Grassroot Crypto Education | Series 2 Volume 12 - Privacy Coins in the Crypto Ecosystem | (#burnsteem25)

fredquantum (76)Crypto Teacher/500sp delin Steem Kids & Parents • 2 years ago (edited)

Introduction

Hello, kids of @steemkidss. How are you today? It's a great pleasure to be back again this week to continue our series 2, last week we discussed forks in the crypto ecosystem and I am glad that the entries by some of you are great as it's evident that they have something added to themselves. It's the 12th volume of this series and we would be taking a look at another great topic today. The topic would be Privacy Coins, let's ride together.

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Privacy Coins in the Crypto Ecosystem

You are familiar with different cryptocurrencies as we have discussed in our previous lectures, speaking of Bitcoin, Stablecoin, and Altcoins. These types mentioned are known to have their transactions recorded on the blockchain which is a distributed ledger where cryptos take characteristics like transparency, decentralization, anonymity, and so on. Let's talk about anonymity, Bitcoin (and most cryptos) transactions are not entirely anonymous and this leads us to the topic today.

Privacy can be termed as keeping some information confidential/private whereby only the authorized body can have access to them. Now, Privacy coins are the types of cryptocurrency (altcoins) which has their transactions, address, the amount involved in a transaction, wallet balance, and so on, hidden to outsiders, this takes privacy to another level as such another user don't have access to your transaction histories and the worth of your crypto wallet.

Privacy coins just like every other cryptocurrency are also built on the blockchain with data recorded in distributed ledgers but the distinctive difference is that your data are anonymous to others.

Remember, block explorers are utilized to see different data of transactions stored in there, and for Bitcoin or STEEM, you can easily look up data in the blocks to see different parameters associated to transactions (sender/recipient addresses, amounts sent/received...) but the case is entirely different in privacy coins.

In essence, one of the things private coins are aimed at is complete anonymity where it becomes so hard to even know how much has left a wallet or balance and where it has been transferred, this is achieved by cryptography utilized by other coins but in this case, anonymity is rigorously put into consideration. Examples of privacy coins are Monero, Zcash, Dash, Beam and so on.

Why Privacy Coins?

Complete Anonymity

Some users/organizations want to benefit from the advantages of cryptocurrency and at the same time want more privacy such that they can transact without revealing the details of their transactions to outsiders, it can be likened to the exchanging of encrypted messages between individuals which remains secret between both parties involved. For users/organizations that want this anonymity, privacy coins can be the best way to achieve it.

Enhanced Data Security

Exploring another user's wallet on Steem, you get to see the total tokens they are holding and more about it on the steem blockchain, likewise, looking up a Bitcoin address on the block explorer, you can easily see how much token a wallet is holding and its interaction with other addresses over time. In Privacy coins, there is enhanced data security whereby all that pertains to an account/user is completely hidden from others.

Untraceability

Transactions on the blockchains you are used with can be traced from one address to the other as such all linked addresses in terms of transactions can be easily traced and identified. In Privacy coins, it's impossible to trace transactions because of their anonymity and enhanced data security structure.

Cryptographic Techniques Utilized in Privacy Coins

We would be discussing some of the techniques utilized in Privacy coins to give them the features they exhibited, it would be discussed briefly and you get to learn more about them in our future lectures.

CoinJoin: CoinJoin is one of the cryptographic techniques used in privacy coins whereby transactions from different senders are grouped into a single transaction and later sent to the target wallets utilizing new address. This makes it hard to trace where the transactions originated.

ZK-SNARKs: This stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge which enables a user to prove the authenticity of a transaction without revealing the details (like addresses, the amount...) of the transaction to anyone, not even the miners on the network.

Stealth Addresses: Stealth addresses are another technique utilized where each transaction originating from an account automatically generates a new address as such previous transactions and the recent transaction can't be linked to any receiver.

Ring Signatures: Ring signatures are another technique utilized in privacy coins to avoid the possibility of linking a user's digital signature made by his/her private key to the address. As such, it helps to guide against exposing one's address through private key signatures.

Highlights of Privacy Coins

It promotes anonymity, takes for instance, Joe as a sender can transact with Jane as the recipient, Jane can only see the details of the transaction between her and Joe without knowing where the assets actually originated from and to outsiders, the details are completely hidden.

Since users' details are shielded from the public, no one knows what a wallet is holding and its interaction with other wallets because all is hidden, as such transactions are not traceable. Privacy coins seem good in terms of privacy as the name portrayed but can be utilized for;

Illegal dealings which remained untraceable as such promotes corruption of different forms.

Funding of arms for terrorism which puts the society in trouble in the long run.

Conclusion

In conclusion, privacy coins are the types of assets with enhanced anonymity and data security that shields a user from the public keeping their activities entirely private, nonetheless, it doesn't mean activities on such platform cannot be traced especially if the framework of a privacy coin blockchain slacks, it makes it easier for the public to trace the activities of users.

If there is any need for you to utilize privacy coins, ensure you make proper research and ensure that the platform you are utilizing is fully private as claimed. I believe you have learned more about the crypto ecosystem today and I look forward to seeing your participation in the homework task. Thank you.

Homework Task

What's your understanding of Privacy Coins in the Crypto Ecosystem? Give examples of Privacy Coins. Explain 2 Cryptographic techniques utilized in Privacy Coins.

What are the Benefits of Privacy Coins? And what are their disadvantages? Would you love to use Privacy Coins and Why?

Guidelines

Write an article of at least 300 words. Keep your explanation as simple as possible.

Include the tag #grassroot-educations2v12, #fintech, #steemexclusive, and your club status among the first 4 tags. Also, tag me @fredquantum in your homework entry.

The participation in this lecture/homework task is open to everybody (anyone can write, I will leave my comments on your entries) but only entries made by verified kids (not participating in the Academy yet) would be accessed with grades.

I will check your articles and drop comments on the entries submitted now till 11:59 pm UTC, 03/07/2022.

Cc:-
@steemkidss

#grassroot-educations2v12 #club75 #steemexclusive #burnsteem25 #steem #fintech