Ever since Monero gained prominence in the market, privacy-based coins have taken up a large segment of the cryptocurrency landscape and ecosystem. People find a level of comfort and interest in these coins as they allow for people’s financial movements to be untraceable. These coins have been used to facilitate illicit activities and purchases, but this does not mean that the coins should be outlawed. We must remember that having your movements hidden is not a crime, and is not suggestive of criminal activity. For instance, privacy coins are also used by journalists reporting in unjust dictatorship-led countries.
As a trader and investor, you will want to get acquainted with these coins simply because they hold a large level of market dominance. For instance, Monero is in the top ten most valued coins and has one of the most vocal fanbases of any major coin. Privacy coins have also been in the news recently as Monero has a hard fork coming which will birth a new coin by the name of MoneroV, and Bitcoin Private has just launched. However, the technology behind privacy coins can be more complex than with average cryptocurrencies, which makes it harder for investors to evaluate them. The aim of this guide is to provide some simple pointers as to what traders should be looking for.
By nature, privacy coins need to do more than a standard cryptocurrency, so it is best to look into what features each coin has. At the very least, you will want your privacy coin to offer untraceability and unlinkability. These are very similar concepts so let’s break them down.
Untracability is when a transaction cannot be followed on the public blockchain, meaning that (unlike most cryptocurrencies) nobody can find out where the money you sent originated. Unlinkability is when the coins you spend cannot be linked to your wallet or address. Together these make up the cornerstone of a private coin, but most of these coins can do more than that. For instance, Monero offers multi-signature capabilities as well.
Some coins, such as PIVX, also offer the feature to create public transactions too, should you wish. While that may not appeal to everyone, the option to do so is still an impressive feature. The coin with the most useful and robust features will likely be the coin most worth investing in.
Monero has a loyal fanbase. It was the first privacy coin to gain prominence, and it has an active team. Those two aspects together make it a powerful force to be reckoned with. This is not to say that Monero will be the leader of its field forever – there are dozens of privacy coins out there trying to topple it, such as PIVX, Verge, ZCoin, Bitcoin Private, DASH, etc. And all these coins have loyal fans too. For an investor or trader, it would indeed be worth looking around the online landscape to see how active each coin’s fans are. Strong fans can bring coins into entirely new price brackets.
The best way to assess fan involvement is to start by looking at their respective subreddits. How many subscribers are there? How frequently are posts made? Looking at social accounts like Twitter will help too. You can also check their Telegram or Slack accounts. There you can ask questions and gauge the general morale of the fans and team members.
How easy is it to run on TAILS?
TAILS is a lightweight Linux operating system that aims to provide the highest standard of privacy and anonymity while you browse the web. It is mainly used by journalists who are reporting in countries which have strict press-related laws. People who use TAILS will also naturally want to keep their financial movements secret as well as their other online movements, so a privacy coin is preferable.
Serious investors should install TAILS themselves and try to run a wallet for the privacy coin of their choice on the operating system. The easier it is, the better. Not every journalist will have great tech skills, so they won’t want to spend the time learning the intricacies of running a wallet or installing a node.
As a bold prediction: the first privacy coin which manages to create a simple method of running their wallet on TAILS will quickly overtake the market cap of Monero. This is because it will have proven its real-world capabilities.
Is it being used in illicit circles?
This is an uncomfortable subtopic, but it needs to be discussed. Privacy coins rely on mass adoption just like any other cryptocurrency, but they are also looking for the adoption of specific websites used for illicit purposes. When a cryptocurrency gets implemented onto a dark web marketplace, its price rises significantly.
Dark web marketplaces are used mostly to buy drugs, but they also commonly sell counterfeit goods and weapons. When a dark web marketplace adopts a privacy coin, it prompts all its vendors to adopt the coin too. It’s not long before customers start using it. The more marketplaces of this nature using such a coin, the larger its market cap will get, making it a more profitable investment.
There is no easy way to check how much adoption a privacy coin has on the dark web without going there yourself. In most countries, it is not illegal to visit these marketplaces, but understand that you are under no obligation or incentive to make any purchases or even engage in conversation with vendors.
Do your investigation to find the links to the most popular marketplaces (whose names will not be mentioned in this discussion). Navigate to an ‘announcements’ or ‘roadmap’ page (if they have one) because it may tell you what coins they plan to use in the future
Recognise that this is investigative work only and that you are not there to make any purchases – you only want to see which coins are being predominantly used. You may want to check with your countries laws before visiting these sites just to make sure your actions stay legal.
On the point of laws, it needs to be discussed that there may be a time when governments begin to outlaw or ban privacy coins. For the last few decades, there has been a trend of governments trying to erode privacy in the name of public security. An example of this is the ‘Investigatory Powers Act‘ in the United Kingdom that allowed the government to pry into the lives of others more so than before. There is a high possibility that governments may choose to ban privacy coins as it directly undermines their command.
As an investor, you need to be conscious that this could happen at any given moment, and as it has never happened before, we cannot say what exactly it will do to the prices of such coins. It could make them plummet as traders frantically sell their assets so that they comply with the law, or it could find people frantically buying so that they can protect their financial movements further. Just note that if it is to happen, your privacy coins will instantly become more volatile than all other cryptocurrencies.
Kai is a cryptocurrency copywriter and professional trader. He can often be found investigating various cryptocurrencies, whitepapers, and blockchain technologies. Kai has been a professional writer for 5+ years, and has invested in 50+ different coins and tokens. He also currently studies Law and Philosophy at university.