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    3. Grayscale's Interpretation of Zcash: How Much is Financial Privacy Worth in the Age of AI?

    Grayscale's Interpretation of Zcash: How Much is Financial Privacy Worth in the Age of AI?

    By: www.theblockbeats.info|2026/08/24 10:21:48
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    Original Title: Zcash: Financial Privacy in the Age of AI
    Original Author: Michael Zhao
    Compiled by: Peggy, BlockBeats


    Editor’s Note: Stablecoins, on-chain payments, and AI are simultaneously transforming the financial system. On one hand, the flow of funds is becoming faster and more transparent; on the other hand, the combination of public ledgers, address labels, and AI analytical tools makes account balances, transaction counterparts, and business relationships easier to track continuously.


    In this context, Grayscale Research has brought Zcash back into the investors' view. It focuses not on whether “privacy coins are experiencing a new wave of speculation,” but rather on a more fundamental question: as the traceability of digital finance continues to increase, will privacy remain a niche demand, or will it once again become a core attribute of currency?



    Grayscale believes that the development of stablecoins, public blockchains, and AI analytical tools is pushing financial privacy back into public discussion.


    Grayscale researcher Michael Zhao believes in the report that AI may drive financial privacy into a third cycle of attention following the digitization of banks and the popularization of the internet. Zcash has been running for nearly ten years, and while recent improvements have been made in shielded transactions, wallets, and mining infrastructure, its market share remains low. If the market begins to reprice privacy, ZEC may receive a valuation reassessment.


    This remains a set of investment logic with a clear stance. Whether AI will significantly increase the demand for privacy coins, whether shielding functions can translate into sustained use, and whether trading platforms and regulatory agencies are willing to support such assets have yet to be verified. The opportunities and risks for Zcash arise precisely from this significant gap.


    The following is the original text compilation:


    Financial privacy is not an added feature of currency, but a part of what allows currency to function normally.


    Cash inherently possesses this attribute: transactions are not publicly disclosed by default. In the banking system, personal accounts and fund flows are generally not directly queryable by the public, and law enforcement agencies typically need to go through legal procedures to obtain relevant information.


    Technological advancements continuously alter this balance. In the 1970s, the digitization of financial records and the implementation of the U.S. Bank Secrecy Act sparked a new round of discussions about financial privacy; after the popularization of the internet and online banking, risks of data breaches and online surveillance propelled security tools such as encryption and two-factor authentication into the mainstream.



    From the digitization of bank records, internet finance to AI analysis, technological progress has improved financial efficiency while continuously altering the balance between privacy and traceability.

    Grayscale believes that the development of stablecoins, blockchain applications, and AI may bring about a third round of discussions on financial privacy. Especially on public blockchains, AI can combine addresses, exchange records, wallet behaviors, and counterparty information to continuously identify on-chain users who were previously only “pseudonymous.”


    In this judgment, the value of Zcash comes not only from a cryptographic function but from whether it can become “private digital cash” outside of public ledgers.


    Bitcoin solved digital scarcity but did not address transaction privacy


    Bitcoin established verifiable digital scarcity through a public ledger, but this transparency also limits its use in certain payment scenarios.


    Balances, transaction counterparts, and historical records on public blockchains can be retained long-term. Even if users use addresses that do not directly display their names, exchange accounts, transfer objects, wallet operation habits, and on-chain analytical tools may gradually link them to real identities.


    This not only affects individual users. Businesses typically do not want suppliers, payroll expenditures, fund scheduling, and customer relationships to be grasped in real-time by competitors; institutions may also be reluctant to publicly disclose wallet structures and trading strategies. Therefore, financial privacy is not equivalent to complete anonymity; more often, it is simply the confidentiality required for normal business activities.


    Zcash has a similar monetary structure to Bitcoin: a total supply cap of 21 million coins, using a proof-of-work mechanism, and primarily for peer-to-peer value transfer. The most important difference between the two is that Zcash allows users to choose whether to disclose transaction information.



    Mechanisms like CoinJoin primarily increase the difficulty of transaction tracking, Monero hides key transaction information by default, while Zcash allows users to choose between transparent or shielded transactions.


    Zcash supports two types of transactions:

    1. Transparent transactions: The sender, receiver, and amount are public, similar to Bitcoin's transaction model;

    2. Shielded transactions: The network can confirm the transaction's validity but does not disclose the sender, receiver, and amount.


    Its underlying tool is zero-knowledge proof, which allows users to prove that a transaction complies with the rules without having to disclose the original information used for verification. The network can confirm that the payer has the right to use the funds, that the amounts before and after the transaction balance, and that no new coins have been created out of thin air, all without seeing the specific transaction details.


    Zcash also supports selective disclosure through viewing keys. Users can open part of the shielded transaction records to auditing agencies, trading counterparts, or other designated third parties. Therefore, the design of Zcash does not aim to make transactions permanently unviewable, but rather to return the right to disclose information from the public ledger back to the users.


    Technology has been running for ten years, but the real bottleneck remains usability


    Zcash launched in 2016 and is one of the earliest projects to attempt to directly apply zero-knowledge proofs to underlying digital currencies. However, its early challenges were not whether privacy transactions could be realized, but rather the high cost of usage.


    The initial shielded transactions required long proof generation times and large memory, making it difficult for ordinary wallets and mobile devices to provide a smooth experience. Subsequent upgrades primarily focused on lowering the barriers to use:


    The 2018 Sapling upgrade significantly reduced the time and memory required for shielded transactions;

    The 2022 NU5 upgrade introduced the Orchard shielded protocol and Halo 2, eliminating the reliance on trusted setups for new shielded pools;

    Unified addresses improved the interaction experience between transparent and shielded addresses;

    The Zodl wallet began supporting cross-asset exchanges, cross-asset receipts, and shielded balance cold storage, attempting to keep users in a state of privacy throughout the complete transaction process.


    Mining infrastructure is also expanding. Foundry announced in March 2026 the launch of a U.S. Zcash mining pool aimed at institutions and listed mining companies, providing more standardized operations and compliance support for the network.


    Grayscale believes that these changes may indicate that Zcash is entering a new stage of development. However, wallet functionality and mining pool expansion can only indicate that infrastructure has improved, and cannot directly prove that end-user demand has grown on a large scale.


    The next key question is whether “privacy can be scaled.” Tachyon aims to reduce the computational and synchronization costs of shielded transactions; Crosslink primarily improves transaction finality and network reliability; if shielded asset solutions are pushed forward again, Zcash's privacy features may extend from native ZEC to other assets.


    Most of these projects still involve complex technical development and network coordination, and their timelines and actual effects have yet to be fully determined.


    90% shielded transactions: Is it enough to prove real demand?


    The core evidence provided by Grayscale comes from on-chain usage.


    According to the report's criteria, as of July 20, 2026, shielded transactions accounted for about 90% of Zcash's transaction volume; approximately 4.2 million ZEC were in the shielded pool, equivalent to about 25% of the circulating supply at that time.



    As of the statistical point adopted by Grayscale's report, approximately 4.2 million ZEC were in the shielded pool, accounting for about 25% of the circulating supply.


    This indicates that the shielding function is not merely a product narrative but has formed observable on-chain behavior. However, the relevant data needs to be interpreted cautiously: different statistical platforms may have varying methods for classifying “shielded transactions,” statistical dates, and whether multiple shielded pools are combined, so external data may yield different proportions. An increase in the number of shielded transactions does not equate to a simultaneous increase in user numbers, payment scales, or economic activity.


    What Grayscale is truly betting on is not that Zcash has already achieved large-scale adoption, but that the market may change its judgment on the value of privacy in the future. As of the data adopted in the report in July 2026, the total market capitalization of the “digital currency” crypto sector defined by Grayscale was approximately $1.4 trillion, with Bitcoin accounting for about 90%, and ZEC's market capitalization was about $8 billion, accounting for about 0.6% of that sector.



    According to Grayscale's criteria, ZEC's market capitalization accounts for about 0.6% of the digital currency sector; “rising to 5% corresponds to about 9 times valuation” is merely a market share scenario calculation, not a target price.


    Based on this, the report constructed a scenario calculation: if ZEC could capture 5% of this sector's market share in the future, it would correspond to a market capitalization of approximately $70 billion, about 8.75 times its market capitalization at that time, rounded to about 9 times.


    This is not a target price, nor does it represent Grayscale's expectation that ZEC will necessarily rise 9 times. It is merely a sensitivity calculation based on changes in market share, and it implicitly assumes that the total market capitalization of the digital currency sector remains unchanged, and that ZEC's supply and competitive landscape do not undergo significant changes.


    More accurately, Grayscale believes that the current valuation reflects the expectation that “privacy will remain on the fringe market.” If investors in the future are willing to view privacy as a fundamental attribute of digital currency, ZEC's low market share may provide valuation elasticity.


    -- Price

    --
    --
    --

    An increase in privacy demand does not mean that Zcash will necessarily benefit


    This investment logic first faces regulatory and distribution risks.


    Zcash's viewing keys can help users disclose transaction records to specific entities, providing certain tools for compliance audits. However, the information is still chosen to be disclosed by the user, which is not equivalent to the default traceability of public blockchains. Meanwhile, the Financial Action Task Force (FATF) continues to require virtual asset service providers to perform customer due diligence, record-keeping, suspicious transaction reporting, and “travel rules.”


    Therefore, selective disclosure can reduce some compliance friction, but it cannot guarantee that exchanges, custodians, and regulatory bodies are willing to support shielded transactions. The stronger the privacy protection, the more likely ZEC will face restrictions in listing, custody, wallet integration, and fiat currency inflows and outflows.


    The second risk comes from protocol security.


    In 2026, developers discovered a soundness vulnerability in the original Orchard circuit, which theoretically could be used to create undetectable counterfeit ZEC. NU6.2 has repaired the relevant circuits, and the subsequent Ironwood new shielded pool further restricts funds from continuing to enter the old Orchard pool and restores the verification of the integrity of shielded supply through a fund migration mechanism.


    It is important to emphasize that this is a theoretical vulnerability and does not mean that ZEC has been practically counterfeited. Ironwood has improved future security structures, but the old shielded pool and its fund migration still constitute legacy risks that need to be continuously monitored.


    Quantum computing is a longer-term issue. The mechanisms introduced by Ironwood help preserve recovery paths for future quantum-resistant migration, but the official technical proposal clearly states that this change itself does not give Zcash complete quantum resistance.


    Finally, there is execution risk. Zcash's investment logic still relies on improvements in wallet experience, protocol scalability, and ecosystem distribution. Any delay in upgrades, failure to coordinate, or lack of user adoption could weaken the narrative of “privacy scaling.”


    Next, we need to see whether privacy becomes a demand, rather than just a topic


    Zcash's bullish logic does not require it to replace Bitcoin. Grayscale is betting on another possibility: as on-chain fund flows become increasingly transparent and AI analytical capabilities continue to enhance, the market may begin to pay a premium for “verifiable but not public” digital currency payments.


    To validate this judgment, what needs to be observed next is not whether the ZEC price continues to rise, but rather several more specific indicators: whether shielded pool funds and real users continue to increase, whether wallets can lower the barriers to using a complete privacy transaction process, whether upgrades like Tachyon can be implemented as planned, and whether exchanges and custodians expand rather than contract their support.


    If privacy use grows, but liquidity and compliance channels continue to deteriorate, Zcash may still struggle to form a larger market. Conversely, if usage, infrastructure, and market access improve in sync, ZEC may transform from an “established privacy coin” into a pricing tool for digital financial privacy demand.


    The current valuation gap of Zcash essentially corresponds not to a confirmed growth story, but to an option that has yet to be fully validated: in the AI era, how much will financial privacy be worth?


    [Original link]

    This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.

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    Contents

    Bitcoin solved digital scarcity but did not address transaction privacy
    Technology has been running for ten years, but the real bottleneck remains usability
    90% shielded transactions: Is it enough to prove real demand?
    cross
    An increase in privacy demand does not mean that Zcash will necessarily benefit
    Next, we need to see whether privacy becomes a demand, rather than just a topic

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