Does Bitcoin’s Enhancing Anonymity Mean Doomsday For Privacy Coins?

In the early stages of Bitcoin development, most cryptocurrency enthusiasts tended to think that the original digital currency offered them complete anonymity and they could make purchases with this type of “new money” without revealing their identities. The level of Bitcoin’s privacy was often compared to that of Swiss bank clients. However, that was far from the case.

Is Bitcoin anonymous? Bitcoin transactions are recorded in the ledger and broadcast publicly to everyone with access to the blockchain. This means, your money transfers are vulnerable to being traced, and, for hackers or governmental structures, the way to your wallet address can be as evident as a trail of wet footprints leading to a bathroom. Remember Ross Ulbricht, the notorious creator of the Silk Road black market?

Authorities tracked his transactions and were able to identify and catch him while he was sitting with his computer at one of the libraries in San Francisco. So, your financial activity is actually an open book, and Bitcoin should be thought of as more of a pseudonymous asset than anonymous. 

This is why the crypto market saw the phenomenon of privacy-focused protocols gain momentum alongside various coin-mixing tools and services without public records linking transactions to wallets. In simple terms, privacy coins were designed to cover tracks after operating with cryptocurrencies, which made their usage very popular among crypto geeks bent on anonymity.

But recent news regarding Bitcoin’s potential upgrades aimed at improving its privacy seems to threaten the future of this class of digital assets, and may even move some to eliminate MoneroDash, and ZCash out of their portfolios. To measure the possibility of such a scenario coming true, we need to look at where privacy coins stand now. 

Overall excitement for cryptocurrency during the pandemic

Statistical data from ICO Analytics shows that prominent privacy coins, with DASH (see Dash vs. Bitcoin) leading the way, had outperformed Bitcoin as of January 31, as privacy became a bigger concern in the industry, most likely in response to the People’s Bank of China statement regarding their centralized digital yuan initiative. This was the first time in 18 months that privacy coins had outperformed Bitcoin in price gain, owing mostly to their lack of viable value propositions and the high regulatory scrutiny leveled at them.   

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