In the first few years of Bitcoin’s existence, one of the features that attracted the most attention from early advocates was the ability to make private transactions.
Bitcoin’s Privacy Woes
In a financial system where banks, businesses and government authorities heavily monitor consumer purchases, the ability for one to vanish from the radar of these intrusive entities and freely buy and sell goods is highly appealing.
Bitcoin promised to not only serve as a peer to peer electronic cash system, but also a tool to fight against censorship and increase financial autonomy through decentralization and privacy. However, it’s become clear over the years that the pioneer cryptocurrency isn’t actually as private as many had hoped.
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The nature of its public blockchain is such that transactions are easily traceable to the source, making it possible for individual addresses to be blacklisted from transacting with crypto exchanges, merchants, or governments.
Regardless of whether one believes that tracking purchases is necessary for law enforcement to prevent terrorism, money laundering or other criminal activity, the fact remains that Bitcoin as a medium of exchange has failed to deliver a solution for allowing people to make transactions privately.
Enter Monero and Zcash, two privacy-focused cryptocurrencies that emerged in 2014 and 2016 to occupy the space where Bitcoin seemed to fall short. Monero and Zcash both seek to obfuscate all three parts of a standard cryptocurrency transaction: the sender’s address, the receiver’s address, and the amount being sent.
Monero was first developed in 2014 by a Bitcoin forum user known by his handle thankful_for_today.