Therefore, other solutions are needed to fulfil the market need for private transactions. A level of privacy similar to that of physical cash is very hard to achieve with digital money. But when there is a problem and market demand, solutions are soon to follow. Hence, here come the privacy coins! Monero, ZCash, and DASH are the top privacy-focused blockchain cryptoassets in terms of adoption, capitalization, and advanced technological innovations:
Monero is widely considered the digital currency with the strongest privacy features, thanks to its cryptography using ring signatures. Monero's cryptography is more complex than that of Bitcoin and most other cryptoassets, so we won't get into all the technical details. But to give you an idea, transactions in Bitcoin are digitally signed with personal cryptographic keys, so that anyone can see the addresses of the sender and the receiver, as well as the transaction amounts. This proves that the sender owns the money being transferred. It is similar in its purpose and effect to signing a check from your bank.
On the other hand, Monero's ring signatures are described as follows:
Therefore, transactions in Monero appear to be signed by a large pool of users rather than a specific user. The ring signature only proves that the transaction was sent by someone in that pool, but it doesn't disclose exactly who. The Monero protocol allows for complete user privacy in terms of amounts, origins, and destinations for transactions, and it has a mechanism to prevent double-spending. In these features, it is similar to ZCash with its zero-knowledge proofs or zk-SNARKs, which we'll discuss next.
Launched in 2016, ZCash brought a new privacy technology to the blockchain market called zero-knowledge proofs with its zk-SNARKs protocol. ZCash provides optionality for users to either send regular transactions, like in Bitcoin, or to send private transactions where no information is revealed, other than that the transactions are valid. The project is led by Zooko Wilcox, who was previously part of David Chaums's DigiCash in the 1990s.
DASH is another blockchain cryptoasset supporting private transactions. For this purpose, it uses a different protocol, which basically mixes many transactions together, to form kind of a large multiparty pooled transaction. In this way, it scrambles the different components of each transaction and makes it nearly impossible for an external observer to put the pieces together and figure out who sent what to whom.