In the world of cryptocurrencies and digital money, transparency is a “fundamental” element of this ecosystem (an example of transparency is the most popular cryptocurrency called Bitcoin). This transparency generates trust in the network, but at the same time, it causes problems for some users.

Given this “transparency” of Bitcoin, “alternative” cryptocurrencies began to appear in the ecosystem focused on maintaining the anonymity and confidentiality of the information of network users. There are reasons why there are people who want to carry out transactions while maintaining privacy and anonymity, for example when donations are made to certain foundations, organizations or individuals, and you don’t want to know who makes them (you don’t want to publish the identity of the benefactor).

For example, donations made to organizations such as Greenpeace, Journalists Without Borders, Doctors Without Borders, among others, (all with worldwide recognition) sometimes these organizations have certain problems with some governments or people (who consider them uncomfortable for their interests ) in these special cases donations are made “anonymously” to avoid problems and take care of the identity of the benefactors.

How does privacy work?

If it is desired that those involved in a transaction protect their identities, that is, that the transaction is completely anonymous, there are several alternatives in the cryptocurrency market, for example Dash has a technique called currency mixing, which consists of Gather a certain amount of coins and “mix” them with others, in this way it is difficult to know where the funds come from and where they are going. This process is reinforced by the amount of mixtures that are made, since the more mixtures, there will be greater security and privacy in the process.

Example in real life

To explain the previous point we will use a simple example: if we have a 100 dollar bill, whose serial is related to our person, by this serial (if we make a payment to a person) it will be known that we made that payment at a certain time And to a specific person. In order to avoid this situation, it is that the “mixing” of the coins is done, in this case the 100 dollars are divided into smaller coins (of different denominations), keeping control of that amount, so that each new ticket that is received, will come with a serial that cannot be related to a person. Thus, the payment is made more securely and anonymously.

The process

To start this process, the wallet makes requests to the Masternodes in order to begin the mixing. The user chooses a denomination among the parameters allowed by the network. This user choice is made in such a way that the Masternode receives the mix request, but does not know who sends it. This is the first step that ensures user anonymity. The previous mix request enters the queue of mix requests from other users.

To carry out the process, the Masternode orders the tickets and instructs the other wallets of other users to make the corresponding payments. Payment is made by the wallet to an address called “exchange address”, which is part of the addresses that the wallet of a particular user can create. To finish (and thus hide the funds) this process is repeated several times, which, for each repetition, it becomes more difficult to specify where the funds come from.

What do you think about this topic? Did you know what private or anonymous transactions are in Dash?

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Image by Chris Yang via under a creative commons license.

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