Who cares about privacy? Not crypto users, says Coin Metrics

Published at: Sept. 2, 2020

The overwhelming majority of crypto transactions do not include privacy tokens, with most traders choosing to move funds transparently rather than privately.

According to crypto analytics firm Coin Metrics’ Sept. 1 State of the Network report, the combined daily transactions of three privacy coins, Zcash (ZEC), Monero (XMR), and Grin (GRIN), equated to only 6% that of Bitcoin (BTC), despite the coins offering substantially more privacy.

“User apathy towards privacy is probably the biggest shortcoming of the current anonymous transactions systems,” the report stated.

“Despite great technological advancements in crypto-currency privacy, uptake of privacy features and assets has been slow.”

In addition, crypto traders may not be taking advantage privacy features their tokens have. ZEC’s includes trustless zero-knowledge proof systems, also known as zk-SNARKs, which allow for transactions that do not reveal “anything about who transacts or what amounts are exchanged.” But the report stated that fewer than 2% of ZEC transactions were “fully-private” and shielded.

Coin Metrics speculated that as mainstream adoption advanced, cryptocurrencies needed to return to their “original privacy-oriented ethos” to survive. If not, the reported stated, the idea of anonymous transactions systems could simply fade away.

However it’s not always that easy to use privacy coins. Australian exchanges have begun to delist privacy coins like Monero citing government regulations.

The increasing privacy of BTC through services like CoinJoin may hold the key to crypto’s private salvation. CoinJoin, with providers including the privacy-focused Wasabi Wallet and Samourai Wallet’s non-custodial Bitcoin mixer, Whirlpool, has seen increased activity. Whirlpoolstats’ Matt Odell reported that users set a new record in August for the number of Bitcoin mixed monthly at 2,429 BTC, or almost $30 million.

Monero and Grin each have unique privacy features. GRIN is an implementation of the Mimblewimble protocol, which employs confidential transactions to obfuscate transaction amounts and makes use of aggregated transactions to prevent the linking of native transaction inputs and outputs.

XMR uses ring signatures that aggregate a crypto sender’s true coins with a set of decoys, picked semi-randomly from other points in the blockchain. On Aug. 6, the token experienced its largest increase in daily hashrate, spiking to 2.2 GH/s.

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