What is private cryptocurrency as mentioned in the new Bill issued by India?

Depending on your perspective, the word “private cryptocurrency” might signify a variety of things. It might refer to privacy currencies like Monero and others, or it can simply refer to anything that does not fall within the purview of a government-controlled central bank digital currency (CBDC). In India, the government intends to present its new proposed cryptocurrency rules to legislators for approval in the Lok Sabha, the lower house of Parliament, during the Winter Session, which begins on November 29.

What is private cryptocurrency?

In recent years, India has had a fraught relationship with digital currencies. It virtually outlawed crypto transactions in 2018, but the Supreme Court overturned the prohibition in March 2020. Private cryptocurrencies, such as Monero, Dash, and Zcash, are built on public blockchains and obfuscate transaction information to provide users with privacy, such as not recording transaction history as they are routed via different networks.

“It is hard to comprehend what the government means by private cryptocurrencies. Bitcoin, Ether etc. are public crypto built on public blockchains and have their own specific use cases. They are needed to run smart contract and write to the distributed ledger that they’re built on top of. People cannot use INR or USDT to pay for fees on the Bitcoin or Ethereum Blockchain,” said Nischal Shetty, Founder of crypto exchange WazirX.

Difference between private cryptocurrencies and public cryptocurrencies

The most well-known cryptocurrencies, including Bitcoin, Ether, Dogecoin, Shiba Inu, and others, are open to the public since their transactions are entirely visible. Even though these cryptocurrencies permit their users to operate under pseudonyms, all transactions on the blockchain can be observed by anyone with access to the blockchain.

These cryptocurrency’ transactions are linked and traceable by design. As a result, organisations dealing with sensitive information, such as commercial contracts or personal information, choose to join a private blockchain. These services let users transact without disclosing their personal information. While these “private” blockchains also contain publicly accessible ledgers, people can have varying levels of access to them. As a result, access may be controlled and transaction data can be encrypted to ensure secrecy.

Public cryptocurrencies and tokens include:

Bitcoin: is the cryptocurrency that popularised the term “cryptocurrency.” While Bitcoin provides anonymity, it does not provide complete privacy. By design, transactions are linked and traceable.

Ethereum: Ethereum was designed to expand the usage of blockchain technology beyond financial transactions. At the moment, Ether is perhaps the most popular Bitcoin alternative, however it does not include any particular privacy features.

Ripple: XRP is a currency designed to be used on the Ripple exchange, which also accepts other cryptocurrencies. Ripple was pre-mined and then XRP was distributed for promotion, and because Ripple is meant to provide resistance against blockchain assaults, XRP may become more popular as the threat of Bitcoin hacking grows. Aside from resistance to hacking, XRP does not provide any further privacy features.

Litecoin: Litecoin was founded in reaction to what some Bitcoin users saw as unacceptably poor transaction times and storage issues. Litecoin significantly outperforms Bitcoin in terms of transaction throughput and storage efficiency. Nevertheless, because privacy is not a design objective, Litecoin does not include any significant privacy features that are not accessible in Bitcoin.

Private Cryptocurrencies include:

Monero: Monero delivers constant anonymity via two features: Ring Signatures and Ring Confidential Transactions (RingCT). Because transaction signatures are shared by a broad number of people, tracing the parties engaged in a transaction is difficult. As a result, identifying specific users with a transaction is extremely difficult. RingCT (which, in speaking, is a subset of Ring Signature rather than a separate feature) enhances privacy by masking financial moves.

Particl: PART is a Particl coin designed for usage on its privacy platform and decentralised marketplace (which also supports many popular cryptocurrencies). Particl is a value token designed with high privacy in mind. Particl, which is based on the most recent version of Bitcoin, extends the protocol with Confidential Transactions (CT) and RingCT. Transactions, like Monero, are untraceable, and quantities are unlinkable. The PART token offers many levels of privacy protection by effortlessly switching between public and private modes while never leaving the owner’s control and never jeopardising their right to privacy.

Dash (originally Darkcoin): Dash is one of the first privacy-focused cryptocurrencies to emerge, attempting to eliminate transaction tracking using a mechanism known as coin mixing. Coin mixing is a third-party mechanism that may be used to enhance privacy to public cryptocurrencies such as Bitcoin, although Dash integrates it by default. The main privacy concern levelled by Dash is that it is reliant on “masternodes,” which are not advanced encryption but rather third-party mixers. It’s impossible to trust Dash’s privacy if you don’t trust the master node operators or the central servers they’re hosted on.

Zcash: This coin’s privacy technique is basically to delete coins’ “memory” – that is, their transaction history – every time a transaction happens. Zcash, like Monero and Particl, makes it hard to trace transactions by obscuring transaction history. To keep their currencies secret, ZEC employs an advanced cryptographic technology known as zk-SNARKs. And, like Particl, Zcash is expanding the use of its anonymity beyond currency.

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