Most cryptocurrency transactions do not use privacy tokens due to regulations
The adoption of privacy and cryptocurrency features has been slow in the cryptocurrency space, according to a new report by Coinmetrics. The cryptocurrency analytics company published a report yesterday, where it discussed the use of privacy features and assets within the cryptocurrency space. In his report entitled State of the Network, the company said that the vast majority of cryptocurrency transactions do not include privacy tokens, as investors and merchants choose to send and receive funds transparently rather than privately.
Coinmetrics revealed that the combined daily transactions of the main privacy currencies, Zcash (ZEC), Monero (XMR) and Grin (GRIN) account for only 6% of the total Bitcoin (BTC) transaction. This despite these currencies offering more privacy than Bitcoin.
Users’ indifference to privacy is perhaps one of the most significant deficiencies in current anonymous transaction systems, the report added. Despite huge technological advances in the privacy of cryptocurrencies, the adoption of privacy features and assets has been less.
Users are not taking advantage of privacy features
The Coinmetrics report highlighted that cryptocurrency traders are not taking advantage of the privacy features that come with most cryptocurrencies. As an example, ZEC uses zero-confidence-based zero proof systems (zk-SNARKs), a feature that allows transactions to hide information about the sender and recipient and the amount they exchanged. However, the report revealed that less than 2% of ZEC’s transactions use the feature to protect the details of the transaction.
According to the analyst firm, with the increase in traditional cryptocurrency adoption, cryptocurrencies need to revert to their original privacy-oriented ethics if they are to survive. “Otherwise, the original idea of anonymous transaction systems could disappear and be replaced by other concepts for which cryptocurrencies are useful.“Added the report.
However, it is not easy to use privacy coins in today’s climate. Cryptocurrency exchanges are increasingly being regulated in several countries around the world, and the regulation does not provide space for privacy currencies. Consequently, some cryptocurrency exchanges have started to withdraw privacy coins from their platforms citing government regulations.
Coinmetrics believes that increasing Bitcoin’s privacy through features like CoinJoin may be the key to saving privacy in cryptocurrencies. CoinJoin, alongside service providers like Whirlpool, Wasabi Wallet and Samourai Wallet’s Bitcoin mixer without custody are seeing an increase in activity in recent months. If the use of CoinJoin and other Bitcoin mixer features continues to increase, privacy in the cryptocurrency space may still survive in the long run.