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Monero vs. ZCash: Privacy Coins Compared

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Monero vs. ZCash

When it comes to privacy coins currently on the market, the two biggest contenders are ZCash (ZEC) and Monero (XMR).

Both of these cryptocurrencies have protocols that are at the cutting edge of blockchain technology. They have both proven themselves over an extended period of time and are relatively well known in the crypto ecosystem.

However, can they really be compared? And, if so, which coin affords you the most privacy?

In this post, I will try to compare the two blockchains and their supposed privacy benefits. I will also look into their mining protocols and the impact that could have on said security.

However, before we jump into a comparison, we have to take a look at the key technology driving each coin.

ZCash Overview

ZCash (ZEC) was released as a Fork of Bitcoin in 2016. Hence, it shares some commonality with Bitcoin in that it is also a Proof-of-Work coin and has the same total mineable supply of 21m coins.

However, that is where the similarities end.

ZCash was specifically forked by the main developer, Zooko Wilcox, in order to be a private alternative to Bitcoin. As such, there is some pretty advanced technology that has been included in the Zcash protocol in order to facilitate this.

ZCash Privacy Protocol

One of the most important privacy features on ZCash has to be it’s use of zero-knowledge proofs and its implementation in their zk-SNARKs.

A full explanation of these are is beyond the scope of this text. Yet, the basic principle of a zero-knowledge proof is being able to prove something is true without conveying anything other than it being true.

This can be particularly useful for occasions when you want to prove that you know a password or have access to a cryptocurrency’s private key without actually sending them.

Example of “Proofing” Secret Data. Image Source: Medium.

Through the use of zk-SNARKs, ZCash allows the user to hide their transaction from the rest of the network. These are called “shielded” transactions and they use addresses that begin with a “z” (z-addrs). These shielded transactions are not mandatory and users must elect to use them.

Users will ordinarily make use of their t-addrs which is the unshielded and transparent transaction. These are no different from normal Bitcoin transactions in that they are broadcast to the network and are fully public.

Below is a helpful image that takes a look at the dynamics of shielded and unshielded transactions.

Example of Different ZCash Transactions. Image Source: ZCash Website.

As you can see, only when users send funds from one z-addr to another are the transactions completely private.

The “Trusted” Setup

Another unique quirk of ZCash was its reliance on what they call the “trusted setup”.

Essentially, this was a public ceremony that the ZCash creators embarked on to rid the future network of potentially deadly “toxic waste”.

In this case, the toxic waste is meant figuratively to refer to the unique private “master” key that could be used to create counterfeit ZEC. This private key was a by-product to the initial creation of the zero-knowledge protocol.

This was no doubt a concern for all users in the ecosystem.

Hence, the developers created the elaborate ceremony where a group of participants would intricately destroy the unique private key pieces (called shards) to ensure that they would never combine and create the dreaded toxic waste.

The Founder’s Fund

The founder’s fund was one of the more controversial aspects of the ZCash ecosystem.

This was hardcoded into the ZCash protocol such that the founders would get 10% of the total mineable coins (2.1m ZEC) which would be distributed incrementally over the first 4 years of the project. Many people considered this as a “tax on mining” and at current rates, it is 20% of all block rewards.

The ZCash Founder’s Fund Split. Image Source: Medium.

It is also by no means insignificant. At today’s rates, the founder’s fund will receive about 1,425 ZEC per day which in today’s dollars is about $179,000 per day. While some see this as an example of “skin in the game”, others think it is enrichment off of the miners.

To be fair to the ZCash developers, not all of the money is heading to the founders as about 2.5% of the rewards will head into R&D and reserves.

Monero Overview

Monero is also a fork of another cryptocurrency called Bytecoin. It forked in April of 2014 and is based on the CryptoNote protocol.

Monero is like ZCash in that it uses a proof-of-work protocol but uses a different hashing algorithm called CryptoNight which is slightly more ASIC resistant than ZCash’s equihash.

However, the real innovations of Monero are when it comes to their privacy enhancing features.

Monero Protocol

Monero relies on some pretty advanced cryptographic technology in order to hide a user’s transactions. These include the following concepts:

  • Stealth Addresses: These are used in order to hide the receiver’s address from the blockchain. They are one-time addresses that are created by the sender and are based on the address given to them by the receiver. Only these two parties will know where the Monero was sent.
  • Ring Signatures: While Stealth addresses help the receiver, we still need to hide the sender’s address. This is done through the use of Ring signatures which mask the address of the person who is sending the funds. It makes use of the signatures of multiple parties to sign the transaction. This “mixin” creates a certain level of plausible deniability for the sender.
  • Ring Confidential Transactions: Ring CT is a relatively new update to the Monero protocol that was implemented in 2017. This used cryptographic functions in order to hide the amount that has been sent thereby making the transaction completely anonymous
Monero Privacy Technology. Image Source: Freedom Node.

Technical explanations of how this technology functions are quite involved and we won’t cover it here. However, the most important thing to note is that Monero requires all transactions to be private transactions and the only choice that the user has in it is the amount of “Mixins” to use in the transaction.

Anti ASIC Stance

ASICs have the cryptocurrency community divided.

Some see them as an great way to give hashing power to a chain and mine coins in a more energy efficient way. Other’s view them as a toxic tool that helps to centralise a network, drive out GPU miners and hence make the chain less trustworthy.

The Monero community is in the latter camp. The developers and ecosystem is well known for their aversion to ASIC mining chips. Hence, not only have they used a hashing algorithm which was quite ASIC resistant but they also hard forked the Monero code in April in order to ward off the risk posed by the Bitmain Antminer X3.

What this shows is that the Monero community is actively working against the threat of these ASICs and is happier to fork their code in the face of any threats from ASICs. This is also a deterrent against any other ASIC manufacturers who want to follow suit.

Protocol Improvements

There are two more really important updates that are being made on the Monero protocol that are set to make the network that much more secure and private. These are the launch of the Kovri I2P Protocol and Bullet proofs.

Kovri will allow Monero to route transactions through the I2P network whereas bullet proofs will make the Monero transactions more efficient and hence cheaper to initiate. If you wanted more information I recently completed a more in-depth piece on Kovri and Bulletproofs.

Monero or ZCash?

What the above overview shows is that both of these cryptocurrnecies use pretty advanced technology. They both have been around for some time, have demonstrated their use cases and have their own selection of backers.

However, what should be your premier privacy coin of choice?

Let’s take a deeper look at the technology and potential concerns that some may have.

Transaction Privacy

Both the Monero ring signature / stealth address technology as well as the zk-SNARKs on ZCash work as intended. They are able to hide transaction data and make them completely private. However, they are implemented in a different way.

Whereas the Monero transactions are all private by default, ZCash only has them as mandatory. This means that most people (out of laziness or indifference) will not use their z-addres. In fact, currently only about 13% of all ZCash transactions use their shielded addresses. The figure is even less when you look at the volume percentage.

Private Transaction Percentages of ZCash. Image Source: ZCash Explorer.

This means that those users who make use of their shielded addresses could immediately raise suspicion of “having something to hide” even if they do not. Therefore, the actions of the users that do not make their addresses shielded is decreasing the privacy of those who do.

Monero on the other hand, decided that this negative externality was not conducive to a cohesive ecosystem. They decided to make all of their transactions private. This means that all transactions on the Monero network look identical and the ecosystem is generally stronger for it.

While there have been concerns about the risk of Monero forks and the impact that they have on the ring signature technology, these are more “edge cases” and unlikely to threaten the network.

Moreover, in the recent Monero hardfork they increased the minimum Mixin level to 6 from the previous minimum of 4. These additional layers of plausible deniability help obscure things that much more.

Centralisaiton Concerns

Centralisation is something that would concern any distributed system let alone one that was focused on privacy.

In the case of Monero vs. ZCash decentralisation, it appears as if Monero is actively fighting against any sort of centralisation. We have seen this with their actions in hard-forking the code recently in order to ward off the risk of the CryptoNight ASICs.

The developers have made it known that they would always take the Anti-ASIC route. Without the ASICs, it means that average users can still contribute hashing power to the network from their home GPU rigs. This takes the power out of the hands of a few large mining farms and places it back into the hands of the community.

Not so much can be said about the ZCash miners. The recent introduction of the Equihash Antminer Z9 had many of the miners in the community angry about the lack of action from the developers and founders.

Then there is the question about the founders and that Founder’s fund.

This has been a contentious issue for the community and the notion that a group of individuals will control 10% of all mined ZEC is quite unsettling.

While some may argue that this aligns their incentives, it only does so until they have received all of their rewards. What happens if after the 4 years they have their 10% and decide to sell out and take a step back from the project? There is no “vesting” as there is with shares. Once they have the ZEC they can easily sell them and walk away from the project.

Trusted Setup

While the trusted setup and the elaborate ceremony were done in order to maximise trust in the ZCash protocol, there are many security hawks who still have a problem with it.

This is because it is based on the community believing with 100% certainty that the master private key is completely destroyed and can never be reconstructed.

This is incredibly hard to do as no one can actually “verify” this is the case. Sure, you have videos, pictures and testimony from the ceremony but you can still not say, without a shadow of doubt, that a private key copy does not exist somewhere. Indeed, one of the most important maxims of crypto is:

“Don’t trust, verify”

While it is more than likely that the ZCash developers were able to effectively destroy the private key shards, this is not something that you can independently verify. I would not really be comfortable putting large amounts of funds into a cryptocurrency asset that lacks independent verification properties.

Monero Has the Edge

While I do not doubt that ZCash is an advanced cryptocurrency with strong privacy protocols, the points above make it clear for me that Monero is still the premier privacy coin.

The community driving the Monero development are some of the most security conscious and privacy centric programmers in the cryptocurrency community. They are mostly driven by ideology and not so much by monetary gain.

Moreover, Monero has proven itself.

For example, when the FBI brought down the founder of the Alphabay darknet market, they were able to identify how much cryptocurrency he had. There was only one coin that they were not able to obtain more information on.

Extract from Asset Forfeiture. Image Source.

While this may be an isolated case, it adds weight behind the case for Monero.

Conclusion

As more and more people become aware of the need for a privacy on the blockchain, they will make the transition away from fully transparent blockchains.

While there are a number of competing privacy coins occupying the space, Monero and ZCash are still viewed as the cream of the crop. Both have proven themselves to be effective and scalable and are both being adopted at record pace.

However, based on the information above, I would be more likely to trust the privacy and security of Monero than I would of ZCash.

Featured Image via Fotolia

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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5 stars on average, based on 10 rated postsNic is an ex Investment Banker and current crypto enthusiast. When he is not sitting behind six screens trading Bitcoin, he is maintaining his numerous mining rigs. Twitter: @nicrypto




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Why Investors Should Be Paying Attention to Blox (CDT)

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In a world where huge promises about blockchains will be linked to blockchains and transactions-per-second will be infinite, it is important to remember that sometimes people just want a new killer app.

Blox (CDT) is one of these killer apps. Although not as popular (market capitalization ranked 376th), it has a very unique promise. It is a portfolio tracking and blockchain asset management application, with some social features being added along the way.

Formerly known as CoinDash, the company was rebranded to Blox in February of 2018. Now, it boasts features including virtual trading, multi wallets, watchlists, and cross-device compatibility, with many more to come.

Social Trading App for Blockchain

For anyone who has seen the popularity of social trading apps for equities, commodities, and options, this makes perfect sense as a cottage industry.

There are certain desires that Blox harnesses, like the idea of being able to piggyback on more successful traders and compare returns. Learning from others is a beautiful thing, and the social trading aspect of the platform enables that.

But it also does much more. For anyone who has experimented with multiple exchanges, you know the perils of dealing with a disorganized portfolio. You struggle to keep track of your cost base, your taxes become a mess, and everything goes sideways. Blox mitigates against this simple problem, while adding in a ton of functionality to keep the pros around.

The CDT Token

The ERC-20 token is still listed as CDT despite the name change. Instead of being mineable, all coins were issued by the founders at inception, and approximately 670 million CDT are in circulation.

Every coin needs a purpose, and use of CDT allows for control of one’s portfolio, as well statistical analysis that might help you get an edge. Additionally, if you elect to make your portfolio public, you are seen to be adding value to the platform and receive CDT in exchange. In the same way that some social platforms are starting to reward content creators, some traders will be rewarded to their contribution to the platform.

Blox offers Software-as-a-Service (SaaS) aspects that traders will be able to pay for in order to get an edge in their trading. Managing crypto assets is something that will only intensity over the next few years, and Blox is well-positioned to take advantage of that.

Short-Term Trading Opportunity

As an investment, Blox would definitely be considered more of an altcoin. It is available on Binance and has been trading sideways for the last week, with a bump occuring on the 21st.
It seems like CDT has been going through a consolidation period since the drop it took in November, and now a breakout period looks to be underway.

It might be too late on this one, as it is already taking off, but with a current level around 200 satoshis, it is easy to see a route to 225 or even 300 satoshis in the future. I’m not sure if this is a long-term bet, as it is still not fully “welcomed” into the mid-cap area, but CDT is definitely a coin to keep an eye on.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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6 More Upcoming Crypto Events That Could Pump These Coins – and Last Week’s Winners

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This is a follow up to last week’s ‘6 Upcoming Events‘ article which detailed several tech updates on the horizon for various cryptocurrencies.

Before we break into this week’s batch, let’s look at how last week’s picks performed:

IOST gained 28%
Quarkchain gained 12%
Theta Token gained 17%
Aeternity gained 13%
Ethereum gained 19%
Cybermiles gained 9%

These gains did come amid a general market uptick, and have been caluclated at the highest possible cash-out point. THETA and IOST proved to be two of the week’s best performers, at the expense of many others; Quarkchain continues to climb, as does Aeternity. Ethereum may have been responsible for triggering the recent market surge on its own, but can it purely be attributed to the upcoming Constantinople update?

Here are six more upcoming events that might result in positive sentiment gains for the coins involved.

Holo (HOT) – Closed Alpha Testnet

Details on the upcoming closed alpha testnet can be found in this Github post. In short, this marks the first step towards getting developers up and running on Holochain using Nodejs and Rust programming languages.

Holo had a strong previous quarter and came charging out the gates in December, and by February had recorded 230% growth in three months.

There’s every chance we’re too late to this one, but after HOT declined 12% in the last three days, there could be another bounce in the run up to the testnet.

Testnet Date: 28th February

Po.et (POE) – E-Book Metadata Platform

Described as a blockchain protocol for ‘content ownership, discovery, and monetization in media’, Po.et is about to release a blockchain version of ISBN codes. The word is they’ll be applied to e-books, with the goal of becoming the metadata provider for the digital publishing industry. Po.et was recently mentioned in this examination of blockchain‘s role in that industry by the Columbia Journalism Review.

POE is ranked 218th by market cap, and has been in decline for most of the quarter. This week saw a slight reversal of that trend as the ETH-based token gained 5%, and volume rose from $200,000 to $1 million.

Launch Date: 28th February

Digitex Futures (DGTX) – Treasury Token Sale

The first round of cut-price DGTX treasury tokens are set to be released at the start of next month. A breakdown of the Digitex Treasury can be found in this official blog post.

DGTX tokens doubled in value in December, then halved again in January. The last seven days have seen more than 12% growth.

Token Sale Date: 1st March

Skycoin (SKY) – Skywire Mainnet Launch

Skywire is aimed at cutting out the dominance of centralized payment servers like BTCPay, which Skycoin views as a looming threat to free expression. Skycoin’s solution is a combination of handheld hardware processors and wire mesh technology, more on which can be read here.

Momentum has been building with SKY for the last two weeks as it soared to 24% gains before subsequently cooling off.

Mainnet Launch Date: 4th March

Pundi X (NPXS) – Commencement of Staking Rewards

Pundi X’s staking upcoming staking mechanism involves monthly payouts weighted to how long your funds remain staked – details here.

Looking at the three-month chart of NPXS shows a huge turnaround in mid-January. Since then the token gained 84%.

Staking Launch: 9th March

GameCredits (GAME) – Gaming Store Launch

In mid-March the GameCredits PC-gaming store is set to launch, where customers will be able to purchase AAA PC games using GAME coins. Benefits include discounts, no KYC or ID checks, and remote access to Fortnite, Battlefield 5, Far Cry New Dawn, and more.

GAME is ranked 328th by market cap, and can be traded on Upbit, Bittrex, Poloniex and Bitbay. Take a look at GAME’s daily chart from the last twenty hours and make of it what you will.

Store Launch: 15th March

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 147 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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Litecoin Price Analysis: LTC/USD on a Potential Launchpad for Another Rocket to the North

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  • The Litecoin (LTC) price remains elevated, as the bulls look at continuing the strong recent run higher.
  • Coinbase Wallet announces support for Litecoin, joining the likes of bitcoin (BTC), bitcoin cash (BCH), Ethereum (ETH) and Ethereum Classic (ETH).

LTC/USD: Recent Price Behavior

The LTC/USD bulls have resumed upside momentum, following brief and minor pullback observed in the session on Thursday. At the time of writing Litecoin is seen trading up in minor positive territory, with gains of around 1.5%. It is worth noting, since 8th February the price has gained as much as 60%, with the high print up at $53.65 produced on 20th February.

The big chunky jump north came after the price managed to escape a narrowing daily range block formation. LTC/USD was moving within the confinements of this for 11 January to 8th February. The breakout higher was very much explosive, given the prolonged period it has traded within. In terms of the initial spike observed on the 8th, it was a gain of around 45% in a single session.

Coinbase Wallet to Support Litecoin

Coinbase, the leading U.S. cryptocurrency exchange, announced it will now support LTC on their native Coinbase Wallet. This will allow users to store their LTC directly on the app. The fifth largest cryptocurrency by market capitalization will be joining the likes of bitcoin (BTC), bitcoin cash (BCH), Ethereum (ETH) and Ethereum Classic (ETH).

Users of the Coinbase Wallet are going to have the ability to download a required update with Litecoin support in the coming weeks via the Apple Store or Google Play Store. Storing LTC will be immediately available upon the completion of the update. Users will need to choose the ‘Receive’ option; this can be observed on the main wallet page to deposit LTC into the wallet.

In the official blog announcement, Coinbase said:

“The new Wallet update with Litecoin support will roll out to all users on iOS and Android over the next few weeks. LTC support is activated by default — all you need to do is tap ‘Receive’ on the main wallet tab and select Litecoin to send LTC to your Coinbase Wallet.”

Technical Review – LTC/USD

LTC/USD daily chart.

The Litecoin price has stabilized at heights above the psychological $50 price mark. A near-term area of demand is seen from the $50-$47 price range, which is helping keep LTC/USD propped up. The next upside targets for the bulls are seen just above a supply zone tracking from $55-$57. It last traded up at these heights back in November 2018. Should the bulls manage to maintain upside momentum, then eyes will be on a return into $65 territory, where the next area of supply is tracking.

In terms of support, as detailed earlier, immediate relief is found within the $50-$47 range. If this fails to hold, then a potential chunky wave of selling pressure would likely come into play. The next demand area to the downside runs from $42.50-$39.50; price last traded here between 9-16th February. LTC/USD had briefly consolidated within this zone before a further squeeze to the north occurred.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

 Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 126 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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