Cryptocurrencies come wrapped in many kinds of packaging: altcoins, memecoins, stablecoins… and of course everyone’s favorite: shitcoins. Among these potentially confusing categories you are likely to find mention of the privacy coin. What differentiates a privacy coin from the others… and what exactly are their purpose?
For today’s Crypto 101 interview we are given an overview of privacy coins from our guest Bryan (aka Snappy Snap) of the PIVX community. Understanding this subcategory of cryptocurrency is fortunately not that complicated — but the conversation did open a number of other questions about the future of the cryptosphere, the way people connect within it, and how the powers that be may impact it. Let’s dig in.
The essential feature of a privacy coin (and PIVX in particular), is to protect its users from sharing personal financial information. PIVX puts this aspect front and center with its name: Private, Instant, Verified Transaction. Detractors of cryptocurrency like to use Bitcoin’s past association with the Silk Road website and inaccurately paint it as private and anonymous… therefore ideal for illegal transactions.
Bitcoin, however, is most certainly not a privacy coin which provides this anonymity. As its blockchain is a transparent and very public transaction history. The amount of and time of Bitcoin transactions are easily viewable with the block explorer. Snappy also points out that Bitcoin provides no IP masking (which makes identifying a user even easier).
Privacy as it relates to cryptocurrencies is often painted as a negative thing, and only of interest to criminals or people who are involved in questionable activities. In actuality, privacy is the reason you have curtains on your windows and a door on the bathroom. However, there’s no digital curtain to pull over your Bitcoin transactions — your wallet address holds your transaction history and balance up for inspection by any who care to look. Whether that be a curious look or a malicious one is anyone’s guess.
In response to Bitcoin user’s vulnerability, small pockets of developers began to work on improving the privacy aspect of cryptocurrency. Most notably, the zerocoin protocol was developed as an extension of Bitcoin which provided temporarily pooling and then trading the currency for ‘zerocoins,’ which obscured their transaction history. As a cryptocurrency in its own right, Zcoin was developed from the zerocoin protocol and then fully launched in 2016. PIVX became the first proof-of-stake currency to adopt the zerocoin protocol in 2017 .
Since that time, PIVX developed itself as a currency (units of which are called Piv) which is focused on inexpensive and speedy transactions with an option for privacy. Using the zerocoin protocol, Piv are converted into zPiv, making the currency completely fungible. Following conversion, the wallet, sender and receiver information become completely private. Instead of a one-to-one swap, base denominations (units of 1, 5, 10, 50, 100, 500, 1000 and 5000) are used to further obfuscate the transactions. The cost of sending a zPiv transaction is only 0.01 piv per minted denomination.
Perhaps the most remarkable aspect of PIVX is the community which has developed around the currency. It defines itself as a digital autonomous organization (DAO) and has no central governance authority. Instead, a system of proposals are voted on regularly by the masternode operators. Developers and promoters earn their compensation in this way. Being a proof-of-stake blockchain, PIVX allows holders of the coin to participate in staking or running a masternode as well, both which net a monthly reward for helping to secure the network.
Regarding the privacy aspect of PIVX, Snappy notes that the community is aware that there is likely to be government scrutiny on the users in an attempt to tax the income. While the currency itself can be used to thwart outside efforts to audit transactions and balances, PIVX as a whole is eager to be at the forefront of digital asset projects which will help guide the discussion that will need to occur with governments to adapt to a world in which cryptoassets are destined to become an increasing piece of domestic and global economies. I personally feel that this demonstrates tremendous foresight on the part of the PIVX community.
PIVX is an interesting project which promotes the idea of community and interdependence in a way seldom seen in other cryptocurrency projects. It is at this level of community where the models we need as a whole will develop, and it very well may be that PIVX is a top contender in setting these new standards. For the adaptation for the cryptoeconomy to develop, survive and coexist with legacy models of economic participation, privacy and fungibility will be key components which demand our attention.
Check out the interview HERE