Recently, cryptocurrencies that prioritize privacy have captured investors’ attention, becoming one of the leading categories of tokens.
As per CoinGecko, which monitors a combined market capitalization close to $22 billion for privacy coins, their value increased by 52.2% in just the past 24 hours. Meanwhile, rival data aggregator CoinMarketCap estimates this category to be nearly $55 billion, with Zcash (ZEC) currently at the forefront.
Launched in October 2016, Zcash is one of the first cryptocurrencies focused on privacy. It traded below $80 at the beginning of October but skyrocketed by 375% to reach $380 by Halloween, overtaking Monero (XMR) as the largest privacy token by market cap.
Governments are considering measures like the European Union’s “Chat Control” proposal, which could mandate scanning encrypted messages, while Meta has resumed training AI models using data from European users. As concerns over data surveillance rise, privacy technologies are becoming increasingly relevant.
Zcash’s impressive month and the growth of shielded supply
Zcash and other privacy tokens have surged even amid a broader cryptocurrency market struggling to bounce back from US President Donald Trump’s tariff threats against China and a $19-billion liquidation event.
This privacy surge isn’t purely speculative. It aligns with a growth in Zcash’s “shielded supply” and an uptick in adoption powered by new wallet technology making private transactions easier.
“Attention is shifting toward projects that aren’t just launching tokens for the sake of it but are developing privacy technologies like zero-knowledge systems backed by real incentives. These systems can deliver privacy by default without necessitating explicit user choices about anonymity,” stated Carter Feldman, founder and CEO of ZK-proof-based blockchain Psy Protocol, in an interview with Cointelegraph.
Central to Zcash’s privacy model is the shielded address, which employs zero-knowledge proofs (zk-SNARKs) to hide the sender, recipient, and transaction amount. Transactions between shielded addresses are pooled for private coin transactions. As this pool expands, the network’s anonymity set grows, enhancing the privacy assurances for all users.
This shielded pool has reached its largest size ever, approaching 4.9 million ZEC.
Zcash developer Electric Coin Company introduced new features in its Zashi wallet at the beginning of October, enabling users to perform cross-chain swaps and private payments via integration with Near’s Intents system. This allows users to seamlessly transfer value into and out of Zcash’s privacy layer without relying on centralized exchanges or complicated bridging interfaces.
Related: What if quantum computers have already broken Bitcoin?
This enhanced user-friendliness has fueled the growth of the shielded pool throughout October. Zcash interactions on Near Intents surged at the start of the month, including over $17 million on October 16 alone.
However, this boom comes with warnings. Investigator ZachXBT highlighted that Zashi’s integration with Near Intents might not completely obscure transaction paths, indicating that cross-chain privacy may still be traceable.
“I reached out to the Zashi team, and they informed me that they plan to address this privacy concern by soon introducing ephemeral addresses and eventually shielded Near Intent refunds,” ZachXBT stated.
Zcash is thriving amid global privacy trends
Worldwide, privacy has become a focal point in policy and tech discussions as governments propose controversial surveillance measures, while companies delve deeper into data-collecting AI models.
“Regulatory scrutiny has paradoxically highlighted the value proposition for compliant privacy solutions,” stated Marko Stokić, head of AI at Oasis Protocol, to Cointelegraph.
“The industry is navigating how to implement privacy in ways that address legitimate user needs while remaining accountable. This has spurred demand for programmable privacy, wherein information can be protected by default but disclosed when legally required or contextually suitable,” he added.
Related: EU Chat Control hinges on Germany’s decision
In Europe, EU officials have temporarily retreated from the controversial “Chat Control” proposal that would have compelled messaging services to scan encrypted chats for illicit content. Concurrently, Meta began training its generative AI models using data from European users on Facebook and Instagram, but assured that private messages would remain excluded.
In the United States, privacy legislation remains a mixed bag. States like California, Colorado, and Virginia have enhanced their protections, while efforts to establish a nationwide law in Congress are stalled.
These worldwide trends have amplified both fear and intrigue regarding digital privacy. As governments consider invasive tools to monitor online behavior and companies amass more data, privacy technologies are being reimagined as viable market opportunities.
“One major misconception is equating privacy with criminality or presuming that compliance and privacy are incompatible. Well-structured systems can safeguard sensitive information in normal operations while remaining auditable when necessary,” Stokić remarked.
Why privacy is increasingly vital for cryptocurrency users
Historically, anonymity was the domain of cypherpunks and traders wary of regulation.
“Privacy is not merely a niche feature for those with something to hide,” Feldman emphasized.
“The true misconception is believing we must choose between privacy and usability, or between privacy and scalability. Technology has evolved to the point where we can achieve both.”
Currently, cryptocurrency transactions occur under constant scrutiny from Know Your Customer regulations, exchange monitoring, and advanced blockchain analysis.
Blockchain forensic experts utilize machine learning to trace wallets and create behavioral profiles. Their systems can associate identities, track relationships between wallets, and predict when assets might move to exchanges.
Governments are also intensifying their oversight. On August 18, the US Department of the Treasury sought public input regarding AI, blockchain monitoring, digital identity credentials, and “privacy-enhancing tools” to detect illicit activities involving digital assets. The agency indicated that the responses would inform new guidance and potential rulemaking under the GENIUS Act.
In the EU, crypto exchanges are required to treat transactions to or from self-hosted wallets as higher risk and apply enhanced due diligence, including verifying wallet control. These requirements will take effect on December 30, 2024.
For many users, this mix of surveillance and scrutiny signals a shift towards privacy-centric cryptocurrencies.
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