Blockchain enthusiast developer and writer. My telegram: ksshilov
As 2021 arrived and the bull market began, the privacy coins are back for a new attempt to bounce off the lows marked during the bear market.
Privacy coins, like Monero (XMR), started to recover in the 2021 bull market. XMR bounced off lows under $100, to trade above $200 in what looks like an altcoin bull market; coins like PIVX boomed even more.
However, privacy coins may still have to fight an uphill battle. As more exchanges have decided to become compliant with financial regulators, coins that provided shielding from prying eyes have regularly been delisted from several exchanges. This deflated prices and led to even deeper losses for Monero (XMR) and similar coins.
In this article, we look at five of the most distinct privacy coins and their potential to regain mainstream attention. Privacy coins are also one of the potential avenues for crypto innovation, expanding the types of transactions that are possible, while not leaving a public, readable record of all transactions. With more competition among protocols, there is much more demand for features that go beyond a simple coin for anonymous payments.
Monero is the original privacy coin, based on the CryptoNote mining algorithm. XRM has been around since 2014, arising as part of the family of CryptoNote coins. The original project, Bytecoin, lost credibility due to a scandal with pre-mined coins that apparently was attributable to the team of developers.
Monero went on to become one of the more successful privacy coins. It had a strong grass-roots community, and one of its chief developers, Riccardo Spagni, was an outspoken crypto promoter. But the project also had its setbacks. For one, the network was attracting powerful miners with specialized machines, which quickly started grabbing the block rewards.
Monero had to go through a change in mining algorithms in 2019, making it once again accessible to small-scale miners. But the biggest blow for XMR was the series of delistings from Bittrex and Bitfinex as well as a series of Korean and Japanese exchanges.
ZCash (ZEC) is a privacy coin specifically developed for untraceable, anonymous transactions back in 2016. ZEC has been aggressively marketed to enterprises, but also gradually reached the wider crypto community. The asset trades above $100 after the end of the three-year bear market, though facing some headwinds from exchanges. ZEC has been delisted from Bittrex but enjoys significant liquidity and decent market depth on Binance, as well as leading Asian exchanges OKEx and Huobi.
ZCash has implemented the ZK-SNARKs technology, also adopted by PIVX. Shielded transactions cannot be traced to the interacting parties. ZCash also allows users to disable the shielded transaction function, for the purposes of auditing, KYC, and for using exchanges and brokers.
PIVX moves beyond the tradition of privacy coins, which often rely on mining. The PIVX blockchain is the first to combine the ZK-SNARKs technology with proof of stake, ensuring efficient, lightweight, fast, and shielded (100% private) transactions.
The PIVX staking mechanism allows anyone to gain returns for holding their coins. The blockchain utilizes second-layer solutions to avoid network attacks while ensuring speed and energy efficiency.
PIVX has a long trading history stretching back to 2016, with the price moves as high as $13 during the altcoin boom in 2017, where it was a top 10 market cap currency. Recently, PIVX has been on another price expansion, reaching up to $2.10. With more interest in crypto, PIVX opens the door to new adoption, this time of a coin that combines multiple features to create an entire crypto-based economy and a marketplace. During the bear market, PIVX remained a highly active project. PIVX was among the topmost actively developed cryptocurrencies, based on CryptoMiso rankings.
The PIVX network also runs as a decentralized autonomous organization, or DAO, which includes the allowance of voting mechanisms. Voting is enabled through the masternode system, where 1 masternode = 1 vote. Even without voting, just holding PIVX allows for cold staking, with no need to open a connection to the network to accrue rewards.
The masternode infrastructure of PIVX is optimized for high returns and increased security, which avoids brute force attacks and makes impersonation expensive. Based on masternode statistics for growth, PIVX was the fastest-appreciating masternode in the past few weeks. The initial investment of 10,000 PIVX now costs above $13,000 based on market prices, with some fluctuation taken in mind. With adoption, the price of a masternode has the chance to continue rising.
Crypto prices are dynamic, but with renewed interest, it is possible for any project to rise again to prominence and adoption. PIVX ensures the possibility for democratic adoption by issuing a dynamic supply of coins, with no total cap. At the same time, during periods of heightened activity, block producers burn the transaction fees, thus diminishing the supply and creating deflation – a surefire way to future proof your tokenomics.
Horizen, the rebranded ZenCash asset (ZEN), grew a step further from being a simple privacy coin. The central blockchain also relies on ZK-SNARKs for its privacy protocol.
ZEN also has masternode features. It is possible to stake ZEN coins for relatively stable annualized returns. The goal of having decentralized nodes is to also protect the network from a concerted mining attack.
The Horizen blockchain, however, has two types of nodes – secure nodes and Super Nodes. The latter also helps to verify the transactions from all the proof-of-stake side chains and distributed apps that can coexist with the Horizen main chain.
ZEN is a relatively volatile coin, which started the 2021 bull market around $11, reached a peak above $75, and fell back toward the $50 range.
XVG is a multi-algorithm coin with privacy features, which aims to position itself as an everyday payments tool. XVG currently trades roughly 90% down from its 2017 peak, when aggressive promotion helped raise prices.
But XVG also saw setbacks, especially when it came to its mining protocol. Because XVG uses five different mining protocols, it is still possible to hijack just one and attack the network. The XVG project, spearheaded by its lead developer known as Sunerok, has decided against masternodes. This means the network remains open to 51% mining attacks, easily attainable against one of its algorithms that is similar to Litecoin and suitable for the same type of mining rig. The Verge network suffered not only accelerated block production, but also a 200-day block reorg back in 2018. Because there were no masternodes and one miner took over the network, there were no other actors to refuse to alter the blockchain history.
Privacy coins like PIVX solve this problem by the second-layer security of masternodes, where a reorg is too expensive unlike a mining attack against a smaller network.
Privacy coins have held significant appeal over the years. While veiling transactions has been discouraged by exchanges, there are still applications for a confidential interaction with the blockchain.
For years, Ethereum’s co-founder Vitalik Buterin has encouraged the development of ZK-SNARKs technology. For now, PIVX is the only project that front-ran Ethereum with their SHIELD transactions, thus becoming a potential competitor with multiple functionalities such as distributed apps, decentralized finance operations, and smart contracts.
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