to know more about the recent developments!!