As cryptocurrency use cases increase by the day, several investment opportunities have cropped up, making it increasingly difficult for fintech investors to choose their portfolios’ best options.
One of the viable investment options in the crypto space is privacy coins. The first of these coins was launched in 2014, paving the way for several others. Today, there are about 86 privacy coins, each with its unique feature.
Privacy coins are increasingly becoming popular among crypto enthusiasts and investors. If they have piqued your interest, you’re probably wondering if you should invest in them in the coming year. After all, they offer several lucrative benefits that you just can’t ignore.
Well, this article seeks to provide some answers and determine whether privacy coins will bring in significant returns in 2021.
What Are Privacy Coins?
Before analyzing their worth as investment vehicles, we must first define what they are and why they are causing a stir in the crypto world.
Privacy coins are a type of cryptocurrency that allows the users’ total anonymity when transacting on the network. Older cryptocurrencies, such as bitcoin, aren’t entirely private. The transactions are recorded on a public ledger, allowing anyone with enough resources and determination to track transactions from their origin to their destination.
Privacy coins offer different levels of privacy to their users. Some of these coins hide the users’ ID, the origin of transactions, wallet addresses, and balances. The extra privacy makes these coins a favorite for users who prefer not to leave a trail when transacting on a network.
The enhanced security features of privacy coins make them stand out from other cryptocurrencies. For example, Monero (XMR) uses ring signatures to blur the public ledger. This way, it becomes harder to trace the origin of a transaction, making it difficult to determine the number of coins held by a particular node.
Dash, on the other hand, has the PrivateSend feature. It uses the CoinJoin technique to mix up the network transactions, quite similarly to how bitcoin tumblers work.
Privacy Coins and Government Regulation
One of the most significant factors that’ll influence investments in privacy coins in 2021 is government regulation. Over the last few years, governments worldwide have been looking for ways to regulate crypto use in their sovereign states, and some have succeeded.
For the most part, the regulation aims to make crypto transactions more transparent, which helps curb illegal activities. While this move is great for other cryptocurrencies, what does it mean for privacy coins?
Crypto enthusiasts are drawn to privacy coins by the lucrative security features. If government regulations are imposed on these coins, they risk being stripped of the extra-security features.
Will this be the end of privacy coins, and should you invest in them in the face of this impending doom?
Well, the truth is that members of the crypto community will always have an interest in privacy coins. As regulatory bodies worldwide continue finding ways to dictate how cryptocurrencies are used, the need to remain anonymous will increase. Therefore, investors will shy away from other cryptocurrencies, thanks to the increased scrutiny, and turn to privacy coins.
The exact market size for these digital currencies is currently unknown. Still, crypto enthusiasts and investors will always turn to them to escape the watchful eyes of the government and regulatory bodies. Privacy coins will keep growing in places with crypto use restrictions as the added security becomes a significant selling point. Therefore, developers will have to find more ways to keep users’ data private on a network, which will ensure the continuous growth of the global market for privacy coins.
3 Reasons Why You Should Invest in Privacy Coins
The privacy coin market will keep growing and is a worthy venture to look into in the coming year. These digital currencies provide several benefits, including reduced chances of money laundering incidents.
If you’re still undecided, here are three reasons why you should put some of your money in privacy coin projects.
Long-Term Use Case
The crypto industry is ever developing, and new projects keep emerging each day. Although most of them have some sustainable use cases, several don’t have much to offer. As more crypto projects flood the space, only those that provide actual solutions to users’ problems will survive.
Most crypto enthusiasts got on board with digital currencies because of benefits like anonymity. However, they discovered that older cryptocurrencies like bitcoin weren’t exactly private. Therefore, developers came up with ways to curb this challenge, and privacy coins seem to be the best solution thus far.
Investors and other crypto users will keep seeking to remain anonymous while transacting, which is why you can be assured that privacy coins are in for the long haul in the crypto industry.
Freedom of Use
One of the biggest disadvantages of having the government track crypto transactions is that users are limited in using their digital currencies. For example, donating to political organizations or other counterculture groups becomes a problem, especially if the government is against it.
With other cryptocurrencies, governing bodies only require access to the public ledger to track transactions on the network and figure out where the donations came from. Privacy coins dispel this disadvantage, thanks to the top-notch security features. Therefore, you can always donate to any organization of your choice without worrying about being tracked.
Portfolio Diversification
Every investor worth their salt knows that one of the crucial factors to successful investments is diversifying their portfolios. Having different investment vehicles reduces the risk of loss and helps ensure greater returns.
As a fintech investor, you have a variety of investment vehicles to choose from. Investing in privacy coins is one of the ways to get into the crypto industry. It provides a sustainable investment that has the potential for greater returns as more people get on board and find different use cases for these digital currencies.
Parting Shot
So, is investing in privacy coins in 2021 a good idea? Absolutely!
The industry is growing rapidly, and 2021 will see more crypto enthusiasts get on board. Privacy coins offer one of the most sought-after traits in digital currencies-anonymity- which is why they’ll remain viable for quite some time.
Like any other investment, you should carry out your research before staking your money. You’re spoilt for choice when it comes to the best privacy coins to invest in, but remember, don’t stake more than you can afford to lose.
