Cryptocurrencies And PrivacyAnonymity and privacy are among the key advantages of digital finance, and this is why the issue of privacy is important to a lot of users. Especially when world governments are beginning to tighten the grip on people’s financial freedoms, making it more difficult to use cryptocurrencies.
Nowadays confidentiality has become a burning issue. The very idea of confidentiality these days seems closely related to cryptocurrencies, however, this is not entirely right. Confidentiality, in simple terms, can be divided into two things – anonymity and untraceability. Anonymity means it is impossible to establish the user's identity while untraceability makes his actions impossible to be traced back to him.
When it comes to confidentiality in cryptocurrencies, most of them have the ability to provide anonymity, however easy it is to lose it. Untraceability, on the other hand, is not fully achieved as through analyzing transaction logs a researcher can identify certain users if anonymity of at least one of the involved addresses has been compromised. There are a number of main methods used to achieve confidentiality in the cryptocurrency space.
🔸 CoinJoin – method of bundling transactions to obfuscate the source of the coins in transaction
🔸 Chaumian CoinJoin – method of obfuscating the transaction log by using a central operator and blind signatures
🔸 CoinShuffle – method of obfuscating transaction logs without a central operator using end-to-end encryption
🔸 Confidential Transactions – method fully hiding the actual amounts, both incoming and outgoing, from third parties
🔸 Ring Confidential Transactions – method utilizing ring signatures to obfuscate the source of the coins in transaction
🔸 Stealth Addresses – method of calculating addresses to receive coins in a confidential manner
Every method listed above has its pros and cons that can only be truly evaluated in practice.
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