September 22, 2020

Privacy Options Underutilized in Cryptocurrency Usage: Report

Privacy Options Underutilized in Cryptocurrency Usage: Report

Advances in cryptography have not met with user enthusiasm, suggesting a disconnect between the cryptocurrency community and its cypherpunk ancestors.

According to Coin Metrics, transactions of privacy-focused cryptocurrencies zcash (ZEC), monero (XMR), and grin only add up to 6% of bitcoin’s transactions. Zcash’s privacy feature is significantly underutilized, with less than 2% of transactions fully shielded.

Although the coins offer more privacy than bitcoin (BTC), their reception is still underwhelming. “For every transaction on one of these privacy assets, there are 16 done on Bitcoin and countless more on assets that offer even less privacy,” Coin Metrics detailed, in its September 1 report titled, “State of the Network: Issue 66.”

Coin Metrics, a crypto market data provider, is worried that these statistics mark a departure from anonymity, a fundamental principle in the initial design of virtual assets. The authors emphasized:

As cryptocurrencies continue to be adopted by the wider public, its (sic) original privacy-oriented ethos must be transmitted in order for it to survive. Failing to do so could result in the original idea of anonymous transactions systems fading away and being superseded by other conceptions of what crypto-currencies are useful for.

ZEC has a privacy function that does not reveal any information about who transacts or the amount exchanged. However, the recent crypto breakthrough it incorporates, known as zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge), is optional so that users can still use transparent transactions. According to Coin Metrics, only around 5% of all issued ZEC is currently shielded and just 2% fully shielded.

Grin uses the Mimblewimble protocol to aggregate transactions, obfuscating native transaction inputs and outputs. XMR aggregates a sender’s true coins with ring signatures. Outside these coins, a privacy feature for bitcoin, Coinjoin, allows users to “mix” their coins together to obscure individual transaction records.

With statistics leaning towards dominant bitcoin usage, the increased encryption of crypto, thanks to new innovations like Bulletproofs and Mimblewimble, is a case for optimism.

“We can also note a renewed interest in Coinjoin with providers like Wasabi and Samourai’s Whirlpool which, despite representing a very small proportion of bitcoin’s transaction volume, are growing quickly,” said the Coin Metrics report.

What do you think about crypto users apathy toward privacy? Let us know in the comments section below.

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