Privacy coins, as their name implies, are a popular kind of cryptocurrency focused on making transactions fully secure, anonymous, and untraceable. For instance, the privacy coin Monero (XMR) uses a dedicated Monero wallet to generate one-time addresses for every transaction users conduct using the coin. These addresses are only usable for single transactions and can’t be traced back to any identifying information about the two parties involved in the exchange.
Because of their focus on anonymity, privacy coins have unfortunately gained something of an unsavory reputation in online circles. Though these coins were designed for legitimate uses, some malicious groups and individuals have used them extensively for illegal activities, like money laundering, ransomware operations, and transactions on Dark Web marketplaces.
But though some parties have used privacy coins for illegal activities, many crypto enthusiasts with legitimate concerns about financial privacy and security have still thrown their support behind these coins. Such supporters believe that these coins still have a lot of potential for revolutionizing the landscape of the financial industry.
Despite this, some cautious investors may still be unsure about supporting privacy coins. However, there are many good reasons to consider adding these cryptocurrencies to your investment portfolio. Consider the three arguments examined in detail below:
Best Possible User Security
Data privacy has become an especially urgent concern for internet users in recent years. Cybercriminals such as hackers and scammers now have highly advanced techniques and technology at their disposal, and data breaches have become increasingly common. As a result, demand for platforms and programs that protect users’ sensitive information from being tracked or stolen is at an all-time high. Naturally, people are especially protective of their financial information, such as their credit card and bank account details.
This is where privacy coins come in. Conventional cryptocurrencies like Bitcoin conduct transactions pseudonymously, but transaction details such as amounts and wallet addresses remain visible on the public ledger and can still be traced back to individual users without much difficulty.
Privacy coins like Monero, however, offer true anonymity through highly advanced security protocols like ring signatures and stealth addresses. Users’ wallet details and even their transaction amounts aren’t recorded on the public Monero ledger and thus can’t be used to identify the parties involved in any Monero exchanges. Privacy coin enthusiasts emphasize that these obfuscation and anonymization technologies can be game-changing for users who urgently need financial privacy.
Users who live in jurisdictions with limited economic freedom due to high crime rates, oppressive governments, or other factors can safeguard their assets more easily with privacy coins. For some individuals, fully secure, private digital assets may even enable a safe exit from their country of origin and pave the way for a better life abroad.
Full Fungibility
Fungibility describes the ability of two or more goods or assets of the same type to be interchanged without losing value. Two bars of gold with identical weights, for example, will always have equal value. If you deposit a USD 100 bill at the bank, you can withdraw the same amount later without having to ask for the exact bill you initially brought in.
With that in mind, fiat money is not fully fungible because identifying markings like serial numbers make it possible to trace the transaction history of a possible bill or coin. The same is true of many cryptocurrencies, as their histories and previous owners can be tracked on their blockchain’s public ledger. Authorities can thus confiscate coins with a history of use in criminal transactions. Owners of these coins may also face interrogations even if they themselves have never used cryptocurrencies for illicit purposes.
Many users take issue with the possibility of losing assets as a result of how those assets have been used in the past. Even more users are understandably fearful of coming under the eye of financial watchdogs. For such people, privacy coins seem like a safer investment, as these are fully fungible and thus impossible to trace.
As an example, no one has any way of knowing what your Monero coins might have been used for before you bought them, as this information isn’t recorded in any form on the Monero network. Thus, it’s impossible to conclusively determine whether your coins have been involved in illegal activities. This fact frees you of any liability for using “tainted” coins and allows you to buy and sell Monero freely.
Mounting Popularity despite Backlash
As mentioned previously, privacy coins have become somewhat notorious for their use in illegal transactions. A number of centralized exchanges, in fact, have gone as far as to delist or even completely remove these coins from their platforms to prevent the spread of criminal activity.
Despite this unfavorable reputation, however, research shows that privacy coins are only continuing to grow in popularity. Monero and other similar cryptocurrencies have enjoyed a steady increase in value over time in spite of having been delisted from several major exchanges. These trends suggest that, even with the backlash against them, many legitimate users from all over the world consider privacy coins worth using and investing in.
Many enterprising crypto traders see the enduring popularity of privacy coins as a sign that investing in them will bring significant returns over time. Increasing demand for secure and private investments, as well as the solid security benefits privacy coins promise, seem to suggest that these cryptocurrencies are here to stay.
Privacy coins are steadily growing in value despite the scandals and setbacks they’ve weathered over the years. This is because numerous crypto users around the world see them as promising stepping stones toward a truly secure, decentralized financial system. Serious investors would thus be wise to consider privacy-focused cryptocurrencies as potentially productive investment opportunities.