Privacy Coins and Privacy Technologies

Tour the technologies that enable real financial privacy in cryptocurrency: Monero, Zcash, Aztec, Railgun, Aleo, ZK proofs, and the post-Tornado Cash landscape of mixers and privacy pools.

17 min · advanced · part of Privacy in Crypto

The Two Approaches to On-Chain Privacy

Designing a private blockchain is harder than designing a transparent one. The chain still has to prevent double-spending, enforce supply limits, and let anyone verify that the rules are being followed — but it has to do all this without revealing who paid whom, how much was paid, or what the balance of any account is. Two broad architectural approaches dominate the field today. **Privacy by default (mandatory privacy)**: Every transaction is private. Validators cannot see amounts, senders, or receivers, and there is no opt-in or opt-out. **Monero** is the canonical example. The advantage is that everyone benefits from the same anonymity set; you cannot make a dangerous mistake by forgetting to enable privacy. The disadvantage is that the entire chain operates under the legal and regulatory shadow that privacy attracts. **Privacy by choice (optional privacy)**: Transactions can be transparent or shielded. **Zcash** is the canonical example: users choose between transparent (t-addresses) and shielded (z-addresses) transactions. Optional privacy is more flexible and allows for selective disclosure to auditors or regulators, but the smaller anonymity set of users who actually shield reduces practical privacy for those who do. A third class of designs has emerged in 2023-2026: **privacy as a Layer 2 application** on top of a transparent chain like Ethereum. Aztec, Railgun, and the new generation of zk-rollups are building tools that give Ethereum users opt-in shielded balances without requiring a separate chain. This is the most active area of privacy research today, and arguably the most consequential, because it brings strong privacy to the chains where most economic activity actually happens.

Also in this lesson

Monero: Mandatory Privacy in Practice
Zcash, zk-SNARKs, and the End of Trusted Setup
Zero-Knowledge Proofs Explained Simply
The Modern Privacy Stack: Aztec, Railgun, Aleo, Iron Fish
Mixers, CoinJoin, and Privacy Pools
For Deeper Reading

Key terms

Ring signature: A cryptographic signature scheme where one of several plausible signers signs a transaction, and an outside observer cannot determine which one. Foundation of Monero's sender privacy.
RingCT (Ring Confidential Transactions): Monero's system, mandatory since September 2017, that hides transaction amounts using Pedersen commitments and range proofs while still allowing the network to verify that inputs equal outputs.
Bulletproofs: A non-interactive zero-knowledge range proof deployed in Monero in October 2018, reducing transaction fees by roughly 97%.
zk-SNARK: Zero-Knowledge Succinct Non-Interactive Argument of Knowledge — a small, fast-to-verify proof that a statement is true without revealing why. Used by Zcash, Tornado Cash, and most zk-rollups.
zk-STARK: A scalable, transparent (no trusted setup) variant of zero-knowledge proofs, used by StarkNet and several other zk-rollup ecosystems.
Trusted setup: A one-time multi-party ceremony required by some zk-SNARK constructions to generate cryptographic parameters. If all participants are honest, the system is secure. Halo 2 (used in Zcash NU5, May 2022) eliminates the trusted setup entirely.
Halo 2: The transparent-setup zk-proof system deployed in Zcash NU5 (May 2022), removing the trusted-setup requirement that had been a long-standing critique of Zcash.
CoinJoin: A Bitcoin mixing protocol (Gregory Maxwell, 2013) where multiple users cooperatively build a single transaction with many equal-sized inputs and outputs to obscure the link between sender and recipient.
Stealth address: A receiving scheme where the recipient publishes a meta-address, but each payment goes to a fresh one-time on-chain address that only they can spend from. Used in Monero and standardized for Ethereum as EIP-5564.
Shielded pool: A set of obfuscated balances within a smart-contract or chain — for example, the Zcash z-pool or the Railgun smart contract — where transactions are private but deposits and withdrawals are visible at the boundary.
Privacy pools: A 2023 design by Vitalik Buterin and co-authors that lets users prove their deposits are not from a sanctioned set, providing privacy with a built-in compliance hook.
Selective disclosure: The ability to reveal specific facts (a balance, a counterparty, a tax-relevant flow) to a chosen party — like an auditor — without revealing your full transaction history.

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Educational only — not financial advice.