Anonymity has always been sought after in the digital currency community. Many mistakenly think that Bitcoin itself is inherently anonymous, when it is in fact it provides pseudonymity at best. This has caused quite a stir in the community, and many developers have begun to offer their own solutions.
The birth of a trend in cryptocurrencies
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After cryptographic currencies started getting more widespread popularity during 2013, we also saw an huge increase in their number. Truth is, that it wasn’t that hard for someone with some basic program development knowledge to create his own coin. At some point we could see that a couple or even more new cryptocoins were released almost each day. Thankfully this would not last long. Investors and currency users started looking for innovation and that’s when coins that used interrogated systems to improve anonymity started gaining popularity as well.
The first Bitcoin”flaw”
Many people mistakenly believe that Bitcoin is a fully anonymous type of payment. While this might not be entirely wrong since in many ways Bitcoin offers better anonymity than other payment options it’s not fully anonymous. Since all transactions are stored and accessible through the blockchain it was suggested Even in the Satoshi original whitepaper it was recommended that Bitcoin users should use a new address for each transaction to avoid the transactions being linked to a common owner. And even though IP addresses are not stored in the blockchain Gavin Andersen once noted the following:
Unless you are very careful in the way you use bitcoin (and you have the technical know-how to use it with other anonymizing technologies like Tor or i2p), you should assume that a persistent, motivated attacker will be able to associate your IP address with your bitcoin transactions.
Taking these and many other factors into consideration developers started working on a way to improve anonymity of cryptocurrencies as well as to increase the popularity of their currency, by triggering people’s interest through innovation. It’s expected that people would more likely use a digital currency with an active and skilled development team rather than something that has been cloned and doesn’t offer something new besides older alternatives.
The beginning of anonymous digital currencies
Early in 2014, DarkCoin would be the first cryptographic currency to offer a complete anonymous transaction system. Even today Darkcoin remains the most popular anonymous altcoin but it’s not the only player in the game. Some time before it’s release the now abandoned Stablecoin had release a mixing service. A protocol that would mix transactions together in order to make tracking the flow of coins and making associations harder. Here is a list of other notable examples:
- Bytecoin, released in March 2014. It’s the first Cryptonote based currency
- Anoncoin, coins transfers are done using the darknets only to prevent tracing the root of transactions
- Zerocoin, a project that is still in development with the aim to improve the weaknesses of Bitcoin
- Cloakcoin, released in June 2014 implemented and decentralized p2p anonymization feature via Proof of Stake protocol extensions
- XC, end to end encryption and trustless multipath design along with other features that are still in development
The future of anonymous digital currencies
The examples mentioned above might not seem many but what’s for sure is that anonymity has surely paved its way into the cryptocurrency ecosystem and it’s here to stay. The technology to achieve true anonymity for the users of cryptographic currencies has achieved tremendous progress during this year. Even though most of the technologies used to improve anonymity are still in development with Bytecoin and being the only altcoin from the above examples to offer a finished product and still have an active development team; efforts are still being put on finishing the other projects as well. DarkCoin announced that Darksend+ is coming in late July/early August, 2014 to make it a finished product as well. The other parties are working on finishing their projects and releasing the final result as well. Anoncoin, Zerocoin and Cloakcoin have announced that new features will be released later this year. XC is fully functional but many of it’s features are still in development, the currency’s future plans seem promising.