Anonymous cryptocurrencies: principles of operation, technologies, and examples

Cryptocurrencies were initially considered anonymous because they allowed transactions without identification — that is, without disclosing users' personal information.

However, traditional blockchain systems such as Bitcoin and Ethereum are transparent and allow tracking of the entire transaction history, which makes cryptocurrency anonymity more of a myth than a reality.

Due to blockchain transparency, on-chain analysts can, with the help of increasingly sophisticated tools, identify users who own specific addresses and transactions.

In addition, exchanges and online exchangers store users' personal data, allowing crypto addresses to be linked to specific individuals, which reduces cryptocurrency anonymity to nearly zero.

To protect confidential data, special anonymous cryptocurrencies exist that hide information about senders and recipients, including addresses and transaction history.

What are anonymous cryptocurrencies?

Anonymous cryptocurrencies are a special class of digital assets created to ensure transaction confidentiality. The emergence of anonymous cryptocurrencies was facilitated by the CryptoNote privacy protocol, developed in 2012 — it is the foundation of well-known anonymous cryptocurrencies such as Monero (XMR) and Bytecoin (BCN).

Note: The term "anonymous cryptocurrencies" is not entirely accurate. These coins protect users' private (personal) data but do not make users completely anonymous. Privacy means control over what data becomes public, while anonymity means complete concealment of the user's identity. Nevertheless, to avoid confusion, this article uses the familiar term "anonymous cryptocurrencies."

Experts attribute the high popularity of anonymous cryptocurrencies to the growing demand for privacy. In their opinion, capital needs a private refuge amid tightening financial control, economic instability, and regulatory policies.

Anonymous cryptocurrencies are also used in countries with high financial censorship, where companies and individuals are forced to protect their privacy and avoid government persecution.

According to on-chain analysts, there is a steady and rapidly growing demand for anonymous cryptocurrencies. In 2025, the volume of transactions with anonymous cryptocurrencies exceeded $250 billion, up 17% from the previous year.

Analytical firms such as Chainalysis predict further growth in demand for anonymous cryptocurrencies and the dominance of Monero in this segment. It is estimated that such digital assets may account for up to 10% of the market share.

How anonymous cryptocurrencies work and how they ensure data privacy

The first and most common method is hiding the actual addresses of senders and recipients, breaking the link between transactions and users' identities.

This method is used in Monero (XMR), Zcash (ZEC), and Verge (XVG). For example, Monero's protocol creates one-time addresses for each transaction, while Zcash uses zero-knowledge proofs (zk-SNARKS).

Encryption in anonymous cryptocurrencies is another way to conceal transaction details. In Zcash, zk-SNARKS technology allows transactions to be verified without revealing specific operation details. This enables Z-addresses, which encrypt actual information about senders and recipients.

In contrast to Monero, Zcash does not make privacy mandatory. Users can switch between private Z-addresses and public T-addresses, which function similarly to Bitcoin's protocol.

Another method ensuring privacy is ring signatures, used in Monero's protocol to make transactions untraceable. In addition, Monero employs two more technologies:

• Ring Confidential Transactions (RingCT) — hide transaction amounts;
• Stealth addresses — one-time identifiers that break the link between a wallet and its owner's identity.

Privacy protection in anonymous cryptocurrencies can also be achieved through private functions such as PrivateSend in the Dash protocol. PrivateSend is a cryptographic feature that merges multiple transactions into a single transaction, obscuring the trail when sending cryptocurrency.

Examples of anonymous cryptocurrencies

Below is a list of the five largest anonymous cryptocurrencies by market capitalization.

1. Monero (XMR)

XMR is the largest anonymous cryptocurrency and ranks 24th among all digital assets by market capitalization, which amounts to $5.7 billion.

The price of XMR is $314. Since early 2025, it has grown by more than 62%, and since its exchange listing in 2014, the rate has increased by over 12,500%.

XMR remains the most capitalized and popular anonymous cryptocurrency, despite criticism from experts.

2. Zcash (ZEC)

ZEC ranks second in market capitalization among anonymous cryptocurrencies after Monero. Its price is $240, with a market capitalization of $3.91 billion.

In 2025, Zcash emerged as the growth leader among anonymous cryptocurrencies, with its price increasing by more than 330% since the beginning of the year and by 473% over the past 90 days. Due to its rapid rise, Zcash was even added to the leading crypto derivatives exchange Hyperliquid.

3. Dash (DASH)

The altcoin DASH closes the top three anonymous cryptocurrencies by capitalization. A key feature of Dash's protocol is its hybrid mining model, combining Proof-of-Work (PoW) and Proof-of-Stake (PoS) mechanisms.

Over the last 90 days, DASH's price has risen by nearly 140%, exceeding $51 per coin, with a market capitalization of $635 million. However, its value remains about 97% below its ATH (recorded in December 2017). One reason for this is intense market competition. Yet since its 2014 listing, DASH's price has increased by more than 23,000%.

4. Beldex (BDX)

Beldex is a decentralized ecosystem designed to solve privacy issues in the Web3 sector. Like Monero, it uses the RingCT protocol to ensure transaction confidentiality.

The native token BDX is among the top five anonymous cryptocurrencies, with a market capitalization of $587 million. Its price is $0.07, which is 54% below its ATH recorded in November 2019.

5. Aleo (ALEO)

Aleo is a privacy-oriented blockchain protocol whose leading network launched in September 2024.

Despite a relatively large market capitalization of $166 million, ALEO is an underperformer among major anonymous cryptocurrencies, showing negative dynamics in 2025 despite growing demand for privacy-focused assets. Since the beginning of the year, ALEO's price has dropped by 64% to $0.29, and since its listing in September 2024, by more than 90%.