Let’s discuss the urgent need for personal financial privacy and explore Privacy Coins, the front runners in the field of cryptocurrency.
In the past months, China has instituted a “social credit” system that judge citizen’s daily activities, resulting in a score that grants tiered access to daily needs such as permission to purchase train or plane tickets. Over 90% of China’s financial transactions occur digitally, all of which are transparent and hence, open for judging. Reports have shown numerous individuals reverting to cash or using the identities of others to make daily purchases. In India, the government has announced that it is considering banning Bitcoin and other cryptocurrency mining, further limiting citizens financial privacy rights. Recently, the Italian government declared personal finances stored in private bank safety deposit boxes taxable. These are alarming actions that are severely limiting personal financial privacy.
The ethos of Bitcoin and cryptocurrencies seeks to implement a financially sound, non-confiscatable and deflationary currency for the world. However, Bitcoin and most currency options are blatantly transparent and not private. Second layer coin mixing options are available where bitcoins from several users are “mixed” and sent back out. Unfortunately, with a little work these coins are still traceable. Most laypersons will not know how to, or have the resources to track transactions from one wallet to another and trace them back to your fiat-crypto entry point, or even an IP address which identifies your specific house address. This task takes only a matter of minutes at the institutional level and is spurring a niche industry of Blockchain Forensics. Already there are several companies such as ‘CipherTrace’ that offer solutions to reverse-analyze blockchain transactions. The Danish and Japanese governments for example have employed such solutions to solve crimes. Several blockchain forensic companies have also been contracted by the USA Federal government (IRS, Homeland Security, ICE), with custom software that harvests blockchain data to lookup transactions with the sole intent to trace it back to individuals.
Why Should I Care ?
To assess if you should care about your financial privacy, ask yourself these questions:
- Would you want your health insurance company to know that you spent money on cigarettes or alcohol?
- Would you want your vehicle insurance company to know that you privately settled a minor ‘fender-bender’ accident and chose not to file a claim?
- Would you want your bank or loan company to find out you had lost 70% of your financial portfolio?
- Would you want the balance of your total financial assets to be laid out on the public blockchain?
The Current State of Privacy Coins
In terms of privacy coins, one such state-of-the-art privacy factor in cryptography is ‘zk-SNARKs’ or more commonly known as Zero Knowledge Proofs. It works by validating the truth of something without revealing how that truth is known or sharing the content of this truth with the verifier. Hence, when applying Zero-knowledge proofs to cryptocurrency, transactions can be validated without revealing any information about the sender’s address, the transaction amount or the receiver’s address. Senders can choose to verify their transactions with receivers just by showing a viewing key. No one else can or will ever have access to this information. When it comes to privacy coins, there seems to be no rival to this method of anonymity.
ZCash (ZEC) is a pioneer cryptocurrency that employed the ‘zk-SNARKs’ (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) algorithm. ZCash is owned and run by a brilliant team of cryptographers and developers at the Electric Coin Company with Zooko Wilcox at the helm. While the blockchain is distributed, Zooko and the ECC are centralized entities at the heart of ZCash. From a privacy coins perspective, zk-SNARKs allows ZCash to hide, or “shield” as it is more widely known, sender and receiver addresses and also transaction amounts. However, allowing an option for transactions to be private or not, is a major flaw in its design. In a recent Unchained podcast with Laura Shin and Zooko (episode 88, 10/16/18, 57’22’’), he acknowledged that “less than 1% of ZCash transactions are between shielded and unshielded addresses”. This creates a serious vulnerability for any user of ZCash that desires privacy as the remaining 99% of unshielded transactions serves as data points for chain analysis. An inquisitive organization or nefarious individual could decipher the 1% of private transactions with relative ease.
The main factor that crowned Monero (XMR) a leader in the privacy coins sector is the fact that its privacy is non-optional, that is, all addresses and transactions are by default, private. The privacy methodology used is something they call the ‘RingCT’ known as Ring Signature. Essentially, the algorithm takes input from several transactions and mixes them up, to confuse any inquisitor of sender and receiver. While the algorithm behind RingCT is mathematically intense, it is not impermeable since the algorithm only mixes the data from through a maximum of 7 transactions (upgraded from 4). The algorithm of RingCT causes significant bloat to the Monero blockchain and hence, the ‘Bulletproof’ protocol was recently implemented to address this problem. In light of all the issues, even Monero team-lead Riccardo Spagni (aka FluffyPony) has famously tweeted that there are stronger privacy coins protocols than RingCT.
Until recently ZCoin (XZC) used the zerocoin algorithm, which essentially works by “burning” a coin (and its history), and “minting” a new coin. Zerocoin has its merits, however, it does not hide the transaction value. Moreover, zerocoin minting is an optional feature for ZCoin. At the time of this writing, less than 10% of ZCoin’s transactions use minted coins. This leaves over 90% of the transactions as data points for chain analysis and reversed transaction lookup. Most importantly, a flaw in the mathematical proof of the zerocoin algorithm allowed an amount of ZCoin to be fraudulently printed and sent into circulation. Fortunately, the flaw was quickly discovered by the ZCoin team and patched. ZCoin is currently working on implementing a new protocol called Sigma, to be followed by Lelantus. We have no details on Sigma or Lelantus at this time.
PIVx is unique amongst the leaders of privacy coins as it is the first privacy focused cryptocurrency that uses proof-of-stake along with masternodes. PIVx was a clone of DASH but instituted the same zerocoin protocol as ZCoin. Its monetary strategy is also different from ZCash, Monero or ZCoin as it has an infinite supply. Proponents of proof-of-stake tout that an infinite supply is needed for high transaction frequency currencies. Furthermore, PIVx also suffers from the same critical privacy flaw as ZCash and ZCoin . PIVx also allows privacy to be optional. Just like ZCash and ZCoin , less than 10% of PIVx transactions are private. Again, this leaves tracks throughout the blockchain space for nefarious actors and governmental bodies to track PIVx users’ activities.
By allowing privacy features to be optional, ZCash, ZCoin, and PIVx have created an environment of transparent-shielded-transparent transactions. This significantly undermines the efforts of users desiring totally private engagement. Monero has the right strategy to force all transactions to be private only, however, RingCT is reminiscent of a smoke-and-mirrors tactic.
GRIN and BEAM
Recently, Grin and BEAM were launched onto the crypto space using Mimblewimble privacy algorithm. Named after a curse in the Harry Potter series, Mimblewimble essentially validates each transaction by verifying that the entire blockchain, including the transaction to be sent, sums to 0 (zero). There are no addresses, only UTXOs. Each UTXO has its own secret key and users store a list of UTXO secret keys. For transactions to occur, Mimblewimble requires that sender and receiver be online at the same time and UTXOs are sent directly. As you can imagine, this is not feasible for mass adoption. Similar to PIVx, Grin has an infinite supply but differs slightly with no mining reward halving. Grin is a community grown project and BEAM is a centralized company backed with funds from a private donor. Both groups are trying to improve Mimblewimble scalability.
In the evolution of the cryptocurrency space, all coins to date were designed with the intention to enable high-frequency transactions in the race to beat Visa. Besides Monero, privacy is a secondary feature for all the major cryptocurrencies.
PirateChain (ARRR) is a newly forged cryptocurrency ingenuously designed to be the best at one feature … Privacy. The goal of this blockchain design is to protect user financial privacy. ARRR possesses the best features of ZCash’s, zk-SNARKs, and Monero’s strategy of default privacy enforcement. All ARRR addresses are by default shielded (Z-addresses) only, and all transactions are by default private (z-transactions) only. This means that the balances of every address are not visible to anyone else besides the user. The transactions also cannot be tracked as there is no trace of the transaction. Complete privacy down to the user’s IP address is protected with the embedded Tor network in the wallet.
Another very unique feature of PirateChain is the anonymity set. It is purposefully designed to use virtually every transaction that has ever occurred to create the anonymity set. Compared to Monero’s use of only 7 transactions for RingCT, ZCash’s or ZCoin’s set of 1000 is an improvement, but PirateChain’s inclusion of every single transaction creates an infinite, impregnable anonymity set.
Hence, for the first time, the algorithm of ARRR allows a cryptocurrency where it is impossible to know or track who sent a transaction, how much the transaction amount is, and who received the transaction. Add to that, no one can see the balances of the addresses and thus, this creates the perfect anonymous currency.
Privacy is not PirateChain’s only outstanding feature. PirateChain is also secured by Bitcoin’s network using a delayed Proof of Work (dPOW) mechanism. ARRR secures its blockchain by the use of the 64 elected Notary Nodes that underpin the Komodo Platform. PirateChain is an independent asset chain built using the Komodo platform. Komodo was a fork of ZCash, hence inheriting the Equihash algorithm and zk-SNARKs. They notarize transactions and embed them into Bitcoin’s network in a 10 minute-delay manner.
PirateChain recently upgraded to SAPLING which significantly reduced transaction size. SAPLING enables the use of lite wallets and mobile wallets, both of which are currently in development. PirateChain has also introduced;
- the first Z-transaction on private mining pools;
- an on-chain tip-bot;
- e-commerce plug-ins for merchants.
At the time of this article, plug-ins for Shopify, WordPress and OpenCart are already available for PirateChain (ARRR). Through self-sovereign payment channels, not dependent on banks, Visa or Mastercard, purchases can be made securely and privately. The number of merchants accepting Privacy Coins such as ARRR is catching on and growing steadily.
Additionally, new technology often brings exciting developments. The team behind Pirate is developing Tortuga, the world’s first privacy-only, ARRR-paired automated escrow service. Tortuga is based on the Barterlly OTC platform developed jointly by the Pirate/Komodo community. The goal of Barterlly is to facilitate safe OTC (over-the-counter) trades directly via Discord, Twitter, or Web interface/Mobile app. Tortuga was quickly born out of Barterlly as it has a “templating” feature that allows clones of Barterlly with customizable aspects. The objective of this unique platform is to minimize fund handling by generating on-the-fly addresses only when the offer is accepted. Fus, for the first time, users can send funds directly from their wallet to a one-time-use address, and safely receive automatic refunds if the counterparty does not go through with the transaction. Tortuga enables users to trade directly from wallet to wallet for both public and private trading. This is not just a crypto industry first but also a game-changing financial instrument. Users will be able to trade any listed crypto asset anonymously via the ARRR pairing. The list of assets includes all Komodo Platform (KMD) asset chains, all BTC and ZCash forks. ERC-20 tokens are currently being integrated. Tortuga is close to the official launch at the time of this writing, we suggest you keep a look out for it.
As you can see, PirateChain is for all intents and purposes, the perfect solution to privacy centric privacy coins. Being absolutely and incomparably private, it is at the same time undeniably secure. While all other cryptocurrencies were concerned about value and mass adoption, and privacy as an optional feature, PirateChain is successful because it turned the strategy of other currencies on its head.
‘Protect user privacy FIRST, and user adoption and transaction frequency will follow.’
Of note, in reply to the question “Which coin do you think has the best privacy features?”, the admin on Monero’s telegram channel recently stated, “Objectively, ARRR right now”.
In the 9 months since its inception, many investors have found PirateChain . Unlike ZCash that taxes every block reward for development funds, PirateChain has no such taxes. With no founders’ or developers’ rewards, the growth of ARRR is a naturally organic community driving support instinctively. Over 3500 twitter and discord followers are supporting Piratechain. At this time, ARRR has the 3rd highest Equihash hashrate in the industry and ranks at the top of whattomine.com in profitability for Equihash coins.
If this report has piqued your interest, please don’t hesitate to find out more by visiting the website or any of the social media outlets for PirateChain: