What is a Privacy Coin?

This video outlines the basic premise of privacy coins and why they’re important. It also touches upon some of the mechanisms they use to keep your transactions private, referencing ZCash and Monero. Think of privacy coins like the digital equivalent of cash.

What is Monero?

When you think about Monero (XMR), think about privacy. Monero is an open-source cryptocurrency, created in April 2014, that uses a type of blockchain in which no outside observer can tell the source, amount or destination of transactions.

What that means for financial privacy advocates is good news: payments and account balances remain entirely hidden, which is not the standard for most cryptocurrencies.

The bad news is that makes Monero popular to those interested in evading law enforcement, or those on the dark web buying illegal substances.

Even the actual coins themselves differ in an important way from Bitcoin (for example). Each Monero unit is fungible. This means any two units of Monero can be mutually substituted and there is no difference between the two. Bitcoin is not.

As a further example, although any two $1 bills are equal in value, they are not fungible because each carries a unique serial number. On the other hand, two pieces of 1 oz. gold of the same grade are fungible, as both have the same value, and don’t carry any distinguishing features. Using this analogy, a Bitcoin is the $1 bill, while a Monero is the gold piece.

Monero, with its non-traceable transaction history, offers participants a much safer network and they don’t run the risk of having their crypto units being refused or blacklisted by others.