Privacy Coins vs. Public Blockchains – Finding the Right Balance

Cryptocurrencies have had a huge development over the years. There are now thousands of them available. Not all digital assets are the same, and it’s important to understand what each of them offers.

When someone speaks about crypto, most people think of Bitcoin and Ethereum. They work under a public blockchain, like a majority of the options available online. 

Regardless, privacy coins have gained popularity recently. What are they? Are they better than assets that use public blockchains? Keep reading to find the answer to those questions! 

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What Are Privacy Coins?

Privacy coins, in a nutshell, are cryptocurrencies that, among other features, focus on the confidentiality of this asset. To understand the importance of this, we must first clear one of the biggest misconceptions about crypto. 

While many think all digital currencies are anonymous, the truth is that most of them are only pseudonymous. Hence, you can be identified through your crypto transactions. This measure helps people avoid scams and similar problems. 

When you use privacy coins, you and your transactions are anonymous. These are some of the most popular options on the market: 

• Monero (XMR)
• Zcash (ZEC)
• Dash 

Details, such as the amount of money sent, sender, and receiver are hidden when using privacy coins. Developers achieve this using advanced cryptography. Ring signatures and zero-knowledge proofs are examples of that. 

Each unit of a privacy coin is identical and interchangeable. Thanks to that, users are not exposed to blacklisting or tainting. 

Benefits of Privacy Coins

The main benefit of using privacy coins is the confidentiality it offers. Users receive advanced privacy features and data protection measures. Likewise, you won’t be as exposed to censorship and external tracking as you would be with a public blockchain. 

Privacy coins are for people making transactions that require a high level of confidentiality. Users looking forward to making personal or confidential business operations use this alternative. 

Although it’s a more specific case, investors who live in oppressive regimes often use privacy coins as well. They do it to avoid external tracking from government entities. 

Challenges of Using Privacy Coins 

If you want to use privacy coins, you will face some challenges along the way. The first of them is that governments don’t generally support the use of this asset. They often associate it with illicit transactions. 

Depending on where you live, there may be strict regulations on the use of these currencies. Because of that, privacy coins have limited acceptance in mainstream finance. 

The limited visibility that these digital currencies offer makes it difficult to comply with legal or corporate standards when using them. Hence, it may be complex to try them for regular business transactions. 

About Public Blockchains 

Public blockchains include the most popular cryptocurrencies available online, such as Bitcoin (BTC) and Ethereum (ETH). Just like privacy coins focus on privacy, regular crypto operates transparently. 

Transaction records are publicly available and verifiable with public blockchains, so people can trace your financial operations. They only need to check your history through block explorers. 

This doesn’t have to be a disadvantage, though. This type of crypto puts a strong emphasis on accountability and trust. 

Since public crypto transactions are transparent, they are more integrated into our daily lives. It’s easy to find several applications for them in various industries. 

Benefits of Public Blockchains 

The transparency public blockchains offer builds trust among users and organizations. In today’s world, most businesses will allow you to use them for casual transactions. 

Using this type of crypto is often safer for casual and professional users than it is for people trying privacy coins. That’s due to the regulatory acceptance public blockchains have in most countries. 

This digital asset has a broad range of use cases. Thus, it’s easier to try it as a mainstream option for your financial life. Besides that, you don’t need technical knowledge to make transactions with public blockchains. 

Challenges of Using Public Blockchains 

If you want to make your transactions with currencies that offer advanced privacy, public blockchains may not be for you. Government agencies and other entities are able to uncover your identity and track your location. The regulatory acceptance of this asset comes from that. 

While many of them are, not all public cryptos are interchangeable. Therefore, there is a greater risk of suffering blacklisting or getting tainted coins. 

Users who operate with privacy coins have a wider array of features available to them. Public blockchains have become simpler to understand over the years. This won’t represent a problem for you if you only want to use crypto for regular purposes. 

Finding the Right Balance Between Privacy Coins and Public Blockchains 

You don’t need to choose one option over the other. Both alternatives have specific case uses. People can pick what benefits them the most depending on the situation. 

Some cryptocurrencies offer features that give you a closer balance between the two. Zcash, for example, has dual modes. Its users can choose between transparent and shielded transactions. 

If you are working on a project that requires trust and openness, use public blockchains. Privacy coins will do the job for people who need financial privacy. 

Emerging blockchains, such as Polkadot or Cosmos, let users implement privacy while keeping an overall public network structure. However, many of these options are still in development.

People often use smart contracts with optional privacy rules to get more flexibility around the confidentiality and transparency of their transactions. 

Conclusion 

Although privacy coins are not widely accepted today, they may become more popular. You want to be prepared to enjoy the benefits of this asset when that time comes. 

Which option is better among the two? That depends on what you want to do with the asset. You can benefit from the benefits both alternatives offer. 

Nevertheless, you shouldn’t use an asset if you don’t know how it works. Are you new to privacy coins? Learn enough about them before trying to make a transaction. 

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