Privacy Coins Comparison Review
This article is part four of a four-part Eden Labs series on privacy tokens. Ask the Eden Labs team questions on our Telegram and receive updates, analysis, and research insights.
The difference between coins and tokens is that coins act as a simple method of value exchange while tokens possess some additional functionality. In the case of Monero, Zcash, and Dash, all of their tokens can certainly act as a simple means of value exchange, but all three have additional functionalities. This includes the feature for optional (or not, in the case of Monero) privacy or, in the case of DASH, a method of participation in their decentralized governance. As such, we choose to label ZEC, XMR, and DASH as tokens, not coins.
In our modern economy and in most progressive countries, there is a certain degree of privacy which is guaranteed to individuals. From a financial perspective, banks and financial institutions hold our money and keep our data safe from peering eyes (unless demanded otherwise by a governing body). However, traditional banking solutions are centralized and are prone to attacks. Even if safe from attacks, banking institutions have frequently demonstrated that greed is their primary motivator and they do not always act in the best interest of their customers. Blockchain technology offers a trustless method of securing funds but lacks some privacy features which are available through traditional solutions. In addition, if done correctly, blockchain technology also provides the possibility of exceeding the privacy capabilities of established solutions.
On non-privacy enabled blockchains, everyone has access to the entire information stored on the network. This means that if one knows an individual’s wallet address, they can see the amount of funds the wallet holds and follow the history of incoming and outgoing transactions. This is something that cannot be done in traditional financial systems (unless compromised). With the availability of information on the blockchain, tracking software can be used to monitor and track individuals with impunity. Because privacy features are missing from many blockchain technology solutions, specific projects have taken the initiative and implemented privacy features for their coins.
The three projects mentioned above take measures to conceal and obfuscate the critical information used to identify individuals on the blockchain. Each project approaches the problem slightly differently, but they all share the same goal of providing privacy and anonymity to their users. To achieve this, each project must conceal the sender and receiver wallet addresses of its transacting users as well as the transaction amount. By obscuring these areas, projects can protect their users from snooping eyes who are potentially interested in an individual’s activity on the network.
As previously mentioned, effective privacy solutions require that wallet addresses be anonymous to peering eyes but still function as intended. To do this, Zcash utilizes zk-SNARKs as cryptographic proofs that convey no additional information, other than the correctness of the proposition in question. In other words, a user proves they have certain funds or information, without revealing any defining details. In non-privacy centric cryptocurrencies, transactions get validated by linking the sender address, receiver address, and input and output values on the public blockchain. However, Zcash uses zk-SNARKs to mathematically prove that the conditions for a valid transaction have been satisfied without revealing any crucial information about the addresses or values involved. For Zcash, zk-SNARKs is an all-encompassing solution for their privacy-related matters.
To obfuscate wallet addresses in Monero, two methods are used respectively. To conceal sender addresses, Monero utilizes ring signatures. Ring signatures provide privacy by allowing senders to join a group and sign a transaction as a single unit, thereby anonymizing the sender by blending them in with the crowd. To protect receiving addresses, Monero uses stealth addresses which allow for unique, one-time destination addresses for outgoing transactions. This prevents the reuse of addresses and therefore, increases privacy. This method allows for recipients to publish a single address and receive unlimited anonymous payments to it without having to worry about being traced.
Achieving privacy in Dash does not rely on concealing or obfuscating sender/receiver addresses. Dash uses a mechanism known as “CoinJoin” to achieve its desired level of privacy. “CoinJoin” is a coin mixing process which mixes the coins of a varying amount of users to confuse the trail back to the funds’ source. This process is similar to shuffling a deck of cards and then asking someone to determine the original order. With Dash, this shuffling happens between two to eight times before a transaction can be deemed private.
Achieving private transaction amounts in Zcash is done through the same manner as the sender/receiver addresses. zk-SNARKs conceals the transactions amounts through zero-knowledge proofs. However, in Monero, the shielding of transaction amounts is achieved through Ring CT (Ring Confidential Transactions). Ring CT conceals transaction amounts to anyone other than the sending or receiving parties and is accomplished through a method similar to public-key encryption; the sender encrypts the transaction values using a shared secret between the transacting parties, and the recipient decrypts the value using a combination of their private key and the transaction’s public key. When it comes to Dash, there is not much to analyze in regards to their ability to obscure private transaction amounts. This is because Dash does not attempt to hide transactions amounts but purely relies on its coin mixing method to provide the anonymity requested.
Unique Privacy Features
- Optional privacy
- Private to public transactions
- Public to private transactions
- Non-optional privacy
- Ring signatures/Stealth addresses
- Optional privacy
- Coin mixing through “CoinJoin” method
As demonstrated by the methods above, each project has approached the issue of privacy on the blockchain differently. Dash and Zcash have opted for an optional privacy feature while Monero has not. This decision makes Monero more attractive to users who are only concerned with privacy. The methods used to achieve privacy in the respective networks are different in several aspects and not necessarily equal in their ability to provide totally anonymous transactions. Both Zcash and Monero produce similar results in terms of secure and private transactions. However, Dash is a different story. To the average user, Dash’s security and privacy features are likely acceptable. However, vulnerabilities still exist as sophisticated software for un-mixing coins exists and can be used to unmask the identity of a private Dash user.
Blockchain networks have many different methods for achieving privacy. Each of the three most popular privacy-centered projects discussed above offer slightly different levels of privacy and anonymity to its users. Dash’s solution is less attractive than the latter, since unmixing coins is a strong possibility which needs to be considered; while unmixing coins is difficult to do and requires specific technical know-how, it is not impossible. Monero and Zcash are both robust privacy-centered solutions, yet, Monero is currently more popular due to its un-optional privacy which makes it more attractive to privacy-focused users.
Team & Leadership
All of the teams behind the respective projects are knowledgeable and experienced, and there is no doubt as to the competency of the teams. Dash has an impressively large group consisting of 30+ people. Zcash too has a large team full of academics, scientists, and professionals in cryptography and related fields. There is no question as to the proficiency of the Zcash team. The Monero team is not as large as the rest, but one factor to highlight is that almost all of the team have remained anonymous; the only personal information available are their Reddit and Github pages. This isn’t particularly alarming due to the fact that Monero is a totally-privacy centric project, and from the information gathered from the team’s Githubs, it is clear to see they are competent and experienced developers.
Both Dash and Zcash have relevant advisors who will help further the development of the projects. Zcash has many impressive advisors to boast of, with some of the biggest names in the industry. Some of the names involved are Vitalik Buterin and Gavin Andresen, among others. In contrast, Dash doesn’t have many advisors, but the project has still managed to onboard several relevant and experienced advisors. Both of the project’s advisory teams will prove themselves useful to the ongoing development of the projects.
Note: Monero does not have any public advisors. Therefore it was not discussed in this section.
Both Zcash and Dash have established essential partnerships to help further their visions. Zcash has been able to garner interest from reputable funds and big names in the financial industry. JP Morgan is an impressive partnership for Zcash; together, they plan on integrating zero-knowledge proofs into JP Morgan’s security layer to help settle transactions. Dash has not managed to secure such high profile investors such as Zcash, but the project’s partnerships still provide a baseline for Dash to work with and spread adoption.
Note: Monero does not have any public partners. Therefore it was not discussed in this section.
- Quantum resistance (Zcash): the Zcash team has admitted that a powerful enough quantum computer could break zk-SNARKs and fool the Zcash protocol. That day will be upon us within the next couple of decades. Until then, it is comforting to know that the Zcash team knows about this potential issue and will be working to mitigate it. Both Dash and Monero would likely be vulnerable to quantum computers.
- Lack of privacy (Zcash): while exchanging ZEC to and from other currencies. When ZEC exchanges with other cryptocurrencies, Zcash cannot ensure the privacy of the transaction. To do so, one would require a combination of TOR and VPN’s to obfuscate their IP and achieve full privacy. This should not be needed for a cryptocurrency touting top of the line privacy features. Monero, in contrast, only encounters this problem if the exchange conducted a KYC.
- Ring Sizes (Monero): when confronted with low ring sizes (group sizes in ring signatures) the probability of an onlooker determining the authentic sender is increased. Since bigger ring sizes required higher fees, users might be inclined to opt for smaller ring sizes without being aware that their transactions become more vulnerable to attack that way.
- Exchange Transfers (Monero): transaction of XMR funds through exchanges could be exploited by hackers. Since exchanges store KYC information, they would know a user’s one-time ring signature; if an attacker could access this, they would be able to cross-reference that information and attribute it to a specific user.
- Possible transaction merging (Dash): since Dash uses coin mixing to achieve privacy, third-party onlookers have the possibility of merging split transactions to find the original sender, thereby de-anonymizing them.
- Lack of true privacy/anonymity (Dash): Dash does not obfuscate the addresses of either sender nor receiver and does not try to hide transaction amounts. Dash only mixes up coins to confuse and eliminate the trail back to the original coins. This is not true anonymity.
As demonstrated throughout this comparison, Monero and Zcash are both highly private cryptocurrencies with advanced cryptographic features. Both Zcash and Monero hide transaction amounts and wallet addresses; however, Dash does not. This makes both Zcash and Monero inherently stronger options than Dash when privacy is the main concern. Although Zcash uses the most advanced cryptography (zk-SNARKs) out of the two, Monero still achieves the same results, albeit at a slightly slower pace and higher fee. Overall, when privacy is the primary concern, users should opt for either Monero or Zcash.
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Disclaimer: This is not investment advice, merely our opinion and analysis on the project. Do your own research.