Anonymous cryptocurrencies

egular readers probably understand that Bitcoin isn't an anonymous cryptocurrency — rather, it's a pseudonymous cryptocurrency. Because Bitcoin uses a public key to secure transactions, it is perceived as private because the key isn't linked to any identifiable information. But theoretically, information about a person using bitcoins can be gleaned over an extended period of time.

Fortunately, for those who want a truly anonymous cryptocurrency, there is a wealth of options out there and some of them are already household names. These include Dash, Monero and many others. With over 50 ‘privacy coins’ to choose from, it may seem difficult to determine which ones to go with, how they work and why one should consider investing in them.

Today, I'll lay out everything you need to know about anonymous cryptocurrencies including what they are, where to trade them and why they're worth adding to your portfolio. Why is interest in anonymous cryptocurrencies beginning to skyrocket? For many the answer is taxes. In the U.S. for example, the GOP have made it known that they intend to impose taxes on Bitcoin-to-Ether trading, and similar moves are being mooted in a number of other jurisdictions. With other regulations on cryptocurrencies in the works, both in the U.S. and offshore, coins that offer genuine privacy and anonymity will likely continue to grow in popularity.

Are privacy coins legal?
The short answer is, yes. The United States Senate deemed virtual currency a legal means of exchange in 2013. In North America, decentralized payment systems are considered a legitimate financial service.

Some countries, such as Canada, have ruled that virtual currencies are subject to anti-money laundering laws while the European Union have yet to issue an official decision regarding the use of cryptocurrency and it has fallen to individual countries within the EU to regulate virtual currencies. For instance, the United Kingdom permits the use of virtual currencies but they are subject to value-added tax (VAT) due to the fluctuating value of digital assets.

The 5 best privacy coins and where to get them
As mentioned, there are many privacy coins (and many more being created each month), but overall I consider these to be the best for private trading.

Dash (DASH)
Monero (XMR)
Zcash & Zclassic (ZEC and ZLC)
PIVX (PIVX)
Spectrecoin (XSPEC)

DASH
Dash's PrivateSend feature provides users with financial privacy by obscuring the origins of all funds. The Dash in your digital wallet consists of disparate “inputs” that serve as separate, discreet coins. It breaks these transaction inputs down into standard denominations and mixes them with the inputs of two other people without your coins ever leaving your wallet.

Dash utilizes decentralization and a chaining approach and uses a protocol which allows currency to remain fungible. This is an area where Bitcoin and other pseudonymous currencies are sorely lacking. Dash's network offers instantly confirmed, double-send proof, optionally anonymous transactions and an autonomous self-funding model via incentivized full nodes.

You can buy DASH from CEX with a credit card or via bank transfer. Kraken is another popular exchange with one of the highest trading volumes in EUR. It allows the buying and selling of DASH in DASH/USD, DASH/EUR and/or DASH/XBT pairs.

MONERO
Confidential transactions were added to Monero in January 2017 and this cryptocurrency has been blowing up ever since. By bundling the sending and receiving of public keys, Monero creates a “mixer” that conceals addresses and renders blockchain analysis all but impossible.

A number of awesome features are associated with Monero, not least of which is its high level of security and untraceability. The XMR network functions on decentralized distributed consensus technology, offering no centralized place of attack in the event of a breach. Unlike other popular cryptocurrencies, your Monero funds are not associated with your public address. So, if you share your public address with someone, they will not know how much money you have. Monero can be purchased on Binance.

ZCASH & ZCLASSIC
Like Bitcoin, there is a finite supply of Zcash coins, but distribution of the coins occurs at a much slower rate which results in artificial scarcity. Utilizing zk-SNARKS to protect the amount and recipient of transactions, Zcash is a transparent currency with a strong future in the space. This variant of a zero-knowledge proof of knowledge enables traders to reveal the number of coins they have to another individual without fear of any additional information being leaked to that person or persons.

Zcash's whitepaper gives prospective investors detailed information about the technical side of things, explaining that transactions are less than 1kB and take less than 6ms to verify. Zclassic is a fork of Zcash which effectively removes the 20% fee associated with traditional Zcash tech. Zclassic is beneficial to miners because they receive a full block reward for their mining efforts.

You can pick up these privacy coins at Coinbase. Those looking to convert bitcoins into Zcash can use Binance for quick conversion.

PIVX
PIVX provides completed fungibility and anonymity. Using a zerocoin protocol, PIVX protects the integrity of your funds and removes you from the “rich list,” thereby safeguarding you against malicious attacks. We've all heard about those AML/CMC compliance firms that track transaction history and blacklist coins. PIVX users are impervious to this kind of scrutiny thanks to their capacity for minting zPIV. By minting PIV, you'll never have to worry about merchants blacklisting your coins.

To ensure true anonymity, they have started implementing deferred broadcasting, funneling transactions through a delayed pre-broadcast phase. Users can buy PIV from several reputable exchanges.

SPECTRECOIN
Spectrecoin looks set to grow big and fast in the year to come. Developed with the aim of providing privacy tools for both financial transactions and communications, Spectrecoin fully encrypts all user activities with its OBFS4 intelligible protocol. Onion addresses prevent the nodes from being referred to by their IP addresses and anyone who attempted to track a user's web traffic would see the traffic coming from random nodes across the network.

With an ambitious roadmap that places privacy above all else, it's obvious why people are speculating that Spectrecoin will knock Onion right off the map. The Spectrecoin developers have even run a successful test to penetrate the “Great Firewall” of China. You can buy, sell or trade Spectrecoin at Cryptopia.