For a long time it was taken for granted that using Bitcoin (BTC) to transact online gave you absolute anonymity. This is a myth though. The blockchain is public so every transaction and every wallet address can be viewed by just about anyone. Though the personal information of the owner is not contained in the addresses software has been developed that is capable of exposing the identities of the holders of Bitcoin wallets.
This means that Bitcoin is not the ideal solution with regards to those who value their online financial privacy. Fortunately altcoins which compensates for the Bitcoin’s shortcoming. Below we will examine reasons why having privacy coins in a digital asset portfolio makes sense.
1. Regulatory scrutiny
As Bitcoin?s price rose capturing the world?s attention, the more scrutiny it has attracted from regulators and governments. All over the world laws are being enacted with a view to dictating how digital currencies should be used. Additionally there are also laws being introduced to ensure that owners of cryptocurrencies pay tax.
Though cryptocurrencies are unlikely to get banned in most of the major economies, the legislation that is being introduced will result in an environment that is not very accommodating for users of virtual currencies. This means that the more the regulatory oversight over digital currencies the higher the chances of anonymous digital coins that include Verge (XVG), PIVX (PIVX), Zcash (ZEC), and Monero (XMR) are of becoming even more popular.
Among the various kinds of cryptocurrency users there are those who are deeply committed to the principle behind digital coins. This group includes cypherpunks, anarcho-punks and libertarians. The development of deanonymization tools for virtual currency transactions such as those of Bitcoin has dealt a blow to these kinds of users and they thus have a reason to switch to virtual currencies that prioritize privacy above everything else.
This is likely to lead to a higher demand for the privacy coins as the cypherpunks, anarcho-punks and libertarians move to digital currencies that espouse the values and principles they cherish.
3. Dark web marketplaces
Initially Bitcoin was the digital currency of choice for dark web marketplaces but with the development of deanonymization tools for the Bitcoin blockchain this is no longer the case. What has been happening is a shift towards using virtual currencies that offer privacy and anonymity in conducting transactions on dark web marketplaces.
However Bitcoin is still heavily used on dark web marketplaces but its use is declining as Zcash and Monero become more popular.
4. Merchant acceptance
Privacy coins are increasingly seeing a rise in the adoption by merchants. This is partly due to the efforts the anonymous digital coins are making by for instance making them attractive to use. Consequently with increased merchant adoption this is expected to lead to higher demand for these coins and as a result the value of these coins will rise.
5. Speed and cost
Most anonymous digital coins enjoy cheaper and faster connections compared to Bitcoin. Thus besides offering privacy and anonymity they have the added advantage of speed and low processing fees. Their values should thus rise with the expected increase in usage.
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