Investing in cryptocurrencies reflects the investor’s opinion that in the future the cryptocurrency will be a functional means of payment. It’s that simple. How can the future of cryptocurrencies be predicted? Let’s have a look at it.
The main principle of anonymous cryptocurrencies is, of course, full anonymity? Is it enough for successful cryptocurrency? May it work?
Let’s start! Very simply, you send bitcoins, your transaction is recorded on the blockchain (information about a sender, receiver and amount) so it can’t be considered to be anonymous cryptocurrency as some think. But this is probably not your case since you are reading the article about anonymity.
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It’s extremely difficult to understand the technology behind anonymous cryptocurrencies so let’s make it simple and think within a period of one year. I warn you, today it will be a bit immoral. Imagine you want to buy some drugs. You know you must be anonymous but you are not skilled IT specialist and you don’t want to spend a lot of time searching information about anonymity so you do just quick research on Google like “the most anonymous cryptocurrency”. In every article, Monero is mentioned and is generally considered to be the most anonymous cryptocurrency. I would compare Monero vs. other anonymous cryptocurrencies is like Bitcoin vs. other cryptocurrencies.
Basically, if you want to pay by cryptocurrencies you will probably use Bitcoin. If you want to pay anonymously you will most likely use Monero. Of course, there is Dash, Zcash or less known Spectrecoin or others. But do you want to risk being caught? Probably not, so probably you won’t search for new anonymous currencies which aren’t generally considered to be fully anonymous. Another great thing about Monero is that it isn’t funded and developed by any legal entity, it’s more difficult for governments controlling its faith. Zcash is, for example, privately owned and developed by Zerocoin Electric Coin Company (ZECC) – a government can easily focus on it. Moreover, 20% of each minted block goes directly to that company, you can consider it as a tax.
Threats are, of course, competitors – Zcash, Dash, Verge etc. As mentioned, in the medium term (one year) there’ll be major anonymous cryptocurrency, like there’s major cryptocurrency Bitcoin right now. Anything can happen but I don’t think there’s a better medium-term investment in anonymous coins (risks compared to expected return). The biggest threat for every anonymous coin is, of course, a security issue. Monero uses a ring signature system to provide anonymous transactions. Users can set the how many mixins they want for their transaction, which makes it easier or harder to trace. Once you need to make a truly anonymous payment you can choose more mixins so nobody can trace it. So the major threat is the human factor as somebody can fail to make fully anonymous payment and get caught. Then it can be considered to be the flaw of Monero. A similar case is when the user pays with Monero and doesn’t use any software for enabling anonymous communication and get caught.
Monero is used to make anonymous payment more and more because people have good personal experience with it. Since anonymity is the most important matter to a certain group of people they don’t want search for new anonymous currencies and they’ll rely on great Monero as long as there won’t be any big security issue. And I believe there won’t be any significant problem.
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Disclaimer: This is my opinion and everyone is fully responsible for their own investment decisions.