In the last lecture, I analyzed the "smart contract" field in the blockchain industry. In this class, I will continue to share the third sub-category in the "mature field of the blockchain industry": "Privacy Currency".
I. What is anonymous currency?
The "privacy coin" in the digital currency field is also called "anonymous coin". Regarding privacy coins, there is currently no accepted definition. Generally speaking, the so-called privacy currency mainly refers to a digital currency that can hide the transaction information of both parties in a transaction. The transaction information includes the sender address, the payee address, the transaction amount, and so on.
The originator of digital currency, Bitcoin, was born. It creatively solved the intermediary problems in currency issuance and transactions, but its solution is not perfect for anonymity.
In Bitcoin transactions, each trader has all their transaction information such as the address of the payee, the address of the sender, and the transaction amount, all of which are publicly available on the blockchain browser. And the only thing that cannot be checked is who in the real society these transaction addresses belong to?
But once the owner of an address reveals his true identity, all his online transaction history will be revealed to the world.
So this anonymity has a professional term "pseudo-anonymity" in the industry, which means: it is not true anonymity but partial anonymity.
2. Why is "Anonymous Coin" just needed?
Privacy has always been a requirement of a considerable part of humanity. Because right or wrong, there is always a part of human society's activities that the parties to the transaction absolutely do not want the outside world to know.
In fact, as early as the early days of Bitcoin's development, the biggest scenario for Bitcoin applications was actually the dark web, which was a gray area used to exchange goods and services.
Even if there is no Bitcoin, there are a lot of application scenarios in real life that are anonymous transactions, typically cash transactions. The two parties of the cash transaction will not leave transaction information and leave no verifiable evidence.
Therefore, digital currencies with privacy characteristics must be a rigid need in the virtual world ecology. Historically, it is now, and it will be in the future.
But how big is the need for privacy coins, I can't make an accurate estimate. This is like it is difficult to accurately estimate how many transactions in real life are real-name transfers and how many transactions are cash transactions. The only thing we can be sure of is that this must be a newly needed area.
3. Mainstream coins in the field of "anonymous coins"
Currently supporting privacy technology, there are many digital currencies that claim to be privacy currencies, and new projects are emerging in an endless stream. Compared with competition in other fields, this field has a feature that the latecomers especially emphasize that the technology they use is quite advanced, and the technology they use can achieve better privacy and anonymity than existing privacy currencies. Sex.
But is that actually the case? Do latecomers really have a chance?
I think the main factors that determine the final winner of this circuit are the following two points:
Whether a disruptive privacy technology has emerged, and this technology is a new algorithm that has been thoroughly reconstructed.
2) Ecological operation, that is, how many people actually use it.
First look at the first point, whether there is a disruptive privacy technology, and this technology is a completely new algorithm. This disruptive algorithm must have little relevance to existing architectures and surpass existing technologies in privacy performance. Only latecomers building on this technology are likely to surpass existing oligarchs.
If the new algorithm appears to be very relevant to the existing architecture, even if it can achieve better privacy performance than this, then this technology will be quickly adopted by existing giants, and the advantages of latecomers will be lost. Save. Only when this technology is a brand-new architecture that existing giants cannot improve on their existing foundations can the latecomers have the opportunity to overtake the curve.
Look at the second point, ecological operation. It takes time to accumulate. Existing giants have inherent advantages in this regard. Even if latecomers have the opportunity to enter the market, whether they can attract large-scale use of users is very questionable. It's hard to overtake a curve.
It is worth noting that the "privacy currency" has the same thing as the "currency" cryptocurrency I talked about in the previous article, that is, their application scenarios are mainly payments and transfers. In this application scenario, the first entry will occupy the first opportunity. Even if its privacy is not excellent, it will be used by the market as an ordinary digital currency, so it will also establish its own position.
In addition, there is a special place in this field. Because of its privacy characteristics, transaction information is difficult to query. In fact, it is difficult to evaluate how many people are using privacy currencies. I think the only thing that can be used for evaluation is the market value. The more people use it, the larger the market value will generally be.
Therefore, according to the above two factors and the market value of the standard, latecomers must have disruptive technology to have a chance to overtake the curve, but even so, if you want to exceed the existing giant in user use, the chance is not great, I think this track currently has only three coins: Monroe, Dash and Big Zero.
There are also some coins such as Verge, Komodo, and Grin that have some potential, but they are unlikely to become the head.
Risks of mainstream currencies and competitors
I analyze with you one by one what problems these coins face.
Monero is a privacy-focused currency, arguably one of the most private currencies in the industry today. It uses a technology called "ring signature" technology, which will copy transactions to multiple users, making them all look like traders. This makes it extremely difficult to track the source of the transaction.
The privacy of Monero is quite good, so its biggest advantage is that it is widely used by the dark web. Of course, Monroe is the nail of the eyes of many governments, and the Japanese government has banned exchanges from trading Monero.
Monroe has another problem related to hackers. It is often a privacy coin that hackers want to obtain. There are often news media reports that hackers implanted virus software in electronic systems and used virus control systems to mine Monero. Such news put a huge moral burden on Monroe's back, and his reputation was greatly negatively affected. But this also shows that its privacy is outstanding from another aspect.
Dash was previously called Darkcoin and Xcoin. It came out earlier, attracted many digital currency enthusiasts as soon as it was born in 2014, and is one of the earliest anonymous currencies. Its market value almost always ranks in the top 20 in the rankings of various periods, so it has always been more popular and has always been relatively strong in the minds of fans.
It uses a technique called "coin mixing" to hide the source of the currency. But from a technical point of view, Dash's main flaw is its dependence on "masternodes". These masternodes are the key points of the Dash network, and they will become targets of malicious attacks by hackers.
Big Zero uses the zk-SNARK technology known as "Zero Knowledge Proof." When a user trades, the sent currency enters a virtual black hole, and the system generates a new transaction. This prevents trackers from accessing the original transaction information.
Technically speaking, the Zk-SNARK technology used by Big Zero Coin requires very high computing resources, so it requires a lot of resources when using it, which brings a lot of inconvenience to users.
The risks faced by these three currencies are not particularly fatal to me. Technology-related risks should be able to find eclectic solutions. The risks related to marketing and government policies are difficult to improve in the short term and not in the long term. fatal.
Therefore, the status of these three oligarchs is relatively solid.
4) Verge, Komodo, Grin, etc.
There are only three coins listed here. In fact, there are far more private currencies listed and traded than I have listed, and these listed coins do not mean that they are particularly promising coins other than oligarchs, but just It is said that these coins are relatively popular in the community and are also preferred by enthusiasts.
The common feature of these coins is that they have not shown any particular advantage over the existing oligarchs, or to put it bluntly, they have not shown any particular advantages over Monero and Big Zero. Even when a new star like Grin is launched, it is well received by the community and gives the community new hope, but the actual effect remains to be tested by the market.
Digital currencies that support privacy features haven't been around for long or short. For example, both Dash and Monero have experienced two rounds of bull markets and survived the repeated polishing of the market. The vitality is still very strong.
With reference to bitcoin, many digital currencies of the Litecoin generation that have gradually disappeared in the same period, I think that most of the existing digital currencies supporting privacy functions will gradually become like those stars in the "digital currency" Eliminated by the market, from a dozen rankings, dozens to gradually ranked several hundred, after a thousand.
Of course, this does not mean that other existing privacy coins or rising stars will not skyrocket in the short term and will not be profitable. It just indicates that in the long run, only the head currency will survive.
The long-term bullishness in the field of privacy currency includes Monero, Dash and Big Zero. Their investment values are ranked according to priority as follows: Monero> Dash> Big Zero