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Privacy Coin Fundamental Analysis

Privacy Coin Fundamental Analysis

Fundamental analysis of crypto assets categorized as privacy coins is very important, because not all crypto assets are truly "private" as claimed by their creators.

There are many crypto assets that claim to be privacy coins. However, only a handful of people can seriously protect the privacy of their users. These are the main factors that should be analyzed when reviewing the privacy mechanisms on a crypto asset.

Remember, that blockchain technology is basically designed to create a data recording system that is transparent and secure, but can still protect the real identity of its users using digital signatures and public key mechanisms.

"However, along with the development of the use of crypto assets, public keys have become very easy to trace, so they can find out who is the real identity of the person behind the transaction."


This fundamental weakness is what drives the design of blockchain and crypto assets that respect privacy in transactions. This design is based on the understanding that privacy is the most fundamental human right.

However, enhancing privacy on a blockchain system that has been designed to be transparent and open to being audited by anyone is not easy.

Here are some aspects in analyzing the fundamental level of privacy of a crypto asset, based on the design of its blockchain technology.

First, is the privacy mechanism embedded in the blockchain, or only at the layers above it, such as wallet integration with TOR and others.


Some privacy coins claim to provide privacy, but simply do not have any privacy systems on their blockchain.

Protecting IP addresses or TOR alone without building privacy features at the blockchain level is not enough, as explained in this research by Alex Biryukov, Dmitry Khovratovich and Ivan Pustogarov and published by the University of Luxembourg.

Then it is a matter of fact, that the TOR network can be completely blocked as is the case in the UK, making such a mechanism extremely risky to use.

Second, was the privacy mechanism created by a cryptographer and reviewed by other experts? 

Or is it just the idea of ​​one or two programmers with no experience in cryptography and information security who are then promoted without being validated or audited by other parties?

It is also very likely that an experienced cryptographer will make mistakes or come across a method that turns out to have significant weaknesses.


Like RSA for example, which has been used by many blockchain developers.

Third, is the privacy mechanism original, or is it just a rebranding of existing technology?


Using existing privacy technology is not a problem, but often a privacy coin developer is reluctant to admit it, because it will reduce the selling value of the crypto assets they publish.

In this case, there are several cases where a privacy coin intentionally does not say they are using technology that has been used and developed by other developers.

    This is also worth noting because the developer may not understand the direction of development of the privacy technique he copied or not as good as the team that actually developed the technique from scratch. It is very possible that there is an error that they are not aware of.

Fourth, does the privacy mechanism involve a trusted setup, or is privacy achieved without involving centralized trust? 

This is because trusted setups can be a significant gap to be able to reveal the real identity behind the transactions that occur.

According to the author, if we examine in the method above, of the dozens of crypto assets claiming to be privacy coins, only a few are left that can be categorized as having good fundamentals with the top three, namely Firo, Monero and ZCash.

Firo, for example, has the highest value, because it has the highest anonymity set, 2 * 16, which even a quantum computer seems to have difficulty dissecting the real identity of each transaction.

Yulina Firmansyah
Yulina Firmansyah Hi, I am a wife who really loves crypto and blockchain technology, I am a writer for this blog.

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