PowerKee’s Bastion of Privacy #2
Bitcoin is the bellwether of the cryptocurrency market. At the time of writing, it’s valuation is estimated to represent over 61% of the entire marketplace. But the privacy provided to users of the Bitcoin protocol is extremely poor.
Protecting privacy while using Bitcoin is possible. Arduous efforts are required to achieve such privacy making the requirements are unfeasible for most.
In the latest Bastion of Privacy release, we detail some of the requirements to accomplish privacy while using Bitcoin. Building on this, we highlight why cryptocurrencies that protect privacy at the protocol level offer a much more appealing option to users.
Tools for Bitcoin Privacy
To accomplish privacy while using Bitcoin, users need to use several complicated technologies. Privacy is traded off anytime that Bitcoiners use an application or service that makes their experience convenient. Centralized exchanges, web wallets, and even poorly encrypted communications platforms are all likely to compromise privacy. Several large-scale firms specialize in uncovering the Bitcoin users’ identity who compromise their anonymity by using such technologies.
To secure strong privacy assurances, Bitcoin users must first ensure that their online footprint is completely disconnected from their Bitcoin usage. This is more complicated than it sounds. In a world where applications track our data, this essentially means that users need to have an entirely different computing setup specifically for Bitcoin.
With their dedicated computing setup, users will need to run a full node which only broadcasts on-chain transactions over the Tor browser. Bitcoin users should also transact on the layer-2 Lightning network as much as possible. When transacting on layer-1, users should use CoinJoin, which is a decentralized coin mixer. Any communications should be carried out on a different computing setup and should use heavily encrypted messaging platforms like Telegram and Signal.
Let’s summarize some of the requirements to achieve privacy with Bitcoin:
- Disconnect online footprint from Bitcoin usage
- Computing setup which is dedicated to Bitcoin
- Operate a full node
- Broadcast transaction over the Tor browser
- Use CoinJoin for layer-1 transactions
- Use the Lightning Network as much as possible.
- Use a separate computing setup for communication which users heavily encrypted platforms
Protocol-Layer Privacy Coins
Given the complications of maintaining privacy while using Bitcoin, several cryptocurrencies have emerged that provide strong privacy assurances at the protocol layer. These cryptocurrencies make protecting the privacy of your financial transactions as easy as owning a specific coin.
Several privacy coins have emerged over the past five years. Monero, Zcash, and PIVX are among the most popular privacy coins currently on the marketplace. Maintaining anonymity becomes much more straightforward when protocol-layer privacy is protected.
Users still need to exercise caution regarding the tools and services they use in connection with these coins. Acquiring the coins through a KYC exchange will immediately link a user’s identity to the purchase. The coins will become untraceable when they’re transferred to a self-custody wallet, but the initial footprint will remain. Moreover, users need to be cautious regarding their activity on social media. Discussion about privacy coin purchases can compromise anonymity.
Let’s compare the requirements to achieve anonymity with a protocol-layer privacy coin:
- Acquire a privacy coin
- Avoid KYC exchanges
- Refrain from discussing the privacy coins on social media.
About PowerKee
PowerKee is a cryptocurrency network that makes privacy easy. Users can transact cheaply and instantly while maintaining anonymity. The PowerKee protocol uses a mixture of zero-knowledge proofs and coin mixing to provide strong privacy assurances to its users.
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