Cryptocurrencies are gradually becoming mainstream assets in today’s financial market ecosystem. However, the opportunity to make money in this burgeoning niche carries a similar amount of risk. Decentralized Finance (DeFi), in particular, has been notorious for security exploits in the past; according to a report by Cipher Trace, DeFi accounted for 76% of the total hacks in crypto during the first half of 2021.
One of the main reasons that malicious players have been attacking DeFi users is the ease of access to address and transaction information. As it stands, most innovations in the DeFi ecosystem are built on public blockchains such as Ethereum, Fantom and Avalanche. This means that anyone can view the transaction history on these chains, making it seamless for hackers or regulatory authorities to track particular addresses or smart contract pools.
Well, thanks to the innovative nature of stakeholders in the crypto industry, some projects are now building privacy-oriented DeFi wallets. These innovations will allow DeFi users to hide their transactions, with some going to the extent of concealing address origins through advanced cryptographic proofs. So, which are some of the privacy-oriented wallets that are changing the narrative? Let’s take a deep dive into the ongoing projects in this space.
BlockWallet is an Ethereum browser extension wallet designed with in-built privacy. This non-custodial wallet allows DeFi users to interact with DApps on the Ethereum blockchain while hiding their transaction status. Ideally, BlockWallet pools users’ funds into one smart contract pool and creates a new wallet address for each withdrawal request. As such, it is hard to track the funds’ origin, let alone the amount of funds in a users’ wallet.
Unlike Metamask, DeFi users who leverage BlockWallet are guaranteed privacy through the platform’s Tor integration. Anyone can easily download the BlockWallet extension and start using this privacy-focused wallet in the DeFi world. The project also plans to introduce more integration functionalities for the Web 3.0 ecosystem, including a Metamask snap plugin to enable a seamless connection between the two wallets.
Avarta is a 4-in-1 DeFi solution that features a biometrically-secure multichain blockchain wallet. This platform uses a combination of biometric features such as face I.D and device data to introduce a secure wallet for DeFi users. Crypto users can leverage this multichain ecosystem to consolidate their private keys within a single wallet. More importantly, the Avarta wallet does not require passwords or seed phrases; instead, the platform uses biometric features as login credentials.
With this unique identity system, Avarta has also pioneered a trust score function that enables users to get overcollateralized DeFi loans depending on their credibility. However, unlike the centralized financial services, Avarta’s DeFi trust score gives users the option of revealing their transaction history or remaining anonymous. Other features include a multi-sig wallet and decentralized identity management designed for corporations and legacy planning.
Launched in 2014, the ledger wallet is one of the most popular hardware wallets in the crypto ecosystem. They have debuted several series, including the Nano S and Nano X. In addition to this, Ledger wallet pioneered several privacy-oriented features in their live app; discreet mode, coin control and full node support.
With these privacy features, Ledger wallet users can hide their account balances and transaction history. For instance, the discreet mode feature generates a new address for every transaction, making it impossible for malicious players to track Ledger wallet users. Meanwhile, the coin control feature allows users to order transactions according to their preferences hence retaining control and privacy.
Tech-savvy Ledger wallet users can also opt to run full nodes which means they get to store their private keys off-chain and maintain anonymity. Notably, this hardware wallet supports over 1,000 digital assets, including Bitcoin, Ethereum and other prominent altcoins such as Cardano (ADA), Stellar (XLM) and Polkadot (DOT).
Samourai is a Bitcoin-focused wallet designed with the core features of privacy and security. This non-custodial wallet follows Bitcoin’s fundamental architecture, basing its development on the principles of decentralization, fungibility and financial privacy. Some of the notable features include Tor and VPN support which allows users to leverage anonymous IP addresses.
As for the private transactions, Samourai generates a new address for each transaction, enabling users to hide their metadata and account balances. The project has also integrated SegWit support, a Bitcoin protocol transactional upgrade that reduces the cost of on-chain transactions while increasing the confirmation time.
Wasabi is another Bitcoin wallet built with a focus on users’ privacy. It is designed as an open-source and non-custodial platform, featuring compatibility with Windows, macOS and the Linux operating systems. At the core, Wasabi leverages a trustless CoinJoin process to mix the input and output of Bitcoin transactions. In doing so, the wallet makes it hard for hackers or potential threats to track on-chain activity.
Like the Samourai wallet, Wasabi also features a Tor integration; the wallet routes Bitcoin transactions to this privacy-focused network, ultimately concealing its users’ IP addresses. It is infamous for being used in the 2020 Twitter hack, where the hackers leveraged Wasabi’s Coinjoins to mask their transaction flows.
With the crypto market going mainstream, privacy is a fundamental feature when operating in this nascent ecosystem. Privacy-focused wallets are a good starting point for both novice and veteran crypto traders. Besides security threats, one can also escape the ongoing regulatory uncertainties by concealing their wallet addresses and balances. It is no surprise that more crypto stakeholders are opting for privacy, an issue that can be addressed by the wallets featured in this article.