Bitcoin
In the beginning there was Bitcoin, an open source digital currency that allows us to make anonymous payments or transactions almost instantly and through an immutable public ledger known as the blockchain, that keeps track of every transaction ever made.
This is probably the way most people would describe Bitcoin, on a basic level. The problem is that these two concepts are contradictory; since every transaction is recorded on the blockchain, including sender, receiver and amount, Bitcoin can be the exact opposite of anonymous.
What makes us believe that bitcoin is anonymous is the fact that wallets are not connected to our names. They're simply a bunch of random characters that don’t mean anything, but our names are the exact same thing a bunch of characters that are used to identify ourselves, so in Bitcoin we give ourselves a complicated nickname or several complicated nicknames, making bitcoin a Pseudonymous cryptocurrency.
Our nicknames or wallet addresses can be, in most cases, easily traced back to the user, through IP addresses, transaction history, used service providers and so on. Specialists have also been known to be able to determine a lot about someone's identity by their transaction patterns, such as time zone, for example.
Tumblers or Mixers were introduced to deal with this traceability problem. A Mixer is basically a collective of people coming together, putting their coins on the table, shuffling them and then each individual takes back his specific amount from the random coin pile. Users can also set options like time delay in the mixture.
Tumblers are considered a “band aid over a stab wound” in the context of bitcoin, since they can still be traced trough careful analysis, and it requires users to trust their BTC with a third party service, which can steal your coins at any given time.
Mixers will also increase the possibility of a coin not being fungible, since a receiver can check that a coin came from a mixer, which may have coins with a record of criminal activity.
DASH
In 2014, Darkcoin was born later to be rebranded as DASH (Digital Cash). Darkcoin was created a privacy centric cryptocurrency that allows users to pre-mix their coins by combining identical inputes from multiple senders into a single transaction that has serveral outputs.
This system was known as Darksend and was recently rebranded to PrivateSend, it is currently a built-in feature in the DASH wallet. This is a step-up from third party coin-mixing services, but it still allows us to determine the receivers of the transactions, which leaves room for expert analysis.
Monero
In the same year DASH was created, Monero also saw light for the first time as a Cryptonote cryptocurrency, focused on providing greater privacy.
Monero uses a ring signature system to provide anonymous transactions. In a ring signature setting, a group of users have a set of keys that can confirm a transaction without revealing which user made it.
Users can set the how many mixins they want for their transaction, which makes it easier or harder to trace. The problem with the [Monero}(http://monero.org/) setting is that the majority of transactions occur with only one mixin, meaning that mixed transactions can still be traced. [Monero}(http://monero.org/) developers are currently looking to implement a minimum 2 (two) mixin solution, to ensure the currency can provide greater privacy.
ZCash
ZCash is different. Developed from Zerocoin, which was to be an alternative privacy system built on top of Bitcoin, ZCash will be a Proof of Work cryptocurrency with no transaction records whatsoever.
Users will be able to make a transaction that will be completely encrypted on the blockchain.
ZCash uses zero knowledge SNARKS to make sure that despite all the information being encrypted, it is still correct and no double spending would be possible. The only information available on the ZCash blockchain will be the time on which transactions take place.
No sender or receiver address and no amounts displayed on the blockchain, makes ZCash the first truly anonymous cryptocurrency out there.
Resources:
https://www.dash.org/
http://monero.org/
https://z.cash/ | formerly http://zerocoin.org/
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