The introduction of Bitcoin and the blockchain technology paved the way for other significant inventions in the crypto space. One of the most important ones has been the Ethereum Blockchain.

Vitalik Buterin was the brains behind the Ethereum Blockchain, whose aim is to do away with internet third-parties. Vitalik introduced Ethereum in 2015, not as a remake of Bitcoin, but as an entirely different generation of blockchain technology. The technology would be able to perform a variety of tasks such as facilitating peer-to-peer contracts via ‘smart contracts.’

Ethereum is a public blockchain, which means that it cuts off intermediaries for any transactions on the network. Although Ethereum is quite popular, thanks to its unique features, many crypto enthusiasts argue that public blockchains don’t offer the same privacy and confidentiality as private ones. Is this the case with the Ethereum blockchain? And if so, how can you protect your privacy while transacting on Ethereum? Keep reading this guide for some useful answers to the above questions.

The Ethereum Blockchain

Ethereum is one of the most popular blockchains, thanks to it being programmable. Since its launch in 2015, the blockchain has aimed to provide a foundation for a new generation of the internet. Through Ethereum, developers can build an internet that allows users to own their data, access open financial systems, allows secure money and payment transactions, and one that isn’t controlled by any central entity.

Ethereum has a native currency that is similar to Bitcoin in many ways. ETH is a digital currency and is decentralized. Since its launch, users have used the currency as a store of value, as collateral and to make payments. Besides, Ether powers Ethereum by paying for computational services and transaction fees.

The Ethereum blockchain is similar to Bitcoin’s in that they both store information on the transaction history in public shared ledger. However, the most significant difference comes in that Ethereum is programmable and functions as a platform. Ethereum uses the ‘Turing-complete’ programming language. Through this language, developers can come up with different programs that allow blockchain transactions and automation of specific outcomes. Therefore, users on the blockchain can create smart contracts and DApps using Ether tokens. Ethereum nodes store the most recent state of Smart contracts, as well as the other transactions on the network.

The Pseudonymous Nature of Ethereum

Ethereum, just like bitcoin’s blockchain, is pseudonymous. This means that users can transact on the blockchain without giving details such as their names, contacts, or any identifying information. Every pseudonym (unknown user) on the blockchain owns both a public and a private key that they use to transact.

However, this is where Ethereum differs from other blockchains. Most blockchain networks use Public Key Infrastructure (PKI). PKI uses a certificate authority to connect users’ public keys to their real identities. This relation is essential to the blockchain because users require it to make any transactions that involve digital certificates. On Ethereum, the link between the public keys and a pseudonym’s identity only matters if the user chooses to advertise their pseudonym, e.g., while offering some public services.

Unfortunately, the smart contracts built on Ethereum present some privacy drawbacks. The most significant hindrance is that the contracts have their program code hosted on a public blockchain. Smart contracts, therefore, require users on the blockchain to check and validate the programs before they are deployed. As such, program obfuscation becomes a challenge.

Because everyone on the blockchain has access to the program code, smart contracts lack both confidentiality and anonymity. Confidentiality refers to the program’s ability to hide the number of digital coins in the transaction. In contrast, the latter term refers to the program’s ability to protect the identities of the senders and recipients.

These drawbacks present particular concerns for users on the Ethereum blockchain. Are there ways to protect your privacy while transacting?

Privacy Solutions for Transacting on Ethereum

The good news is that there are several solutions you can turn to. You don’t have to compromise your Ethereum transactions because of the privacy and confidentiality concerns. Here are some of the ways that you can protect your privacy.

Use Bitcoinmix

Bitcoinmix is a crypto tumbler that can help you maintain your anonymity on the blockchain. Bitcoinmix mixes your digital coins so that you don’t leave any trace of your identity on the blockchain. It comes in handy when you are transacting on Ethereum.

Here’s how it works. Say, for example, a user on the blockchain sends you some Ether coins. You can send these coins to Bitcoinmix, which will then shuffle them with digital currencies from other users on Ethereum. The tumbler will then send you some different coins to your wallet at a small transaction fee of between 2-5%. Bitcoinmix deletes all logs after sending your new coins, so you can always be assured of your anonymity.

Aztec Protocol

In February of this year, Aztec launched on the Ethereum blockchain. Aztec is based on Z-cash and uses cryptography to provide high-level security. The protocol achieves this by using confidential tokens that hide the amounts for private tokens. Besides providing high-level security, the protocol also aims to reduce transaction fees on the blockchain.

The Aztec Protocol allows users to conduct private transactions in two ways. They could either use Aztec to design a token that supports anonymous transfers or create private versions of the existing tokens on Ethereum. The protocol then converts the tokens into notes that are encrypted representations of the tokens. Whenever a user sends tokens, Aztec encrypts them into notes that act as a proof of correctness. The recipient’s account, therefore, cannot see the coins. The sender retains the notes as proof of the amount and the address of where the coins were sent.

Aztec plans to increase privacy on Ethereum by hiding the senders and recipients and making smart contracts entirely private in the future.

Hopper

Hopper is a mixer, just like BitcoinMix, but functions in a slightly different way. The open-source mixer smart contract allows users on the Ethereum blockchain to make their transactions more private using an iOS device.

From your iOs device, you can alert Hopper that a payment from a specific address is incoming. You can then transfer a specific amount to the mixer, which is identical to the amount that other users send. Hopper then has a pool of similar Ether amounts, all of which have secret destinations. As more users deposit Ether tokens, your anonymity increases. You can then use the app on your device to send the funds to a different destination. You will need to provide Zero-Knowledge proof before the withdrawal is authorized.

Author’s Note

The programmable nature of Ethereum makes it one of the most sought-after blockchains that are currently available. Maintaining privacy during transactions, therefore, becomes a paramount issue. Given that developers are continually building new DApps and smart contracts on the blockchain to automate everyday tasks, it would be wise to ensure your privacy remains intact on Ethereum. Luckily, there are several options that you can choose from to help maintain your anonymity and protect your digital assets.

Source: Crypto Adventure.

The rapid expansion of the crypto space has seen several innovative ways of generating substantial profits apart from just simply trading cryptos by buying low and selling high. One such innovative way of generating profits in the crypto space without trading is running Masternodes, which have increasingly become popular.

Simply put, Masternodes are a series of servers that underpin a blockchain’s network. Masternodes maintain the blockchain by allocating the task of validating the blockchain to machines that are not previewed to mining. Masternodes eliminate the competitive aspect of the POW consensus mechanism by rewarding nodes for the work.

Currently, there are over 400 blockchain-based projects which allow members to operate masternodes on their blockchain, notably DASH, Syscoin, and PIVX, among others. Here is an in-depth guide to Masternodes.

Masternodes Explained

As mentioned earlier, Masternodes refers to cryptocurrency full nodes or computer wallets that run and validate transactions in real-time under a consensus-based protocol in a decentralized network of connected computational devices. Masternodes are quite like normal nodes but entails additional features that make it a Masternode.

Unlike usually thought or considered, Masternodes can run on both Proof-of-Stake and Proof-of-Work consensus mechanisms. Most crypto enthusiasts usually make a mistake by regarding Masternodes as exclusive to coins leveraging POS consensus mechanism. In fact, you can run a Masternode on any coin regardless of the coin you have in mind. As long as you’ve collected a coin above the required fixed amount, you’re good a run a Masternode even on Bitcoin’s blockchain.

How Do Masternodes Work?

Masternodes rely on staking to function, just like Proof of Stake. To run a Masternode, you’d first need to buy a substantial amount of the currency you would like to run the Masternode. For instance, to run a Masternode on DASH, you’ll need 1,000 DASH equal to $72, 300. Once the Masternode is live and operational, it accommodates a unique series of functions, including instant and/or anonymous payments. Masternode also enables a decentralized governance system to work within the blockchain. Masternodes are always in constant communication with other networks to achieve a decentralized network.

Masternodes share 45% of block rewards with the blockchain’s miner as compensation. 10% of the remaining funds are channeled to the blockchain’s treasury fund with operators given the opportunity of voting on proposals for how the funds will be spent to improve the network.

Depending on the currency, the guidelines for running a Masternode differs significantly. If these guidelines are broken or aren’t met, a Masternode is stopped from operating.

Functions of Masternodes

Masternodes special functions in a blockchain network including:

1. Enhancing privacy of transactions

2. Participating in governance and voting

3. Performing instant transactions

4. Facilitates budgeting and treasury systems in cryptos

How to Host a Masternode

Usually, depending on the coin, you’ll need quite a big capital to host a Masternode. Also, hosting a Masternode requires a bit of technical knowledge in the Linux command line. Alternatively, you can hire the services of a reliable third-party expert if you don’t have the technical know-how, or you can host on 3rd party masternode platforms.

To run a Masternode, you will need a web hosting company to host the Masternode. When choosing a hosting company for Masternodes, you would want to avoid regular website hosting since you will require a VPS server that gives you full control over it, plus allows you to install any software of your choice.

Hosting Masternodes-Return on Investment

Running a Masternode is a capital-intensive venture, and you’ll need to be committed to generate substantive profits. For instance, a Masternode needs to be online constantly (24/7) to be rewarded. If, unfortunately, your Masternodes goes offline, it can be terminated, and the profits canceled. Additionally, downtimes, even for a single hour, will substantially wipe out any profit generated on that day. Running a Masternode, therefore, is not a walk in the park – it requires full commitment.

Nonetheless, Masternodes have a lucrative Return on Investment (ROI). With constant commitment, you can generate an ROI of 11% per annum. This figure can go up if the market value of the coin staked increases. For instance, DASH was valued at $11 on 1st January 2017 and $1100 on 1st January 2018, representing a stake value of over $1M. This drastic increase in value meant that DASH stakers earned increased rewards and were also paid in Dash with the value increasing by a similar amount over that period.

Benefits of Masternodes

Masternodes are an excellent way of earning passive income in the cryptocurrency sector. Thus, it provides an opportunity for crypto investors to generate substantial profits. For a blockchain network, Masternodes function to protect the network from various attacks such as 51% attacks. Masternodes also maintains the decentralization of blockchain networks by eliminating the premise of investors purchasing a large amount of a particular coin to control the network-as with Bitcoin whales.

Cryptocurrencies on Masternodes

Numerous projects rely on Masternodes, with IQ.Cash being the pioneering project. Here are four examples.

IQ. Cash

IQ.Cash also supports Masternodes with a network made up of 57% Masternode owners, 43% miners, and 6% project developers. Masternodes on IQ.Cash functions to allow fast payments inside the blockchain system. To run a Masternode on the network, you’ll need 3, 000 IQ deposit.

Dash

Dash was the first cryptocurrency to implement Masternodes in its ecosystem. Masternodes on the DASH blockchain perform specialized tasks such as “PrivateSend” and “InstantSend”. Also, Masternode operations on the DASH network can vote on treasury and governance decisions. Running a DASH Masternode is extremely expensive, and you will need an upwards of 1,000 DASH (1 DASH=$73 USD)

Stratis

Stratis (STRAT) is a platform where developers and companies can learn all about blockchain technology. Stratis recently launched a Masternode product on the major Microsoft Azure marketplace. In an announcement, the platform said, “The Masternode technology implements a collateral verification feature that requires the node operator to provide 250,000 Strat to be held in a watched address on the blockchain. This requirement helps to incentivize the supply of appropriate resources required to operate the network.”

PIVX

PIVX is yet another crypto project that leverages Masternodes technology. To run a Masternode, users are required to deposit 10, 000 PIVX (10,000 PIVX = 1 PIVX). Just like Dash blockchain, PIVX Masternode operators are given voting rights to make governance decisions and earn rewards.

Final Thoughts

Masternodes presents innovative ways of generating substantial profits in the crypto sector. While they are quite capital intensive, they have high returns on investment. It’s worth your time, money, effort, and risk if you’re looking for ways to diversify your investments in the crypto space.

Resources

Crypto Adventure