Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
Zcash is emerging as a significant alternative to Bitcoin, drawing attention for its privacy-focused features and shared foundational elements with the leading cryptocurrency, according to a recent report by Galaxy Digital research analyst Will Owens. This resurgence comes as some critics express concerns about Bitcoin’s increasing centralization through Wall Street adoption and on-chain surveillance.
Zcash’s Resurgence and ‘Encrypted Bitcoin’ Label
Owens highlights that Zcash, while considerably smaller than Bitcoin, is viewed by its advocates as “encrypted Bitcoin,” embodying cypherpunk principles amid growing on-chain surveillance. The privacy-centric crypto allows users to “shield” transactions using zero-knowledge proofs, a feature designed to obscure transaction details.
Despite underperforming Bitcoin for most of its history since its 2016 debut, Zcash’s price has soared nearly tenfold over the past two months, climbing from $40 to $396. This surge saw Zcash hit a seven-year peak of $376 in October, according to CoinGecko data.
Shared Foundations and Privacy Enhancements
Zcash was forked from Bitcoin’s codebase, inheriting key characteristics such as a 21 million supply cap, a proof-of-work consensus model, and a halving issuance rate. However, Owens notes that Zcash directly addresses a privacy limitation acknowledged by Bitcoin’s pseudonymous creator, Satoshi Nakamoto, through its shielded transactions.
This privacy focus stands in contrast to Bitcoin’s inherent transparency. Owens points out that Bitcoin Exchange-Traded Funds (ETFs) have not made Bitcoin less transparent but more intermediated, as they rely on centralized custodians.
Regulatory Pressure and Anonymity Set
The re-emerging interest in Zcash coincides with mounting regulatory pressure on Bitcoin privacy tools in the U.S. Federal prosecutors are seeking maximum sentences for the founders of Samourai Wallet, Keonne Rodriguez and William Lonergan Hill, who pleaded guilty to operating an unlicensed money transmitter.
Following these arrests, Wasabi Wallet, another privacy-preserving service, banned U.S. customers and announced the preemptive closure of its service. Owens suggests that while Zcash’s fundamentals haven’t changed, perceptions of its technology have shifted, bolstered by “constant vocal support from some of crypto’s top voices,” including Mert Mumtaz, CEO of Solana infrastructure firm Helius Labs.
Mumtaz emphasized that Zcash’s privacy improves as more users engage in shielded transactions, contributing to a larger “shielded pool” that makes tracing funds more difficult. Currently, 30% of Zcash’s supply is shielded, enhancing its anonymity set.
Market Position and Competitors
Zcash maintains its position as the largest privacy-focused cryptocurrency by market capitalization, with a total value of $6.5 billion, according to CoinGecko. Its primary competitors in the privacy coin sector include Monero and Litecoin, valued at $6.44 billion and $6.43 billion, respectively.
The renewed interest has also extended to other privacy-focused cryptos, with Dash soaring 162% to $122 and Decred jumping 139% to $41 over the past week.
Key Takeaways
Zcash is gaining traction as a privacy-centric alternative to Bitcoin, fueled by concerns over Bitcoin’s centralization and on-chain surveillance, alongside regulatory crackdowns on Bitcoin privacy tools. Its shared codebase with Bitcoin, combined with its unique shielded transaction capabilities, positions it as a spiritual successor for those prioritizing cypherpunk principles and enhanced anonymity.
