An overwhelming majority of crypto transactions does not include privacy tokens, the report reveals
Crypto analytics firm Coin Metrics published a data-based report yesterday suggesting that most traders choose to move funds transparently rather than privately. The State of Network report on the privacy issue in cryptocurrencies outlines the privacy features and daily transactions of three privacy tokens – Zcash (ZEC), Monero (XMR) and Grin (GRIN) in an attempt to understand users’ preference for privacy when it comes to cryptocurrencies.
According to the report, the combined daily transactions of the three privacy coins equated to just 6% of Bitcoin’s volume (BTC), despite Zcash, Monero and Grin offering substantially more privacy. The report further argued that “User apathy towards privacy is probably the biggest shortcoming of the current anonymous transactions systems”.
Further, many traders are unaware of the privacy features provided by such tokens. ZEC offers trustless zero-knowledge proof systems, also known as zk-SNARKs that enable transactions to be conducted without revealing “anything about who transacts or what amounts are exchanged.” However, less than 22% of ZEC transactions were “fully-private” and shielded, the report revealed.
Monero and Grin also offer unique privacy features for their users. Monero allows someone to prove they belong to a group without revealing which member they are. “Therefore, compared to Bitcoin, it is impossible to determine the sender of a Monero transaction,” the report said.
Grin, though relatively new, leverages new advancements in cryptography to allow its users to conceal not only the amounts and public keys used, but also obfuscate the transaction graph, the report explained.
In comparison to traditional financial systems involving fiat currency, cryptocurrencies offer a lot more privacy. Conducting transactions in cryptocurrencies do not require the user to provide the identities of those involved and the source and usage of funds. In fact, defending privacy “in an age of already ever-growing surveillance” was one of the original objectives of cryptography and cryptocurrencies, the blog explained.
Yet, despite the technological advancements in the crypto industry, uptake of privacy features and assets have been neglected. The report argues that crypto’s privacy-oriented ethos must be upheld amid the crypto community’s efforts to push towards mass adoption.
“Failing to do so could result in the original idea of anonymous transactions systems fading away and being superseded by other conceptions of what crypto-currencies are useful for,” the report added.
The increasing privacy of Bitcoin through services like CoinJoin, might be crypto’s salvation. The report explained that CoinJoin has seen increased activity with providers including the privacy-focused Wasabi Wallet and Samourai Wallet’s non-custodial Bitcoin mixer, Whirlpool.
Written by Harshini Nag