The growth of geopolitical tensions has led to an increased demand for a cryptocurrency with a high degree of confidentiality. So, over the past month, Zcash has risen in price by 109%, and Monero – by 48%.
The basic principles of the Zcash and Monero network are identical to Bitcoin – transactions are collected in blocks, and the work of miners is necessary for their generation. However, Bitcoin is a completely transparent blockchain, where anyone can track the movement of funds from wallet to wallet. Anonymous coins, on the contrary, use mathematical methods to hide information about the movement of funds.
Zcash uses the zero-knowledge proof protocol zk-SNARKs, which allows you to confirm a transaction without disclosing the amount and the parties to the transaction. Monero relies on another principle – ring signatures. The network consists of many rings, and each member of such a group can sign a transaction. As a result of mixing, it is impossible to establish for certain the person who signed the signature, as well as who sent the transaction to whom.
Inside such networks, all transfers occur secretly, but the confidentiality of anonymous coins has its limitations – these are entry and exit points. So, with the increase in regulatory pressure, South Korean exchanges conducted a massive delisting of Monero, ZCash and Dash in 2020, and law enforcement agencies increased surveillance of suspicious expenses. For example, the use of Monero and attempts to mix transactions did not help the couple in laundering 120 thousand.
BTC ($5.5 billion) stolen in 2016 from Bitfinex.
The global spread of KYC (know your customer) and AML (anti-money laundering) policies increase the complexity of using anonymous coins for criminal purposes, as an increasing number of centralized exchanges and payment systems either refuse to work with such tools or allow transfers only within their system. At the same time, back in 2019, Interpol refused to claim anonymous cryptocurrencies, since scammers in the vast majority of cases still prefer Bitcoin.
Most crypto experts agree that the focus should not be on suppressing anonymous cryptocurrencies, but on more careful monitoring of the financial activity of suspicious individuals. Wealth in Monero does not matter if it is impossible to justify the source of income when making a large purchase in front of tax or law enforcement services. In this case, the interest in anonymous coins will be situational.