Anonymous Coins: Monero, Zcash, and More: How They Work

Privacy is one of the most debated topics in crypto. While blockchains like Bitcoin and Ethereum are often thought to be anonymous, they are actually pseudonymous — meaning all transactions are public and traceable, even if names are not attached. That’s where anonymous coins (also known as privacy coins) come in. These cryptocurrencies use advanced cryptographic techniques to obscure transaction details, making it nearly impossible to trace who sent what to whom. The two most well-known examples are Monero (XMR) and Zcash (ZEC), but there are several others worth noting.

Why Privacy Coins Exist

Blockchain transparency is both a strength and a weakness. While it ensures trust and accountability, it also means that anyone can look up transactions. This can compromise financial privacy for individuals and businesses. Anonymous coins were created to address this gap by offering fungibility (all coins are indistinguishable from each other) and privacy (shielding senders, receivers, and amounts).

Monero (XMR)

Monero is the most widely used privacy coin, launched in 2014. It uses multiple technologies to obscure transactions:

• Ring Signatures – Mixes a user’s transaction with others, hiding the sender.
• Stealth Addresses – Creates one-time addresses for each transaction, hiding the receiver.
• RingCT (Ring Confidential Transactions) – Conceals the amount being transferred.

• Pros: Strong privacy, large user base, constantly evolving security.
• Cons: Often delisted from exchanges due to regulatory pressure.

Zcash (ZEC)

Zcash takes a different approach. Instead of making all transactions private, it offers the option to choose between transparent and shielded transactions. It relies on zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge) — a cryptographic method that allows transaction validation without revealing details.

• Pros: Flexibility — users can choose between transparency or privacy.
• Cons: Lower adoption than Monero, and optional privacy means many transactions remain public.

Other Privacy Coins

• Dash – Originally offered “PrivateSend” mixing features, but now focuses more on payments.
• Grin & Beam – Use Mimblewimble protocol for compact, private transactions.
• Verge (XVG) – Routes transactions through Tor and I2P networks for anonymity.

Privacy Coins vs Regular Cryptocurrencies