This page serves to provide an overview of the state of anonymous money on the internet.
Traditional payment systems protect user privacy by closing off their ledgers to the public. This introduces several issues:
- It is inherently untransparent.
- There is no guarantee of privacy; records can be stolen, sold or otherwise given away to other parties including governments.
- It enables financial censorship.
Cash is a great alternative. Sadly, it looks like governments are scheduled to eliminate it. It also has the limitations of being only pseudo-anonymous, burdensome (and in some places illegal) for large transactions, and not being usable on the internet.
Bitcoin is a step in the right direction. It bills itself as electronic cash, and unlike cash it isn't at risk of disappearing because of government de-monetization schemes. Unfortunately Bitcoin is not truly anonymous, but only pseudonymous (and a pseudonymous identity can be easily leaked to a real person). There have been two notable consequences of this:
- It has proved a vital tool for law enforcement agencies which employ companies like Chainalysis to track Bitcoin transactions.
- Many have mistakenly assumed Bitcoin's lack of anonymity is an inherit property of all cryptocurrencies.
The second point is for better or worse. The powers that be might try to ban anonymous cryptocurrencies if they were aware of them. For the moment though there is a relative legal peace about the matter but this will come to pass. On the other hand, the privacy potential of cryptocurrencies tends to be dismissed even by privacy conscious people due to Bitcoin's lack of privacy.
- Bitcoin is the original cryptocurrency and is more widely used than privacy coins.
- Bitcoin may be a conduit for acquiring other cryptocurrencies which provide a higher degree of actual privacy such as ZCash and Monero. Services like xmr.to can be used to acquire Bitcoin anonymously.
- The fact is that while privacy coins are great, there aren't commonly accepted whereas Bitcoin is (at least, on the internet).
- There are some projects meant to improve the privacy of Bitcoin. For instance Dandelion is a proposal to obfuscate IP addresses.
These are what you're here for.
Certain cryptocurrencies, dubbed "privacy coins" can achieve actual privacy. They:
- Keep the address of the sender, address of the recipient and transaction amount private. Or in some cases they do not even have addresses. For more on that see MimbleWimble.
- Provide a mathematical guarantee of privacy so that users don't need to trust another party to keep their secrets.
Here are some notable, privacy enhancing coins:
- Monero is a cryptocurrency which uses several techniques to produce transactions which anonymize senders, recipients and amounts. Privacy is mandatory unlike that in ZCash.
There are three components to Monero's anonymous transactions:
- Ring signatures protect the identity of the sender.
- RingCT privatizes the amount sent.
- Stealth addresses (one time public keys) are generated by the sender to protect the identity the recipient. The recipient must run a node to identify payments before the money can be spent.
- ZCash is a cryptocurrency that uses zero-knowledge proofs to produce anonymous shielded transactions. These transactions are optional and represent a small portion of all ZCash transactions.
Mimblewimble is a protocol created by an anonymous persona. It is intended to provide better privacy and scalability than Bitcoin.
- Grin is the most popular implementation of the Mimblewimble protocol.
- Beam is another implementation of Mimblewimble.
- Tari is a Monero sidechain that uses MimbleWimble.
- The Ethereum core developers paved the way for private transactions in late 2017, with the addition of elliptic curve computations to the EVM. Several proof-of-concept projects provide private Ethereum and ERC-20 transactions:
- E&Y Nightfall
- HeiSwap is a smart contract based Ethereum mixer.
- Has not been audited because the developer cannot afford it.
- AZTEC (Anonymous Zero-knowledge Transactions with Efficient Communication) allows one to build confidential assets represented as AZTEC notes from Ethereum tokens. An observer cannot identify the quantity of notes being moved in a transaction. It also employs Monero style stealth addresses to protect the privacy of the recipient.
- Uses a trusted setup
- Approximately 9x more expensive than an ordinary transaction but will likely be reduced in the future.
- Incognito is a private Ethereum sidechain.
Confidential transactions are still distinguished from regular transactions.
- tornado.cash smart-contract Ether mixer.
Using privacy technology on Ethereum presents a unique benefit: plausible deniability
xmr.to is a service that will send Bitcoin to a designated address in exchange for Monero thereby withholding the identity of the sender.
Bisq is a non-custodial exchange that reduces the risk associated with centralized exchanges as well as helping to preserve the privacy of those who transact using it. It can also be used to trade fiat pairs, but will require a deposit to do so.
GNU Taler is not a cryptocurrency, but a payments network that aims to provide financial privacy for the sender only. It is endorsed by Richard Stallman as an alternative to both Bitcoin and traditional payment networks.