The available types of cryptocurrencies have multiplied exponentially since their inception, and one of the more popular kinds is privacy coins. As their name implies, privacy coins refer to cryptocurrencies that focus extensively on providing privacy and security to users, making all transactions anonymous. Currently, Monero is the most popular privacy coin in the market, so it’s no wonder why people who are interested in trading in this particular cryptocurrency search for the best XMR wallet that they can find to store investment.
Privacy coins tread a slim line between notoriety and popularity. On one hand, ill-intentioned individuals and groups take advantage of the anonymity privacy coins offer and use them to transact in illegal activities, like money laundering. However, these coins also offer a safer haven for users who simply wish to protect their privacy and ensure their security online.
The dilemma of privacy coins has placed several investors on the fence on whether they should support these coins or not. More specifically, the connection between criminal entities and privacy coins has dissuaded many people from supporting them. That said, privacy coins still have a lot to offer, and there are excellent reasons why serious investors should still look into adding privacy coins into their portfolios. Consider the following below.
Fungibility
Fungibility refers to the interchangeability of two or more assets or goods of the same type. Their interchangeability implies that they have equal values. For example, two one-dollar bills are fungible because their values are applicably the same. This framework, ideally, should also apply to cryptocurrency. However, many coins are not fungible in the crypto industry because it is possible to trace their histories and owners on the public ledger. This presents a problem for investors and users.
Why? Since the crypto coins are not fungible, it means that the authorities and other financial watchdogs can confiscate coins that have been “tainted” previously. For example, a couple of Bitcoins have been used in a criminal transaction and these tainted coins were sold afterward. Even if the coins have changed hands multiple times, the current owner of these coins–despite being innocent–can still be interrogated by authorities for possessing these tainted coins.
The possibility of losing coins due to its transaction history feels unfair for many users. Hence, using privacy coins–whose backgrounds cannot be traced and are truly fungible–can feel like a better investment for portfolio builders.
Better User Privacy and Security
Nowadays, people have become more aware and assertive about how their data is being used. For many, data privacy is important, and several individuals employ programs and other means that will protect themselves from getting tracked and/or hacked, whether online or offline. It is especially the case with financial information, such as credit card details.
While cryptocurrencies like Bitcoin do offer a degree of anonymity, it is not complete. Some details about the transaction are still visible on the public ledger and can be traced to individual addresses by crypto-competent entities. Privacy coins, on the other hand, employ various ways to keep transactions anonymous. Monero, for example, uses ring signatures, RingCT, and stealth addresses to make sure that transactions are fully untraceable on their platform.
Indeed, it can be said that privacy coins play into the general trend of the demand for more data privacy and data control in public spaces. As long as users wish for more financial freedom, it is highly unlikely that privacy coins are going anywhere soon.
Increasing Popularity
Circling back to a previous point earlier, privacy coins have a bad rep in getting used for illicit activities. While the legal governing bodies cannot control the development nor use of privacy-oriented coins, they do have authority over the centralized exchanges for these coins. To address the concern over the use of privacy coins in criminal cases, several exchanges have delisted or even completely removed privacy coins from their platforms.
Despite this attempt, however, privacy coins continue to grow in popularity. Privacy-oriented altcoins such as Monero, Zcash, and Dash have increased their values over time in spite of being delisted, and this development highlights an important fact.
People like privacy coins and believe that they are something worth using. Moreover, this inclination does not seem to be shifting anytime soon. As such, the value of privacy coins will only increase as their use and popularity become more widespread, which is an excellent opportunity for serious investors. Adding these types of coins in their portfolio may come to see significant returns over time and boost their investment to new heights.
To summarize, privacy coins are cryptocurrencies designed to ensure user privacy and make transactions anonymous. They have advantages and disadvantages are different parts of the legal spectrum, but one aspect that smears their reputation is their use in criminal activities. In spite of this, several users and investors see a large potential and convenience in using privacy coins, which contributes to their increased popularity. Indeed, they are one step closer to a truly decentralized financial system.
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