Zcoin privacy project launches Lelantus testnet

Privacy coin project Zcoin (XZC)_ _has launched a testnet for Lelantus, a next-generation privacy protocol created by Zcoin developers. Lelantus is designed to enable untraceable transactions. Untraceable transactions (the ability to make confidential transfers) is the goal of all privacy coins, however, each project is pursuing a slightly different path. The Lelantus testnet will give Zcoin users the opportunity to test the untraceable transaction functionality and ensure the capability is ready for launch on mainnet towards the end of the year.

Zcoin is designed to enable transactions that are untraceable by corporations, financial institutions, and oppressive governments. Zcoin advocates privacy as a fundamental human right. Zcoin is based on a simple burn and spend model that strengthens privacy while theoretically making it more easily accessible to users.

The Zcoin protocol enables confidential blockchain transactions with short verification times. Based on a modified construction of one-out-of-many proofs, Lelantus lets users destroy coins of arbitrary amounts and redeem brand new coins (even partially) that appear to have no previous transaction history associated with them.

Reuben Yap, the project steward of Zcoin says “Lelantus pushes the boundaries of privacy with technology that offers very high practical anonymity while requiring no trusted setup, and an elegant cryptographic construction that uses only well-established cryptographic assumptions. Private transactions have suffered from low privacy via small anonymity sets or required a degree of trust, something that is against the philosophy of public blockchains. Zcoin addresses both these issues. Our aim with Lelantus is to offer long-lasting privacy even in the face of increasingly advanced blockchain analysis techniques.”

Lelantus will give Zcoin users the ability to anonymize transactions with a single click. This functionality recognizes the need for an ability to make both regular transparent transactions – as well as anonymous ones. This ability to turn off or on anonymous transactions is similar to Zcash, which has the same functionality. However, unlike Zcash, which is based on zkSNARKS, Lelantus requires no trusted setup. This advanced cryptographic approach is also being considered by Monero developers, whose proposed Triptych protocol update would include some of the elements in Lelantus, such as trustless set-up and obscured transactions.

The case for privacy

While mainstream media often makes the case that Bitcoin is an untraceable cryptocurrency, this is not the case. Bitcoin transactions are made on the public Bitcoin blockchain and can be viewed by anyone. Professional blockchain analysis companies such as Chainalysis are very adept at tracing Bitcoin transactions and are increasingly used by governments around the world.

Privacy coins are a small subset of crypto assets that are designed to enable the kind of anonymous blockchain transactions not possible with Bitcoin. Privacy coins such as Monero and Zcash attempt to keep the identity of the sender and receiver of a transaction unknown.

Privacy coins are controversial due to the potential for users to make illegal transactions. Regulators are concerned that privacy coins will be used to facilitate money laundering, tax evasion, drug purchases, and darknet market transactions. Privacy coin users argue that individuals have the right to financial privacy and should be able to make transactions without the state knowing every detail.

Riccardo Spagni, a privacy advocate who has helped steer the Monero project characterized the need for transactional privacy as a human right. “My interest in Monero is ideological. I have a belief in privacy as a basic human right. And I was interested in this technology that could advance that, that could enable people’s privacy especially those who were in places and situations where their privacy was taken away from them.”

The privacy coin rally

Earlier this month the leading privacy coins enjoyed a brief price rally after countries from the Five Eyes Alliance, along with India and Japan, signed a joint statement calling for backdoor access to encrypted protocols. The statement said that the undersigned “support strong encryption, which plays a crucial role in protecting personal data, privacy, intellectual property, trade secrets and cybersecurity.”

However, the statement then went on to say that “some implementations of encryption technology, however, pose significant challenges to public safety, including to highly vulnerable members of our societies like sexually exploited children. We urge the industry to address our serious concerns where encryption is applied in a way that wholly precludes any legal access to content.”

In response, Monero (XMR) surged to US$135, its highest price since September 2018. While Monero remains the best-known privacy coin project, like all privacy coins it may face regulatory hurdles in the near future.

Regulators may pressure exchanges to delist privacy coins and the U.S. Internal Revenue Service has commissioned the blockchain tracking company Chainalysis and data forensics company Integra Fec to develop transaction tracing tools for Monero.

The fight between those in favor of strong encryption and untraceable transactions and those against is likely to be a key technology battleground in the years ahead.