homecryptocurrency NewsExplained: What are private cryptocurrencies? How they are different from public ones
By design, transactions of these cryptocurrencies are linkable and traceable. Therefore, organisations dealing with sensitive information—like commercial contracts or individuals’ personal information—prefer to join a private blockchain. Private blockchains include Monero, Particl, Dash, and Zcash. These platforms allow users to transact without making the data public.
By CNBCTV18.comNov 24, 2021 12:54:37 PM IST (Updated)
The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021 seeks to ban all private cryptocurrencies in India and make way for an official digital currency to be issued by the Reserve Bank of India (RBI). The Bill will be introduced in the Lok Sabha in the Winter Session, which is scheduled to begin from November 29.
It will, however, “allow for certain exceptions to promote the underlying technology of cryptocurrency and its uses... It also seeks to create a facilitative framework for the creation of the official digital currency to be issued by the Reserve Bank of India," said the Lok Sabha bulletin.
The government hasn't clarified the definition of private cryptocurrencies yet. Currently, the popular opinion is Bitcoin, Ether and several other crypto tokens based on public blockchain networks will continue to be in use.
Meanwhile, cryptocurrencies like Monero, Dash, and others that cloud the transaction information to offer privacy to users may be categorised as private tokens and hence, are likely to be banned.
Difference between private and public cryptocurrencies
The best-known cryptocurrencies like Bitcoin, Ether, Dogecoin, Shiba Inu and others are public as their transactions are completely transparent. Although these cryptocurrencies offer some degree of anonymity to users as they allow them to operate under pseudonyms, all transactions on the blockchain can be viewed by any person who has access to the said blockchain.
By design, transactions of these cryptocurrencies are linkable and traceable. Therefore, organisations dealing with sensitive information—like commercial contracts or individuals’ personal information—prefer to join a private blockchain. Private blockchains include Monero, Particl, Dash, and ZCash. These platforms allow users to transact without making the data public.
While these "private" blockchains also have public open ledgers, they allow different levels of permissions for users. Thus, the access can be restricted and transaction information can be encrypted to protect confidentiality.
How does a state-controlled cryptocurrency differ from other digital coins?
China's central bank has already rolled out its official cryptocurrency -- digital yuan -- after banning traditional cryptocurrencies such as Bitcoin and Ethereum from being traded in the country. The Bank of England, Sweden’s Riksbank, and the central bank of Uruguay are also likely to introduce public cryptocurrencies soon.
Unlike the digital yuan and other public cryptocurrencies in the offing, Bitcoin and most crypto tokens are decentralised and are fundamentally resistant to outside influence, control, and authority. While Bitcoin and other popular digital currencies are being seen as a possible replacement to fiat currency, public cryptocurrencies are more of an accessory to cash.
Probably, the biggest difference that distinguishesa state-controlled cryptocurrency fromothers is that the former has legal status. For instance, the digital yuan can be used as a payment mechanism and positioned as a legal tender. On the other hand, other cryptocurrencies do not have a centralised structure.
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(Edited by : Yashi Gupta)
First Published:
Nov 24, 2021 12:18 PM
IST
FAQs
Public blockchains allow anyone access; private blockchains are available to selected or authorized users; permissioned blockchains have different levels of user permissions or roles. Many cryptocurrencies are built on open-source, public blockchains.
What is private cryptocurrency? ›
The government has no control over transactions using private cryptocurrencies, and fears that the secrecy these coins allow could encourage money laundering or other illegal transactions. In contrast, public coins such as Bitcoin, Litecoin, Ethereum and Ripple are built on public blockchains that are more transparent.
What is the difference between public and private keys in crypto? ›
A public key is like a bank account number, whereas a private key is like a PIN number or password. Your private key should never be shared with anyone, as it's the only way to access your cryptocurrency. If you lose your private key, you may lose your cryptocurrency.
What is the difference between a public coin and a private coin? ›
Public coin protocol versus private coin protocol
In a public coin protocol, the random choices made by the verifier are made public. They remain private in a private coin protocol.
How does a private blockchain differ from a public one? ›
Public blockchain are completely transparent, meaning that anyone can view all transactions on the network. On the other hand, private blockchains are not transparent, meaning that only authorized participants can view transactions. Public blockchains are more secure than private blockchains.
What is the difference between public and private trading? ›
The main difference between a private vs public company is that the shares of a public company are traded on a stock exchange, while a private company's shares are not.
What is the most private cryptocurrency? ›
What Is the Best Privacy Cryptocurrency? Monero is the most popular privacy crypto, followed by ZCash and Dash. Each appeals to different users.
Which crypto is most secure? ›
Which cryptocurrency is most secure? Ethereum is considered to be the most secure cryptocurrency as compared to other digital assets. This is largely because its platform uses the blockchain technology, which is one of the most robust technologies for digital transactions.
What is the difference between public and private Bitcoin wallet? ›
Private keys are secure codes for cryptocurrency transactions and proving ownership, while public keys allow others to send cryptocurrency to you. It's crucial to keep private keys safe. If your private key gets lost or stolen, you could irreversibly lose access to your Bitcoin holdings.
Where is the best place to buy crypto? ›
Crypto platform and number of cryptocurrencies available
- Crypto.com: 350+
- Coinbase: 260+
- Kraken: 200+
- Gemini: 70+
- Robinhood Crypto: 15.
- Interactive Brokers: 4.
- Fidelity Crypto: 2.
A private key is a randomly generated number usually presented in 64-digit hexadecimal form. A public key is generated from this number and is used to generate a cryptocurrency address.
Is public or private key better? ›
Having your public key does not grant unauthorized access to your encrypted messages or data. The asymmetric encryption system ensures that only the holder of the private key can decrypt the information encrypted with the corresponding public key.
What is the difference between private and public money? ›
In essence, public money is backed and guaranteed by state institutions, offers a high level of security and is used as an official means of payment. Private money is issued by private companies, is based on trust and is often used for electronic transactions and complements public money.
What is the difference between public token and private token? ›
To draw a simple analogy, think of the public token as your name, something many people know, while the private token is akin to your Taxpayer ID, which only you can use to make purchases in your name.
What are the disadvantages of privacy coins? ›
Disadvantages of Privacy
- Regulatory Scrutiny: Regulators often view privacy coins suspiciously due to their potential use in illegal activities such as money laundering and tax evasion.
- Complexity: The technology behind privacy coins can be more complex, making them less accessible to the average user.
An initial public offering (IPO) is a process in which a private company sells crypto assets of its business to the public in new issuance.
Is it safe to buy crypto on public? ›
Public Investing is a registered broker-dealer and FINRA member, and does not provide cryptocurrency trading or custodying services. Cryptocurrencies are not securities and are not FDIC insured or protected by SIPC. Cryptocurrency investing is speculative and involves significant risks, including loss of principal.
What is a public vs private sale crypto? ›
Startups and early-stage companies often use private sales to raise capital from a small group of strategic investors. Private sales are usually conducted before the public sale and are often used to gauge interest and test the market.
What is public crypto? ›
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