Introduction

Today I will be talking about privacy coins or privacy cryptocurrencies. I prefer calling them tokens and not cryptocurrency or coins as they are not issued by a central government and are not a stable store of value. At the moment all the tokens are mere experiments, just like Bitcoin was until speculators took over.

Tokens, Fiat, Crypto, Electronic currencies

The idea of tokens is not new, it has existed for a while only that those tokens were valid in a specific ecosystem. For instance, when you went to fairs or video arcades, you bought a bunch of tokens, which you could use within the boundaries of the business, and outside of that business, they were pretty useless. Then came the Casino tokens, which are worth more than the fair or video arcade tokens, but again they are valid within a particular Casino.

We have been using electronic money for a while now, ever since credit cards and debit cards came into existence in late 70’s to early 80’s. You purchase goods/services and you pay with your Debit/Credit card, and money gets transferred from one entity to another.

Prior to debit cards and credit cards, the only way to track peoples spending activities was via their bank accounts and cheques. Although Cheques are less prevalent now, as electronic funds transfer mechanisms have taken hold.

Privacy, Anonymity & Fungibility

Anytime we exchange fiat currency, we never know who used this bill before us, all we can say is I got this bill from A and I gave it to B, that is it, and even that information is not written anywhere, it is all in our head. The only issue with fiat is that it is controlled by governments, and they can print as much as they want which results in devaluation. Just think of how much your $10 bill is worth now vs twenty years ago.

Bitcoin was an experiment to create a payment instrument that did not have a central body controlling it. When you transacted in Bitcoin, people thought that their transactions were anonymous just like when using fiat. The issue is that the Bitcoin distributed ledger, called the blockchain, maintains each and every transaction since that particular block was mined.

Since public blockchains such as LiteCoin, Bitcoin, Ethereum, etc. are open ledgers you can go to the particular blockchain explorer site, such as http://blockchain.info, and trace all activities related to the particular public address. Once you identify a person to that address, their activities can be easily traced.

The other issue with Bitcoin is, fungibility since all transactions are recorded in the blockchain, all activities related to a particular token can be traced. This allows organizations to check if a particular token was used for illicit purposes if it was then they can refuse to accept it. With existing fiat no one checks against a list where did the $5 bill came from, you never know who the owner of that particular bill was before the person who gave it to you and you don’t even bother to ask for the details either. It is common understanding all $5 bills have the same value regardless of who owned it or what it was used for.

Some Privacy Tokens

To address this very issue privacy coins or privacy tokens have come into existence.

All these tokens are different implementations of the same requirement, making crypto token transactions untraceable for both the receiver and the sender.

Following is a list of tokens that I could find so far, and there are many more.