One of the biggest threats to privacy coins is that governments can crack down on them. That’s because, privacy coins take away government power to peep through transactions, as a security measure. Quite understandable given the complex nature of crimes in the 21st century ranging from terrorism financing, human trafficking among others. But what if governments decide to play in the background? Rather than trying to regulate or control the usage of privacy coins, they choose to look for vulnerabilities that can essentially give them eyes on transactions taking place through privacy coins.
To give context to this is an advertisement by the U.S department of homeland security (DHS) small business innovation research (SBIR) program on their website, essentially looking for people who can achieve just that. The description to the pre-solicitation reads as follows:
“This proposal seeks applications of blockchain forensic analytics for newer cryptocurrencies, such as Zcash and Monero. And, ongoing research within the field also contributes to new technological implementations and techniques that continue to multiply the specific types of consensus, privacy, security, and proof mechanisms. A key feature underlying these newer blockchain platforms that is frequently emphasized is the capability for anonymity and privacy protection. While these features are desirable, there is similarly a compelling interest in tracing and understanding transactions and actions on the blockchain of an illegal nature. To that end, this proposal calls for solutions that enable law enforcement investigations to perform forensic analysis on blockchain transactions.”
With the resources that governments have at their disposal, there is no doubt that such initiatives can go a long way in breaking privacy coins. Only privacy coins with top-notch privacy tech behind them can have some level of safeguard against such moves, and Monero and Zcash could be safe bets. Both Monero (XMR) and Zcash (ZEC) have some of the best privacy technologies in the world.
For instance, Zcash (ZEC) uses Zn-Snarks technology. This is a privacy tech that allows a person to prove they hold a specific piece of information without revealing it, or interacting with the one proving it, or the one verifying it. This makes Zcash solid tech that may be theoretically impossible to break. Monero (XMR) too has some strong privacy capabilities. Monero uses ring signatures, which means that digital signatures can be done by any member of the ring group. The result is that Monero (XMR) is private at the protocol level, making it almost impossible to peep into incoming transactions.
On top of that, these cryptocurrencies are constantly innovating in order to get better at privacy. They need to do that because their value is fully reliant on being private. If users were to get the impression that they are no longer private, they would lose value. This is motivating enough for their communities to keep innovating and stay ahead of the privacy game.
As for whether they can stay ahead of the game for long, only time will tell. One thing is clear though, these cryptos are solid tech. Otherwise, the DHS would not be exploring ideas on how to get eyes on them.