While blockchains provide a censorship-resistant means of transferring wealth, they were never intended to provide privacy. However, blockchains such as Monero, Zcash, and Secret Network have established infrastructure for private blockchain transactions in the years after Bitcoin’s birth. Simultaneously, coin mixing technologies such as CoinJoin and Tornado Cash enable users to separate the cryptocurrency they possess from their real-life identities.
The cryptocurrency movement has given birth to a more open alternative to the existing financial system. While blockchains such as Bitcoin and Ethereum provide benefits such as financial inclusion and transparency, they are not particularly good at protecting their users’ privacy. Several blockchain-based solutions have emerged in response to the need to assist users in remaining private.
Zcash is a popular blockchain among privacy aficionados. Zcash, which was launched in 2016, uses zero-knowledge proofs to authenticate transactions without disclosing the sender, receiver, or transaction amount.
Zero-knowledge proofs use advanced encryption to allow parties to confirm the contents of a transaction without disclosing any secrets to one another. ZK-proofs do this by utilising a unique set of verifying keys that are shared by all network participants. These keys enable network members to cryptographically confirm changes to the Zcash ledger without disclosing which addresses were involved or how much money was exchanged.
Monero is arguably the most successful privacy-focused blockchain that is still being developed and utilised today. The network, formerly known as BitMonero, was launched in 2014 and has lasted thanks to its best-in-class anonymity, range of privacy-preserving features, and active developer community, which still includes many early contributors.
Monero conceals the identities of senders and recipients, as well as the amounts sent in transactions, by masking the addresses used by participants. The network conceals transaction details using a variety of privacy-preserving techniques such as ring signatures, zero-knowledge proofs, stealth addresses, and IP address masking techniques.
In the eight years since its inception, Monero has received multiple modifications to strengthen its security and privacy features. To prevent application-specific integrated circuit (ASIC) equipment from mining Monero, the network altered its Proof-of-Work algorithm from CryptoNight to RandomX in December 2019. The change increased network security by making it more difficult and costly to 51 per cent attack the network.
Monero will incorporate ZK-SNARKs into its privacy technology around May 2020. Transactions became faster, more efficient, and required fewer confirmations as a result of this.
Secret Network is a new privacy-focused blockchain that is gaining traction. Secret Network, unlike Monero and Zcash, is Turing complete. That is, it is capable of handling smart contracts such as those found on blockchains such as Ethereum and Solana. The network is pioneering “Secret Finance,” which consists of DeFi applications powered by privately encrypted smart contracts.
Secret Contracts protect privacy by encrypting all transaction input, state, and output. Other transaction details, including block height, time, chain ID, sender, address, sent funds, and contract hash, are not encrypted, in contrast to Monero and Zcash. As a result, Secret Network is less concerned with anonymity than other privacy-focused networks, but it nevertheless assures that interactions between users and smart contracts are totally secret.