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3 Cryptocurrencies for Privacy-Minded Investors

Lucas Hahn

In my recent article on bitcoin price predictions, I mentioned John McAfee, one of the biggest cryptocurrency enthusiasts, and his prediction that bitcoin would hit $1 million by 2020. McAfee developed the antivirus software that bears his name and also sought the Libertarian Party nomination for president in 2016, losing to Gary Johnson. He recently claimed to be running from the SEC, which wants to subpoena him.

McAfee stated in December that he viewed privacy cryptocurrencies such as Verge (XVG), Monero (XMR) and Zcash (ZEC) as the best investment opportunities. Many people think bitcoin allows for privacy and anonymity, but that is a misconception.

Contrary to popular belief, bitcoin is not anonymous; experts describe it as “pseudonymous.” You can view every bitcoin transaction on this website, which traces every bitcoin back to the Genesis Block mined in 2009. Further, you can see the public address of both the sender and the recipient. Once you link a person to a public address, their privacy is gone.  

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Edward Snowden calls this bitcoin’s biggest weakness. Amazon (NASDAQ:AMZN) recently received a patent for analyzing bitcoin transaction data and selling this to subscribers. This could help governments identify bitcoin users.

Those who want to maintain their privacy may turn to other coins that better protect privacy.


Valuing Cryptocurrencies

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Cryptocurrency prices can be found on coinmarketcap.com. But how should cryptocurrencies be valued? Aaron Brown, who worked as managing director at AQR Capital Management, suggests looking at four factors: transaction speed, ease of use (which includes transaction cost), size and quality of the developer community, and mainstream adoption.

Cryptocurrencies need to be user-friendly. If changes to the code reduce transaction costs and increase transaction speed, the coin will become more valuable.

Attracting and retaining top talent is important for tech companies like Amazon and Apple Inc. (NASDAQ:AAPL). Cryptocurrencies such as bitcoin and Ripple are no different. If a top engineer joins a cryptocurrency team and improves the code, the coin should increase in value.

And if more places accept a cryptocurrency as a method of payment or offer it as an investment, it will increase in value. If a website like Amazon decided to accept bitcoin, expect the price to go up.

Let’s look at three of these cryptocurrencies that promise greater privacy than bitcoin:


Cryptocurrencies to Buy: Zcash

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Bryce “Zooko” Wilcox is the founder and chief executive of the Zerocoin Electric Coin Company, which administers Zcash. The Zcash team includes scientists from top universities such as MIT, Johns Hopkins and Tel Aviv University in Israel.

Zcash reached a price of $2000 a coin in the first week of trading but then crashed, closing at $27.16 on February 22, 2017. ZEC again boomed in late 2017, peaking at a closing price of $880 on January 7.

Zcash transactions can be either private or public. ZEC uses a form of cryptography known as zero-knowledge proofs, which allow you to show that you know a secret without revealing what that secret is. The technology behind Zcash has received some high-profile endorsements. Ethereum founder Vitalik Buterin praised Zcash’s cryptography last year.

And JPMorgan Chase & Co. (NYSE:JPM) partnered with the Zcash Company last year and used zero-knowledge proofs in Quorum, its smart contract platform.

Zcash recently soared 45% after the Winklevoss twins listed it on Gemini, their cryptocurrency exchange.  ZEC currently trades at $333 a coin. There are just under 4 million ZEC in circulation, and the maximum supply of Zcash is capped at 21 million.

According to BitInfoCharts, ZEC has an average block time of 2.5 minutes and an average transaction fee of 0.03 cents.  


Cryptocurrencies to Buy: Verge (XVG)

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The cryptocurrency Verge was founded as DogeCoinDark by a software developer named Sunerok in 2014. DogeCoinDark became Verge in 2016. XVG traded at under $0.01 per coin until December 13 last year. Then it began its meteoric rise, peaking at nearly 28 cents on December 24.

According to the Verge Black Paper, Verge allows users to conduct transactions on private or public ledgers. Verge maintains privacy by hiding IP addresses via technologies such as The Onion Router (TOR) and the Invisible Internet Project (I2P). These bounce your data back and forth between a global network of servers, making it difficult to trace.  

Like Zcash, the maximum supply of XVG is capped at 16.5 billion, and it should reach this between 2025 and 2027. Currently, there are 14 billion XVG, trading at 5.4 cents, for a total market capitalization of $808 million. According to its website, XVG charges an average transaction fee of 0.1 XVG, around half a cent at today’s prices.

Verge claims a transaction speed between 5 and 10 seconds and a capacity of 100 transactions per second. This could increase to 2000 per second if Verge adopts something called RSK technology in December.

RSK could also enable smart contracts on the Verge network.


Cryptocurrencies to Buy: Monero (XMR)

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Monero debuted in 2014. It is based off a white paper published in October 2013 under the pseudonym Nicolas van Saberhagen. Like Satoshi Nakamoto, this person’s true identity remains unknown. However, one of Monero’s lead developers, Riccardo “Fluffypony” Spagni, is well-known inside the cryptocurrency community.

Currently, there are 16 million Monero in circulation. Around 2022, when this is projected to reach 18.4 million, Monero production will slow to 0.3 XMR per minute until the end of time.

Monero currently trades at $195 per coin, giving XMR a market capitalization of over $3 billion. According to BitInfoCharts, Monero transactions cost on average $1.49. The Monero website claims an average transaction speed of 26 minutes.

Monero transactions are private by default, unlike Zcash and Verge, where users can choose between public or private transactions. Monero maintains privacy via sophisticated forms of cryptography, including ring signatures and stealth addresses. The Monero team plans to further increase privacy by adding I2P technology (which XVG already uses).  

Linda Xie, co-founder of Scalar Capital, a hedge fund focusing on cryptocurrencies, told an interviewer in January that the fund was focusing on privacy coins such as Monero and Zcash. Monero and Verge recently received an endorsement from an unlikely source: the Chinese government.

China’s Ministry of Industry and Information Technology recently released a report ranking cryptocurrencies in three areas: innovation, technology, and applications. Monero ranked ninth and Verge tied with bitcoin for 13th place.

Ethereum won first place, followed by four lesser-known altcoins: Steem, Lisk, NEO, and Komodo.

As I mentioned in my previous article, investing in cryptocurrencies is riskier than buying stocks and bonds. You should always conduct thorough research before making investment decisions. The risk of fraud is high, and the SEC recently created a website to remind investors of the danger of investing in cryptocurrency scams.

As for McAfee, he now is bullish on bitcoin Private, which is roughly a cross between bitcoin and Zcash.

As of writing, Lucas Hahn was long BTC, BCH and ETH.

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