Cryptocurrencies have attracted the interest of investors worldwide. Unfortunately, however, much of this interest seems more speculative (buying cryptocurrency to make a profit) than related to replacing traditional payment methods or national currencies with cryptocurrency markets proving highly volatile.
Part of cryptocurrency’s volatility stems from being bearer assets – meaning whoever holds onto their private key for one is considered the owner – making them vulnerable to theft or hacking attempts. However, certain private crypto currencies like Monero offer transaction anonymity which helps mitigate these risks.
Blockchains are databases that record all cryptocurrency network transactions. When an individual wants to buy something, they send money through this blockchain in exchange for tokens which will then be delivered directly into their wallet as digital vault. Each user receives two keys – public key which may be shared among many parties managing digital vaults; and private key which acts like password that only the owner of that wallet can unlock their funds securely.
While Bitcoin and other non-private cryptocurrencies provide transparency by listing wallet balances and transaction data on their blockchain networks, private cryptocurrencies provide untraceability and anonymity by employing techniques like stealth addresses, ring signatures, CoinJoin and zk-SNARKs to conceal themselves from surveillance.
Privacy features help conceal traders, making it virtually impossible to trace transactions using services such as blockchain analysis. Monero uses these techniques alongside its ring confidential transaction feature for unparalleled anonymity among other cryptocurrencies.
But criminals aren’t the only ones looking for ways to conceal their financial activity; for some individuals, privacy is an inherent right and freedom is key when making financial decisions. Cryptocurrencies provide some protection from price volatility but do not make suitable stores of value.
Notably, private crypto currencies do not guarantee total security and cannot prevent criminals from buying and selling them on marketplaces. As it’s possible for hackers and thieves to gain access to bank account balances, so too could they gain access to cryptocurrency holdings that you store incorrectly and therefore can become lost forever. If you want to ensure that you are keeping your coins secure, we advise storing them offline on a computer not connected to the internet or writing down their private keys somewhere safe. As an alternative, password managers with end-to-end encryption might provide more assurance.