Second-Tier Privacy Coin Comparisons
Here, we will discuss some of the other less well-known privacy tokens that are out there and how they compare to the bigger players in the space and if they have any legitimacy to them to challenge the likes of Monero or ZCash.
What is a Privacy Coin?
Privacy coins have some similarities to the most widely used/known crypto asset, Bitcoin. Bitcoin is a decentralized, public ledger where transactions sent through the blockchain are semi-anonymous. Every Bitcoin transaction, including amount, sender wallet address, and recipient wallet address, is broadcast to the public ledger for all to see; however, the owner of each wallet is unknown. Unfortunately, it is becoming easier to link a wallet address to its owner’s identity. Like Bitcoin, privacy coins still utilize a public ledger for transactions. Where they differ is that privacy coins employ various means to obfuscate the path of each transaction. Each privacy coin implements different technology to accomplish the same goal of preventing the tracking of wallet address activity. Here we will discuss the top privacy coins in the space, assessing each coin based on the following features:
What are the specifics behind each coin’s privacy technology? Each coin employs different means of keeping the amounts, addresses, and transactions private on its blockchain.
NAVCoin: NAVCoin’s main privacy feature is the NavTech subchain. NAVCoin utilizes a secondary blockchain for any opt-in anonymous transactions. Transactions are sent to the NavTech subchain where they are encrypted and sent to a token pool. The final payment is then sent to the recipient from the token pool. TOR, an IP service that essentially masks the IP address and location of the user, is also a feature of NAVCoin.
ZClassic: ZClassic is similar to ZCash with the only real difference is the removal of pre-mining and founder’s rewards. That means that ZClassic utilizes “zn-SNARKs” or zero-knowledge Succinct Non-Interactive Argument of Knowledge as its privacy method. We touched upon it more in our previous privacy coin post but essentially zn-SNARKs allows for a sender to prove that the information they are sending to the receiver is true without having to provide any information other than the fact that the information is true. Miners are able to verify transactions through zn-SNARKs without knowing who sent or received the coins based on each party proving that a certain statement is true without ever revealing any precise details. Zn-SNARKs is potentially one of the most private and easy to use technologies within the privacy coin space.
DeepOnion: Similar to Verge and NAV, DeepOnion utilizes TOR, an IP service, that essentially masks the IP address and location of the user. How it differs, however, is that it pairs the use of TOR with a built-in stealth address feature into the DeepOnion native wallet. This feature assigns a random one-time address for each transaction made by the sender. All transactions are routed to these unique addresses before ending up in the receiving wallet thereby masking the recipient and any transaction history for that receiving wallet. DeepOnion is also working on implementing a multi-signature system called DeepSend. While the stealth address feature helps provide a more complete privacy solution, to have access to that feature, one would need to use the native DeepOnion wallet. That means all other transaction outside of that wallet would not utilize that feature and therefore would not be completely private.
Komodo: Komodo is another coin that utilizes zn-SNARKs. Komodo differs by pairing zn-SNARKs with Jumblr. Jumblr is a decentralized coin-agnostic tumbler that is included into the atomic swap capabilities of Komodo and its decentralized exchange BarterDEX. Jumblr is fully decentralized, so unlike other zn-SNARKs coins like ZCash, the tumble mechanism breaks the link between transactions without the need of a third party.
Bitcoin Private: Bitcoin Private could be described as a fork merge. It is a combination of the privacy of ZClassic and the blockchain technology of Bitcoin. Since they are using the privacy of ZClassic, Bitcoin Private is utilizing the opt-in feature of zn-SNARKs.
Fungibility is an asset’s interchangeability with other assets of the same type. Interchangeability assumes everyone values all assets of the same class the same. For crypto assets, this means that every unit of a specific coin is worth the same value and thus can be substituted for another unit of that same coin. No coin risks potential blacklisting or depreciation due to its possible use within an illegal or fraudulent transaction.
NAVCoin: The NavTech subchain is an opt-in technology, meaning the entire supply of NAVCoin does not necessarily utilize the privacy feature. Therefore, NAVCoin is not fungible.
ZClassic: Similar to ZCash, ZClassic offers the opt-in ability for senders to use zn-SNARKs so not all transactions take advantage of the privacy feature. For fungibility, the entire transaction history of ZClassic would need to be private. Without a fork to require the use of zn-SNARKs or a larger adoption of the opt-in feature, ZClassic falls short of providing fungibility.
DeepOnion: DeepOnion falls short of being fully fungible due to its opt-in privacy features. The only way fungibility would be possible is if every holder of the coin uses the DeepOnion wallet solely to utilize stealth addresses. There can be no reasonable expectation for that to happen therefore DeepOnion does not provide fungibility.
Komodo: As we’ve experienced with both ZCash and ZClassic, the zn-SNARKs privacy feature is an optional feature. When users chose not to use that feature the coin relies on Bitcoin protocol rather than zn-SNARKs. Since not all transactions utilize the privacy feature we can look at whether Bitcoin is fungible. Unfortunately, Bitcoin is not fungible so ultimately neither is Komodo.
Bitcoin Private: As stated above with ZClassic, since zn-SNARKs is an opt-in feature and not utilized by all transactions in the blockchain this project cannot claim fungibility.
Having a decentralized blockchain means there is no reliance on one entity. All nodes have equal power and control; there are no masternodes that have more influence over other nodes. The crypto asset is not created, maintained, or represented by any one central authority.
NAVCoin: NAVCoin is a fully open-sourced project. While NAVCoin claims decentralization, the top 25 addresses hold approximately 55% of the coins with the top 100 addresses holding nearly 75%.
ZClassic: ZClassic removed the founder’s reward that was a major concern of ours regarding ZCash. The ZClassic team has now moved on to focus on Bitcoin Private so without a central team this project is relatively decentralized. However, no developers have really stepped up to further the ZClassic development so while it is decentralized, there is a risk that no one steps up, and this project fades off once the maintenance of the ZClassic GitHub stops in March 2019 (according to the team now at Bitcoin Private).
DeepOnion: DeepOnion is open source however the development team began staking premined coins without the community’s knowledge. This gave them an advantage to earning more coins through staking, making it less decentralized than if they did not stake premined coins.
Komodo: Komodo considers itself decentralized. The one issue we see with its claim for decentralization is that Komodo is just an upgraded version of BitcoinDark which was an earlier privacy focused coin. The same dev team and overall plan came from BitcoinDark. Out of the 100 million coins that were premined, a large part of that reserve was provided to BitcoinDark users. So the concern is that a majority of the team that previously worked on BitcoinDark and is now developing Komodo holds a large percentage of the coins.
Bitcoin Private: Due to this being a fork merge, the BTCP tokens were awarded 1 to 1 to all holders of BTC and ZCL. While the project itself is decentralized, with over 200 contributors and engineers (many of them former ZClassic developers), the token distribution favored those large token holders of BTC and ZCL. So, while the project is decentralized, it would have been nice to see a larger distribution of tokens to the public.
In our opinion, Monero is still the clear choice amongst the privacy coins if you are looking for something that is fully private, fungible, and decentralized. It is the only one that offers default privacy whereas just about all of the other coins in the space only offer opt-in privacy. With that said, what coins like Komodo and Bitcoin Private are doing is definitely interesting. We will continue to watch this space closely especially with all the regulatory discussions that are occurring at the moment.