Disclaimer: The information in this blog represents the opinions of its author and is for educational purposes only. It is not intended as investment advice. Cryptocurrency markets are extremely risky so you should only invest money you are willing to lose.
On Its Head
Blockchain is a revolutionary technology because it turns the sclerotic old client-server model of data transfer and storage on its head. Blockchain transactions are peer-to-peer and self-verified by the math itself, obviating the need for a trusted third party to be the "keeper of truth".
Processing Power & Asymmetric Math
The reason this model works is that data is decentralized, transparent, and stored on a distributed public ledger instead of a private server. The processing power of a network of computers is combined with the asymmetry of cryptographic math to build this publicly transparent, self-verifying chain of transactions. The transparency of the blockchain is its most powerful protector, making it almost impossible to alter, counterfeit, corrupt, hack, or replace. Corrupted blocks will easily and immediately be spotted by any node on the network.
Peer-to-peer means that you can transact with anyone, anywhere in the world, without any intermediaries or third parties verifying the transaction. Transparency means that any computer, anywhere on the network, can verify the entire chain of transactions simply using cryptographic math. This remarkable innovative power of distributed ledger technology is also its Achilles' heel - introducing a significant flaw - lack of privacy.
Publicly Transparent, Individually Private
All blockchain transactions are publicly transparent yet individually private. This means that, according to the blockchain, transactions occur between public addresses that can only be decoded by a private key, held by a single individual. So the personal identity of everyone transacting on the blockchain is protected by encrypted keys.
No So Fast
Easy, right? Uhhhhhhh..... not so fast. There are 2 other levels of privacy to consider that can make all the difference.
Encrypted keys protect the identity of the user at the transaction level, but since an individual uses the same public key for all transactions, it is possible to learn quite a bit about someone, perhaps even their identity, using so-called "metadata" gathered from these public addresses.
Metadata is knowledge of the exact date, time, and amounts exchanged between certain specific public addresses. It's easy to imagine that analyzing such data would yield powerful clues to the identities of the parties involved. Could someone use multiple different public addresses? Of course, but this would introduce a whole new level of complexity and multiple private keys to safeguard which would be rather cumbersome for someone transacting frequently on the blockchain.
So if we could encrypt the personal identity, and mask the metadata, we'd be good to go, right? Weeeeeeeeeeel, no. There's one more level of security to consider, that of IP addresses.
IP addresses contain all kinds of info - like geographic location, device, etc. Compiling and analyzing metadata about transactions on the blockchain between specific IP addresses is yet another achilles' heel of the privatization of blockchain transactions.
An active user of the blockchain interested in retaining anonymity would have to move around a lot, constantly switch public devices, and operate under several different if not hundreds of private identity keys. Clearly an untenable solution.
Verge is a privacy-centric cryptocurrency that was built from the ground up to preserve anonymity. It is open-source and decentralized, with several features that address each of the three levels of privacy described above - it even has a protocol that allows for adjustable, customizable levels of transparency.
IP Level Security
Verge uses the anonymity networks TOR and I2P. On these networks a user's IP address is masked by sending data through a series of different, random nodes so their source and destination is essentially scrambled beyond decipherability. You might think that this complex routing would slow the network down but verge actually boasts ultra-fast transaction times with confirmations in less than 5 seconds.
Going even further, IP addresses of both sender and receiver are obfuscated on the verge blockchain, making them undecipherable even if an anonymity network weren't deployed.
To address the metadata issue, verge uses stealth addressing whereby the public addresses of both sender and receiver are impossible to decipher.
Dial-Up or Down
One of the really cool things about verge that makes it a potential leader in the private crypto space is the Wraith Protocol, which essentially allows the user to dial-up or dial-down the level of privacy of their transactions. When the Wraith Protocol is turned on, stealth addressing makes it impossible to decipher even the public addresses of users. When it's turned off, public addresses are transparent just like on the bitcoin blockchain.
For example, a merchant may want more transparency for bookkeeping and accounting purposes, while sensitive securities deals may require complete anonymity - verge can handle both.
Top Mid-Cap Percentage Gainer
Verge is one of the top mid-cap cryptocurrency percentage gainers in the past month, having increased more than 750% in price since Nov. 17th. With a market cap of $772 million, verge may have a lot more room on the upside, and may position itself as a leader in the crypto-privacy niche.