Their privacy does not matter – In their latest report, Antoine Le Calvez and the Coin Metrics team take stock of the confidentiality of crypto transactions. The observation is clear: cryptocurrency users don’t care much about their privacy.
Anonymous cryptocurrencies are seldom used
The comparative study of Coin Metrics thus relates to the use of 3 well-known anonymous cryptos .
ZCash and privacy
ZCash came into being as a result of privacy issues encountered by some users of the Bitcoin network. The protocol uses zero-knowledge evidence (zk-SNARKs) to anonymize a transaction. Concretely, this means that to validate a transaction, the nodes of the network do not need to know its content (sender, receiver, amount).
However, ZCash does not provide this anonymity by default . It is the users who decide to activate this feature. There are therefore two types of corners : “transparent” ZECs and shielded ZECs .
ZCash – Percentage of shielded ZEC
ZCash: percentage of ZEC shielded on the total provision
As we can see, only 5% of ZECs in circulation are present on shielded addresses .
Coin Metrics also measured the percentage of transactions involving the anonymity features of the network.
Privacy and ZCash – Percentage of confidential transactions
ZCash: percentage of transactions using network functionalities dedicated to transaction confidentiality
There are therefore in reality 3 categories of transactions:
Those totally transparent (the majority);
These partially anonymous (some of the corners involved is part of the shielded supply );
The truly private ones (all interactions take place within the shielded pool ).
Privacy and ZCash – Percentage of totally confidential ZEC transactions
ZCash: percentage of completely confidential transactions.
Thus, only 2% of transactions carried out on the network are completely confidential . Rather surprising for a cryptocurrency created to preserve the anonymity of its users.
Monero and Grin
Monero is based on the Cryptonote protocol. It uses different methods to hide the sending and receiving addresses of a transaction ( circle signatures and stealth addresses ). Unlike ZCash, on Monero privacy is not optional . Indeed, the user can modify the size of the signature circle , and therefore the degree of confidentiality of his transaction, but the network requires a minimum number of signatories.
As for Grin , it is an implementation of the famous Mimble Wimble protocol . The degree of confidentiality Grin is very high . It is not only possible to hide the addresses and the amounts, but also the graph of a transaction , that is to say the path by which the coins have passed.
Coin Metrics analysts compared the combined percentage of ZCash , Monero and Grin transactions versus Bitcoin transactions:
GRIN-XMR-ZEC-Percentage of trades vs. BTC trades
Percentage of transactions in GRIN, XMR and ZEC compared to transactions in BTC
Thus, all transactions made via these anonymous cryptos represent only 6% of Bitcoin transactions .
The cryptosphere moves away from its cypherpunk origins
In its report, Coin Metrics makes several references to Eric Hughes‘ cypherpunk manifesto .
“Privacy is the power to selectively reveal yourself to the world. “
Thus, the cypherpunks understood very early that the defense of their private life would go through the design of anonymous financial tools . Citizens should have the right to choose what personal information to reveal in a transaction. Obviously, governments and central banks are not of this opinion . It is thus more and more difficult to use anonymous means of payment . The use of cash is restricted to small amounts, and it will become increasingly complicated to obtain anonymous cryptocurrency. In several jurisdictions, foreign exchange platforms no longer have the right to offer privacy coins .
This is undoubtedly a brake on the adoption of the above-mentioned cryptos. But the main factor is user carelessness .