Cryptoasset Anti-Financial Crime Specialist (CCAS) Certification Practice Test

How do privacy coin transactions remain anonymous within a blockchain?

1. Privacy coins act as individual mixers.

2. A stealth address is created alongside the public address.

3. The public addresses are only visible on designated blockchains.

4. Specialized privacy coin hardware wallets use masking software.

The correct answer is: A stealth address is created alongside the public address.

The correct answer highlights the concept of stealth addresses, which play a crucial role in enhancing the anonymity of transactions involving privacy coins. When a stealth address is generated, it allows the sender to create a unique address for every transaction, which is derived from the recipient's public address but does not reveal it. This ensures that although the transaction is recorded on the blockchain, the actual destination public address of the recipient remains hidden, effectively making it very challenging to trace the transaction back to the recipient. In the context of blockchain technology, the visibility of public addresses can lead to easy tracking of transaction histories. However, using stealth addresses mitigates this risk. It complicates the analysis of transaction patterns, helping to protect user privacy. This mechanism significantly enhances the anonymity unlike public address transactions, where the same address can be reused and easily monitored. The statement regarding privacy coins acting as individual mixers refers to how some transactions can be combined and obfuscated, but it does not specifically address the ongoing anonymity aspect of randomizing addresses with each transaction. The idea that public addresses are only visible on designated blockchains is misleading, as all public addresses on a blockchain can be seen by anyone. Lastly, while specialized hardware wallets utilizing masking software could contribute to privacy in some contexts, they