Privacy Coin in the spotlight: Why did Naval say Zcash is the insurance for Bitcoin?

Author | Max Wong @IOSG

1. Introduction

In an era of increasingly stringent financial regulation, privacy-focused projects have once again become the focus of cryptocurrency. As one of the pioneers of privacy coins, Zcash (ZEC) has sparked renewed interest. This trend has rekindled people's interest in “freedom currency,” a term often used to describe private, censorship-resistant digital cash. Zcash, as a rapidly rising privacy coin, brings true financial privacy through cryptographic technology, expanding the vision of Bitcoin.

Recently, the catalyst for Zcash's popularity largely stems from Naval's tweet on October 1: “Bitcoin is insurance against fiat. Zcash is insurance against Bitcoin.”

This report aims to delve into the technology and infrastructure of Zcash, compare it with other privacy participants, and analyze the catalysts behind the recent resurgence of the Zcash ecosystem. It is important to note that the price of this token is highly volatile, and readers should be aware of the risks.

2. Zcash - What is it and how does it work?

Zcash is a privacy-protecting digital currency launched in October 2016, which is a fork of the Bitcoin codebase. It deliberately replicated many of Bitcoin's monetary principles; Zcash operates on a proof-of-work blockchain and has the following features: fixed supply: a cap of 21 million and a predictable halving schedule. Fair emission: no pre-mining, similar to Bitcoin's issuance model. Decentralization: permissionless, no central authority, and does not rely on intermediaries.

1. Privacy Standards

ZCash uses zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge), which allow transactions to be verified without revealing any details about the sender, receiver, or amount. In simple terms, Zcash provides users with fully encrypted transactions, shielding on-chain data, which is not achievable with Bitcoin's transparent ledger. In fact, this privacy mechanism of ZK is exactly what Satoshi Nakamoto intended to explore on Bitcoin, but it was technically unfeasible at the time.

Transaction details encryption

When users conduct shielded transactions, key details such as the sender's address, receiver's address, and transaction amount are fully encrypted on the chain.

Create ZK proof

The sender (prover) uses their private key to generate a zk proof (zk-SNARK) that confirms several conditions are met, all without revealing sensitive data: the sender has sufficient funds to pay for the transaction; the funds spent were legally generated in previous transactions; the transaction input value equals the output value, preventing the creation of counterfeit currency; the sender has the right to use the funds (possesses the correct private key); the funds have not been previously used (using a mechanism called “invalid”).

Instant verification

Other nodes (validators) on the Zcash network use a public verification key to instantly verify zk-SNARK proofs. The proofs are very small (a few hundred bytes) and can be verified in just a few milliseconds, making the verification process very efficient.

2. Dual Transaction Type

It is worth noting that Zcash's privacy is optional — users can remain transparent to meet compliance or audit needs, or they can choose to be completely confidential.

ZEC uses a dual address system, consisting of transparent addresses (t addresses) and shielded addresses (z addresses). Transactions between transparent addresses are similar to transactions on any non-private chain, but transactions involving shielded addresses are encrypted and private. When sending ZEC, the ledger does not display any information about the parties involved or the value; it only shows that a valid transaction occurred. Only the participants (and those who share the optional viewing key with them) can see the details.

This gives Zcash fungibility (each unit is interchangeable) and is not affected by past history, thereby achieving true financial confidentiality when using shielded transactions.

3. Three main funds pools

The large-scale implementation of private transactions is a significant technical challenge. Zcash has undergone three major upgrades to enhance its cryptographic technology and efficiency:

Sprout (2016)

The initial release version - demonstrated that privacy based on zk-SNARK is feasible on public blockchains. However, Sprout transactions require a large amount of computation (requiring several terabytes of RAM, which is not feasible on mobile devices) and necessitate a trusted setup (one-time parameter generation). Edward Snowden and others, under the pseudonym “John Doe”, participated in this notable setup, aiming to ensure that no party could compromise the parameters. The traditional Sprout z address (usually zc…) is now deprecated but still usable.

apling (2018)

A major upgrade significantly improved performance and usability. Sapling has reduced proof time and memory requirements by over 100 times, ultimately making private ZEC transactions feasible on everyday devices (even smartphones). It also introduces some important features, such as diversified addresses (allowing one key to have multiple shielded addresses, thereby enhancing privacy) and viewing keys (enabling users to share read access to their transaction details for auditing or compliance). Sapling still relies on a multi-party trust setup, but it has taken a big step towards practical private payments. Sapling z addresses (Bech32, zs…) are still supported, allowing users to utilize older tokens.

Orchard (2022)

The latest generation of products achieves trustless privacy. Orchard utilizes the Halo 2 proof system (developed by Zcash engineers) without any new trusted setup. It further enhances efficiency, supporting features like batch transactions and improved synchronization. With Orchard, the privacy of Zcash not only becomes stronger (without setup assumptions) but also more scalable - it is designed to support future second-layer solutions, such as ZK-rollups. It also introduces unified addresses (UA, u1…), which can bundle recipients of Orchard (as well as optional Sapling + transparent) into one address; wallets typically default to routing new funds to Orchard. Therefore, Orchard is now the default shielded pool for modern Zcash wallets.

A common summary of the development history of Zcash is: Sprout proved the possibility of private funds, Sapling made it available, and Orchard made it trustless and scalable.

Three, upcoming upgrades

Crosslink: The technological infrastructure of Zcash is continuously evolving. The project is currently undergoing a significant upgrade called Crosslink, which will introduce a hybrid Proof of Stake (PoS) layer based on a Proof of Work consensus. This will allow ZEC holders to stake their coins to earn rewards and participate in block finality, while miners are still producing blocks—combining the advantages of PoW and PoS. This hybrid approach is expected to improve network throughput and security (by providing fast finality and making 51% attacks more difficult).

Tachyon Project: Zcash developers (especially cryptographer Sean Bowe) are leading the implementation of the Tachyon project — — which aims to significantly enhance the scalability of the Zcash shielding protocol. The goal of the Tachyon project is to achieve “planetary-level” private payments by eliminating performance bottlenecks (such as each wallet having to download and scan every coin) through innovative technologies like proof of data carry.

4. Comparison of ZCash and Monero

Zcash (ZEC) positions itself as a currency similar to Bitcoin, but with optional encrypted privacy. Its shielded transfers use zk-SNARK, allowing validators to verify the correctness of transactions without seeing the sender, receiver, or amount. With UA, wallets can transfer funds to the correct recipient while maintaining auditability: users can still transact transparently or share view keys with accountants/regulators. The trade-off is a matter of user choice; when you actually use the shielded pool, privacy is maximized.

Monero (XMR) uses different toolkits to provide privacy by default in each transaction: ring signatures (which mix the original transaction among many decoy transactions, making it difficult for observers to determine which wallet actually sent the funds), RingCT (hides amounts), and stealth addresses (the recipient receives payments through a one-time hidden address that cannot be linked back to their real wallet). This makes usage simple, but privacy is probabilistic: the strength depends on the size of the ring, decoy selection, and user behavior. In practice, its confidentiality is high, but there is no selective disclosure during audits, and due to compliance friction, some exchanges avoid listing it.

In general: Ring signatures achieve transaction anonymity by placing the transaction among multiple decoy transactions (it can be said that Monero only increases the appearance of plausible deniability), while zk-SNARK proves the validity of the statement without revealing any information other than the validity of the statement itself. The initial hesitation towards ZCash was due to the need for a trusted setup, but with the recent launch of the Halo upgrade, ZCash can generate zero-knowledge recursive proof combinations without a trusted setup. Despite the challenges, in the paper “Monero Traceability Heuristics,” Monero has been shown to have some traceability: “Wallet application bugs and Mordinal-P2Pool transparency.”

5. So, why did the market choose ZCash? What happened?

6. Introduce Zashi

One of the biggest contributors to ZCash's recent growth is ECC (Electric Coin Co’s) focus on consumers. Previously, the protocol mainly focused on the ZCash core - establishing cryptography and technology - but now they are paying more attention to user experience and user onboarding. A significant part of this work is the development of Zashi, the official ZCash wallet.

Josh Swihart — CEO of ECC:

“When I took over as CEO of ECC in February 2024, we decided to truly focus on user experience… We created a wallet called Zashi. After the launch of Zashi, you could see the total number of shielded transactions and the amount of ZEC in the shielded pool grow exponentially.”

The launch of Zashi has greatly improved the user experience of Zcash. It offers a smooth interface comparable to popular EVM wallets, supports secure storage features such as viewing keys and hardware wallet integration, and even plans to enable shielded tracking and delegation features after launch. But more importantly, Zashi is designed specifically for ZEC shielded transactions, which means that all tx sent on Zashi are private by default. If a user receives transparent ZEC, the wallet will require them to shield it before spending. Additionally, Zashi supports single-address multi-pool support for all different funding pools (Sprout, Sapling, Orchard), meaning users can easily migrate funds from different funding pools.

Compared to a few years ago, this is a huge change, when using Zcash privately required multiple dedicated software across different products. Due to these breakthroughs in user experience, the usage rate of shielded pools has increased parabolically, indicating that if there is a convenient option, many users will indeed choose privacy.

By simplifying private transactions to just a few taps and abstracting the technical complexities, these wallets have driven adoption among less tech-savvy users. The improvement in wallet user experience is considered a major driver of recent ZCash growth.

One of the most evident signs of Zashi's contribution to the development momentum of the Zcash ecosystem is the explosive growth in the use of shielded addresses on-chain. As of the fourth quarter of 2025, over 4.5 million ZEC are stored in shielded addresses, accounting for about 28% of the total supply. This is a record high, whereas just a few years ago this ratio was only 5%. The above chart illustrates how the shielded pool began to show exponential growth around 2024, coinciding directly with the release of Zashi.

This means that more ZEC has entered the Zcash cryptographic pool, which in turn strengthens the network's privacy protection for everyone (larger anonymity set). In practice, this will also tighten the liquidity in circulation (as shielded funds are harder to trace and are often held long-term for privacy protection), thereby having a positive impact on price dynamics.

2. Introduce NEAR Intents - Crosspay

Zashi's CrossPay also serves as a large-scale onboarding mechanism for Zcash, fundamentally achieving interoperability within the Zcash ecosystem.

Crosspay is a cross-chain bridging/exchange solution that utilizes NEAR intentions, allowing users to swap in or out ZEC from another chain while still maintaining privacy; Zashi also leverages NEAR to integrate a decentralized offline solution, allowing users to exchange ZEC to another chain (or swap to fiat gateways) without revealing their ZEC address—completely eliminating the need for CEX. This has driven a recent influx of capital and users into the ZEC ecosystem.

NEAR Intents is a chain abstraction protocol: users (or agents) specify what they want (for example, “swap BTC→ZEC” or “pay 50 USDC to this address”), and a decentralized network of resolvers competes to execute across chains; users only need to sign an approval. It hides the bridge/DEX hops and the best price/liquidity routes.

The user requests “exchange X → ZEC” or “pay Y USDC on chain Z.”

NEAR Intents resolver competes to return the best quotes.

Users approve once in Zashi; the resolver executes the cross-chain route; ZEC is shielded or the recipient receives the correct tokens.

Remove the amount of USDC and USDT from this sample; currently, the intention quantity of ZEC NEAR accounts for more than 30% of the total intention quantity of NEAR.

Overall, we can infer that the integration of Zashi with Crosspay is also one of the main drivers of market share growth. Starting from September 2025, the magnitude of ZEC NEAR intentions will significantly increase, which coincides with the launch of Crosspay.

3. The New Importance of Dual Transaction Type Privacy — Story

As governments and regulatory agencies around the world vigorously implement monitoring measures (from stricter KYC/AML to tracking of central bank digital currencies), the spirit of crypto-punk has once again come to the forefront. Zcash provides a hedge for those concerned about these trends: a form of encrypted, unmonitorable currency.

Arjun Khemani:

“They only focus on the rise of numbers, but fail to notice the fall of freedom.”

As mainstream cryptocurrency users become aware that their privacy is being eroded (for example, Tornado Cash and other mixing currencies being blacklisted), many are starting to look for on-chain privacy alternatives. Zcash has emerged as a battle-tested L1, with stronger privacy protection capabilities than mixing coin protocols (reportedly, Zcash's usage is broader than that of Tornado Cash).

In short, the rise of the “freedom narrative” has shaped Zcash into a key asset for maintaining financial freedom — this narrative resonates with both ideological investors and those simply seeking to hedge against “Big Brother” investors.

4. Supply Dynamics After Halving

Zcash's second halving (November 2024) significantly reduces its new coin issuance, and we are now seeing its effects. The block reward decreases from 3.125 ZEC to 1.5625 ZEC, halving the annual inflation rate. Historically, Bitcoin's price only sustained above $1000 after the second halving — thereafter, Bitcoin's price rose parabolically. Zcash's supply curve is identical to Bitcoin's, just shifted by a few years, and has just crossed the same milestone.

ZEC USD issuance and inflation schedule

As demand rises, the circulating supply is tightening, which is a typical supply-demand squeeze. Investors speculate that once the “suspense” of high inflation disappears, ZEC may develop along the early trajectory of Bitcoin. In fact, by the fourth quarter of 2025, ZEC's market performance had already surpassed that of most major cryptocurrencies. Some of this is simply a matter of market timing, but fundamentally, Zcash's tokenomics is becoming increasingly attractive as it matures: it has a fixed supply cap, decreasing issuance, and the end of miner rewards is approaching, similar to Bitcoin's development path.

ZEC dollar price and halving schedule

The term “halving” — even though misunderstood by some traders (the rumors about the 2025 halving are incorrect) still draws attention to the Zcash story.