Recently, cryptocurrencies centered on privacy have gained significant attention from investors, becoming one of the most sought-after token categories.
According to CoinGecko, which monitors a combined market cap nearing $22 billion for privacy coins, their value surged by 52.2% in the last 24 hours. Rival aggregator CoinMarketCap estimates the category’s total value at almost $55 billion, with Zcash (ZEC) currently leading the way.
Zcash, one of the pioneering privacy-oriented cryptocurrencies, was introduced in October 2016. It traded below $80 at the start of October but skyrocketed 375% throughout the month, reaching $380 by Halloween, surpassing Monero (XMR) as the largest privacy token by market capitalization.
Governments are contemplating measures such as the European Union’s “Chat Control” proposal, which could mandate the scanning of encrypted messages, while Meta has resumed AI training on data from European users. As concerns over data surveillance escalate, the focus on privacy technologies has intensified.
Zcash’s remarkable month and the growth of shielded supply
Zcash and other privacy tokens experienced a surge even as the general cryptocurrency market struggled to recover from US President Donald Trump’s early October tariff threats against China and a $19 billion liquidation incident.
However, the interest in privacy is not merely speculative. It aligns with an increase in Zcash’s “shielded supply” and a surge in adoption driven by new wallet technology that has made private transactions more user-friendly.
“The focus is shifting towards projects that are developing privacy technologies like zero-knowledge systems, supported by genuine incentives rather than launching tokens arbitrarily. These systems can provide privacy by default without necessitating explicit choices regarding anonymity from users,” said Carter Feldman, founder and CEO of Psy Protocol, a blockchain based on ZK-proof technology, in an interview with Cointelegraph.
Central to Zcash’s privacy model is the shielded address, which employs zero-knowledge proofs (specifically zk-SNARKs) to disguise the sender, receiver, and transaction amount. Transactions conducted between shielded addresses enter a pool, allowing for coins to be privately traded. As this pool expands, the network’s anonymity set grows, thereby enhancing the privacy assurances for all users.
This shielded pool has now reached its highest volume ever, approaching 4.9 million ZEC.
Zcash developer Electric Coin Company launched new features in its Zashi wallet at the beginning of October, enabling users to execute cross-chain swaps and private payments via an integration with Nеаr’s Intents system. This allows users to seamlessly transfer value in and out of Zcash’s privacy layer, bypassing centralized exchanges or complex bridging solutions.
Related: What if quantum computers have already disrupted Bitcoin?
This enhanced usability fueled the growth of the shielded pool throughout October. Zcash activity on Near Intents surged at the start of the month, with over $17 million recorded on Oct. 16 alone.
Nevertheless, this growth comes with certain caveats. Investigator ZachXBT indicated that Zashi’s integration with Near Intents may not entirely obscure transaction trails, suggesting that cross-chain privacy remains traceable.
“I reached out to the Zashi team, and they informed me that they plan to address this privacy concern by soon adding ephemeral addresses and ultimately shielded Near Intent refunds,” ZachXBT stated.
Zcash is thriving amid global privacy trends
On a global scale, privacy is at the forefront of discussions surrounding policies and technology, with governments introducing contentious surveillance proposals while corporations delve deeper into data-hungry AI models.
“Regulatory scrutiny has paradoxically highlighted the value proposition of compliant privacy solutions,” Marko Stokić, head of AI at Oasis Protocol, shared with Cointelegraph.
“The industry is navigating how to embed privacy in ways that fulfill legitimate user needs while maintaining accountability. This demand for programmable privacy enables information to be secured by default but disclosed when necessary or contextually appropriate,” he noted.
Related: EU Chat Control hinges on Germany’s decision
In Europe, EU lawmakers have, for the moment, stepped back from the contentious “Chat Control” proposal, which would have compelled messaging platforms to examine encrypted conversations for illegal content. Simultaneously, Meta has commenced training its generative AI models utilizing data from European users’ Facebook and Instagram accounts, though they assured that private messages will be excluded.
In the United States, privacy regulations remain inconsistent. States like California, Colorado, and Virginia have bolstered their protections, while efforts in Congress to enact a national law continue to be stalled.
These global trends have heightened both concerns and intrigue regarding digital privacy. As governments contemplate invasive measures to monitor online activities and businesses gather increasing volumes of data, privacy technologies are being viewed as market opportunities.
“The greatest misunderstanding is equating privacy with criminality or believing that compliance and privacy cannot coexist. Well-designed systems can safeguard sensitive information during regular activities while remaining auditable when necessary,” Stokić asserted.
Why privacy is becoming increasingly important to crypto users
Anonymity was once the domain of cypherpunks and traders skeptical of regulators.
“Privacy isn’t merely a niche aspect for individuals with something to conceal,” Feldman remarked.
“The true misconception lies in believing we must choose between privacy and usability, or between privacy and scalability. Technology has progressed to a point where we can enjoy both.”
In today’s environment, cryptocurrencies are subject to relentless oversight from Know Your Customer regulations, exchange monitoring, and sophisticated blockchain analysis.
Blockchain forensic experts utilize machine learning to trace wallets and create behavioral profiles. Their systems can correlate identities, visualize connections between wallets, and anticipate when assets will be transferred to exchanges.
Additionally, governments are tightening their controls. On August 18, the US Department of the Treasury sought public input on AI, blockchain surveillance, digital identity credentials, and “privacy-enhancing tools” aimed at detecting illegal activities linked to digital assets. The Department stated that this feedback would inform upcoming guidelines and potential regulations under the GENIUS Act.
In the EU, crypto exchanges must classify transfers to or from self-hosted wallets as high-risk and implement enhanced due diligence, including wallet ownership verification. These requirements will take effect on December 30, 2024.
For numerous users, this blend of monitoring and scrutiny serves as a prompt to explore privacy-centric cryptocurrencies.
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