How Do Privacy Coins Attempt to Solve the ‘Tainted Coin’ Problem?
The 'tainted coin' problem arises when a cryptocurrency unit's value is diminished due to its association with a publicly known illicit transaction. Privacy coins solve this by obscuring the transaction history by default.
By hiding the sender, recipient, and amount, all coins become indistinguishable from one another. This ensures complete fungibility, as no coin can be identified as having a 'bad' history.
Glossar
Privacy
Anonymity ⎊ Privacy within cryptocurrency and derivatives contexts centers on obscuring the link between transaction origins and identifiable entities, a critical distinction from traditional finance’s reliance on Know Your Customer (KYC) protocols.
Privacy Coins
Asset ⎊ Privacy Coins are cryptocurrencies fundamentally designed with built-in features intended to obscure transaction details, such as amounts, senders, and receivers, from the public ledger, thereby prioritizing transactional confidentiality over radical transparency.
Privacy Features
Anonymity ⎊ Privacy features in cryptocurrency protocols aim to enhance the anonymity of transactions by obscuring the link between a user's identity and their on-chain activity.