Abstract

Since September 2025, the long-dormant privacy coin sector has undergone a remarkable value reassessment. According to Ju.com market data, Zcash ($ZEC) surged from a low of $35 in August this year to a peak of $750 in November, marking an increase of over 2200% in less than three months, which also propelled the entire privacy sector's market capitalization to exceed $64 billion. This seemingly sudden explosion is, in fact, the inevitable result of the intertwining of four forces: technological maturity, regulatory pressure, expansion of on-chain monitoring, and market reflection.

This Ju.com analysis report systematically reviews the technological evolution of the privacy coin sector, the regulatory game dynamics, the fundamentals of core projects, and the macro valuation framework, attempting to answer a core question: In an era of increasing transparency on-chain, why has privacy become even more scarce and important? Ju.com analysts indicate that privacy is transitioning from a marginal characteristic of cryptocurrencies to a fundamental demand of Web3 infrastructure, and the compliant privacy route represented by Zcash may become a key bridge connecting traditional finance and decentralized systems in the next five years.

Investors need to recognize that investing in privacy coins should not be simplified to short-term speculative behavior but should be integrated into the strategic level of portfolio management, serving as a defensive asset to hedge against systemic risks of transparent public chains and to respond to the strengthening global surveillance environment. Meanwhile, the upcoming implementation of the EU's new anti-money laundering regulations in 2027 will become a watershed moment for the industry within the next 18 months, determining which projects can navigate the regulatory cycle and which will be marginalized. The core conclusion of this Ju.com report is that the privacy sector has moved out of the experimental phase and is on the eve of large-scale commercial application, but this path is fraught with uncertainty, requiring investors to remain rational and patient.

I. Market Background: The Awakening of the Sleeping Giant

1.1 Historical Price Breakthrough

Zcash ($ZEC) experienced a remarkable price breakthrough in the fourth quarter of 2025. From the low of $35 in August 2025, the asset climbed to a peak of $750 in just three months, with a cumulative increase of over 2200%. This performance also pushed its market capitalization past the $10 billion mark, returning it to the top 20 in cryptocurrency market capitalization. Meanwhile, according to Ju.com market data, another leading privacy coin, Monero ($XMR), also showed strong momentum, with prices fluctuating around $400 and a stable market cap of about $7 billion.

According to CoinMarketCap's market data, the overall market capitalization of the privacy coin sector has surged from less than 1% at the beginning of the year to the current 2% of the total cryptocurrency market capitalization. More notably, the explosive growth in trading volume: ZEC's 24-hour trading volume exceeded $750 million at its peak, increasing more than 20 times since the beginning of the year. This simultaneous rise in volume and price starkly contrasts with the fleeting moment of the privacy coin sector at the end of the 2021 bull market, suggesting that there may be deeper structural changes behind this increase.

1.2 Resonance of Four Driving Forces

The explosion of this market is not coincidental but rather the result of simultaneous qualitative changes across four dimensions: supply, demand, technology, and narrative. Understanding these underlying driving forces is a prerequisite for grasping the investment logic of privacy coins.

Supply Side: Halving Cycle Combined with Shielded Pool Lockup

Zcash completed its second halving in November 2024, reducing the block reward from 3.125 coins to 1.5625 coins, resulting in a halving of the new coin issuance rate. The impact of this monetary policy adjustment is often underestimated by the market. Historical experience shows that Bitcoin only enters a long-term imbalance in supply and demand after experiencing two halvings, thus driving prices into a sustained upward channel. ZEC adopts the same supply curve design as Bitcoin, just delayed by seven years, so it is reasonable to speculate that the second halving in 2024 marks the beginning of a new supply contraction cycle. More importantly, on-chain data shows that the proportion of locked shielded pools has reached a historical high, further tightening the actual tradable liquid supply, creating a strong constraint on the supply side.

Demand Side: Privacy Awakening Triggered by On-Chain Monitoring

In 2025, the U.S. Department of Justice's seizure of 127,000 Bitcoins from a Cambodian gang dramatically showcased the vulnerability of transparent public chains in the face of national-level monitoring capabilities. This incident not only proved that law enforcement agencies have mastered mature on-chain tracking technology but, more importantly, it triggered a collective reflection on privacy issues within the cryptocurrency community. Users began to realize that as long as a wallet address has been associated with a KYC identity, whether through centralized exchanges for deposits and withdrawals or by participating in DeFi protocols requiring real-name authentication, the entire historical transaction record, asset holdings, and fund flows of that address can be completely restored by algorithms.

This shift in awareness is particularly evident among high-net-worth individuals. Once on-chain addresses are linked to real identities, anyone can query their asset scale through public blockchain explorers, exposing large holders to threats of extortion, phishing attacks, and even personal safety risks. Blockchain analysis companies like Chainalysis have already developed machine learning algorithms capable of predicting fund flows, preemptively marking "high-risk addresses," and even providing real-time monitoring services to law enforcement agencies. In this context, privacy is no longer a niche pursuit for geeks but has evolved into a rigid demand for all on-chain participants.

Technology Side: Engineering Breakthroughs in Zero-Knowledge Proofs

Zcash has completed a series of milestone upgrades over the past two years: the introduction of the Halo 2 proof system completely removed the original trusted setup requirement, addressing the long-standing initialization trust issue that plagued the project; the launch of the Orchard shielded pool unified address formats, significantly lowering the user entry barrier; and the NU5 and NU6 network upgrades fundamentally improved the efficiency and reliability of privacy transactions. The cumulative effect of these technological advancements has transformed ZEC's privacy features from a laboratory product into a production-grade tool. The improvement in user experience is directly reflected in adoption rate data: the usage rate of shielded pools surged from a historical average of 5% to the current 30%, proving that usability improvements are the key bottleneck for large-scale adoption.

Narrative Side: Collective Endorsement from Opinion Leaders

BitMEX founder Arthur Hayes publicly stated that Zcash is "the last opportunity in the cryptocurrency space that could achieve a 1000x return," arguing that privacy technology has matured and that increasing regulatory pressure will amplify the scarcity of privacy assets. Notable Silicon Valley investor Naval Ravikant even marked ZEC as his second-largest bet, believing that the status of privacy coins in the next decade will be akin to that of Bitcoin in the past decade. Grayscale, as a bridge between traditional finance and cryptocurrency, continues to operate ZEC trust products, providing exposure for qualified investors, which in some ways labels ZEC as "institutionally recognized." The collective voices of these opinion leaders have redefined the position of privacy coins within the cryptocurrency narrative framework, transforming them from marginal assets in a regulatory gray area into strategic tools for countering financial surveillance.

II. History of Technological Evolution: A Twenty-Year Journey from Mixing to Zero-Knowledge Proofs

2.1 Generational Leap in Privacy Technology

The history of privacy technology in cryptocurrencies is essentially an arms race between cryptographers and on-chain analysts. Each generation of technology is a response to the shortcomings of the previous generation and lays the groundwork for the next innovation. Understanding this evolutionary context is a necessary prerequisite for assessing the current investment value of privacy coins.

First Generation: Limitations of CoinJoin Mixing

The representative of the first generation of privacy solutions is the CoinJoin mixing technology used by Dash. The core idea of this solution is extremely simple: to mix the transaction inputs and outputs of multiple users together, making it difficult for external observers to determine who paid whom. From a technical implementation perspective, CoinJoin's advantage lies in its simplicity, requiring no modification of the underlying blockchain protocol, only coordination at the application layer. However, this simplicity also exposes a fatal flaw: the effectiveness of mixing highly depends on the number of participants and the randomness of their behavior patterns. If the mixing pool is insufficiently large or if an attacker can control the mixing nodes, the entire privacy protection will collapse. More importantly, with the advancement of machine learning technology, researchers have developed various algorithms capable of restoring fund flows before and after mixing through transaction graph analysis, temporal correlation, and amount matching. This renders CoinJoin-type solutions ineffective against national-level monitoring capabilities.

Second Generation: Protocol-Level Privacy of Monero

The culmination of second-generation privacy technology is Monero. Unlike Dash, Monero redesigned its privacy protection mechanism at the protocol level, introducing a triple protection system of ring signatures, stealth addresses, and ring confidential transactions. Ring signature technology mixes real transactions with a group of decoy transactions, making it impossible for observers to distinguish the true sender. Stealth addresses generate one-time receiving addresses for each transaction, completely severing the long-term association between addresses and identities. Ring confidential transactions further encrypt the transaction amounts, preventing external observers from seeing either the parties involved in the transaction or the transfer amounts. The combination of these three technologies makes Monero one of the most thoroughly privacy-protected assets in the cryptocurrency world.

According to on-chain data analysis from DeFiLlama, Monero's usage share in dark web markets grew from 15% in 2021 to 45% in 2025, surpassing Bitcoin as the preferred payment tool in the underground economy. This data indirectly confirms the practical effectiveness of its privacy technology. However, Monero's design philosophy also determines its most controversial point: privacy is mandatory and cannot be turned off. Every XMR transaction is encrypted by default, and users cannot choose a transparent mode or selectively disclose transaction records to third parties. This purist stance, while aligning with the values of geeks, has led Monero into a prolonged confrontation with global regulatory agencies. Multiple jurisdictions, including the EU, Japan, and South Korea, have explicitly stated that they will focus on regulating Monero, and many centralized exchanges have been forced to delist it. More concerning is that as artificial intelligence deepens its application in on-chain analysis, the anonymity of ring signatures is being challenged. A research team in Japan published a paper in 2024 showing that by training deep neural networks to analyze transaction time distributions, network propagation paths, and decoy selection patterns, they could infer the true sender with over 60% accuracy. Although this success rate is not yet sufficient to support law enforcement actions, it reveals a disturbing trend: probabilistic privacy is gradually failing in the face of powerful computational capabilities.

Third Generation: The Zero-Knowledge Proof Revolution of Zcash

The Breakthrough of Third-Generation Privacy Technology: Zcash and Zero-Knowledge Proofs

The breakthrough in third-generation privacy technology comes from Zcash's engineering application of zero-knowledge proofs. Zero-knowledge proofs are a cryptographic theory that originated in the 1980s, with the core idea being that a prover can demonstrate to a verifier that a statement is true without revealing any additional information. For example, if Alice wants to prove to Bob that she knows the password to a vault without disclosing the password itself, traditional methods either leak the password or fail to be convincing. Zero-knowledge proofs provide a third option: Alice can use a series of cleverly designed mathematical challenges to convince Bob that she indeed knows the password, while Bob gains no information about the password itself throughout the process.

Zcash applies this theory to transaction verification scenarios. When a user initiates a shielded transaction, the sender's address, receiver's address, and transfer amount are all encrypted, and external observers can only see a segment of ciphertext. However, the transaction still needs to be verified by the network: nodes must confirm that the sender has sufficient balance, that there is no double spending, and that calculations are correct. Traditional blockchains achieve verification by making all data public, while zero-knowledge proofs replace this with the generation of a mathematical certificate. This certificate proves to the network that "there exists a legitimate transaction that meets all rules" without disclosing any specific details of the transaction. The entire verification process takes only a few milliseconds, and the proof file size is merely a few hundred bytes, allowing privacy transactions to maintain efficiency while achieving strict confidentiality in a cryptographic sense.

More critically, Zcash introduces the design concept of optional transparency. The system supports both transparent addresses and shielded addresses, allowing users to choose flexibly based on specific scenarios. For corporate settlements that require auditing, transparent addresses can be used; for individuals focused on privacy, shielded addresses can be utilized. Zcash has also innovatively designed a "viewing key" mechanism: the owner of a shielded address can generate a special key to authorize specific third parties (such as auditing firms or regulatory bodies) to view the transaction history of that address without granting transfer permissions. This refined permission control finds a technological balance between the seemingly contradictory demands of "privacy and compliance."

Zcash vs. Monero: The Ultimate Divergence of Two Paths

Within the privacy coin sector, Zcash and Monero represent two distinctly different philosophical paths. This divergence is reflected not only in technical implementations but also in a deeper understanding of the essence of privacy. Understanding the divide between these two projects is crucial for judging the long-term evolution direction of privacy coins.

Monero supporters insist that privacy must be mandatory, arguing that any optional transparency design undermines the integrity of the anonymity set. This argument has its internal logic: if only a few people use shielded transactions, then shielded transactions themselves become a marker, implying "there is a need to hide this transaction." Only when all transactions are encrypted by default can a single transaction truly blend into the crowd, achieving an effect of invisibility. From a purely cryptographic perspective, this stance is irrefutable. However, the complexity of the real world is that perfect privacy often conflicts with other societal needs. Businesses need to undergo audits to secure financing, individuals may need to prove the source of their assets to tax authorities, and financial institutions must comply with anti-money laundering regulations. Monero's "all or nothing" design renders it completely inapplicable in these scenarios.

Zcash has chosen a more pragmatic middle path. Its dual-track design allows users to choose between privacy and transparency, while the viewing key mechanism provides a possibility for "post-audit." Critics argue that this design sacrifices theoretical privacy strength. However, supporters counter that 100% privacy means 0% usability, rendering such privacy meaningless. A deep analysis by Cointelegraph points out that the reason the EU distinguishes between Monero and Zcash in its new anti-money laundering regulations is precisely because the latter possesses the technical capability to "meet reasonable regulatory demands without compromising privacy."

From a market performance perspective, these two paths have shown a clear divergence trend in 2025. While Monero has also seen considerable price increases, its liquidity continues to shrink under regulatory pressure, with delistings from major exchanges leading to a dual deterioration in trading depth and OTC costs. In contrast, Zcash maintains a relatively healthy liquidity environment: mainstream exchanges support transparent address transactions, satisfying regulatory requirements while preserving user access. Users can purchase transparent ZEC on exchanges and then transfer it to personally controlled shielded addresses, thus finding a balance between compliance and privacy.

From a technical development perspective, the two projects are also heading in different directions. Monero focuses primarily on enhancing the robustness of its existing privacy mechanisms, such as expanding the scale of ring signatures, optimizing decoy selection algorithms, and introducing full-chain member proofs (FCMP++). These upgrades revolve around one goal: maintaining the effectiveness of anonymity in the context of increasingly powerful AI analysis capabilities. Zcash, on the other hand, is consolidating its advantages in zero-knowledge proofs while actively exploring integration with a broader blockchain ecosystem: the Crosslink upgrade will introduce a PoS consensus layer to enhance network throughput; the Tachyon project aims to extend privacy payment capabilities to a "planetary scale"; and integration with the NEAR protocol makes cross-chain privacy exchanges a reality. This difference reveals the distinct visions of the two projects for the future: Monero aims to become cash in the digital age, while Zcash seeks to become the privacy foundation layer of Web3.

The Full Picture of the Privacy Coin Ecosystem: From Core to Periphery

After understanding the evolution of privacy technology, we need to examine the entire ecosystem from a more macro perspective. Based on functional positioning and technical architecture, the privacy coin ecosystem can be divided into five levels: core privacy coin layer, infrastructure layer, DeFi application layer, tool service layer, and the market data and trends that support the entire system.

From a market scale perspective, the total market capitalization of the privacy coin sector is approximately $64 billion, with a 24-hour trading volume nearing $7 billion and a continuously rising search interest index. The current three core narratives—regulatory dynamics, ZK technology development, and institutional attention—are reshaping the valuation logic of the entire sector. At the core layer, Monero occupies the "privacy orthodoxy" position with its mandatory privacy, Zcash represents compliant privacy with its zero-knowledge proof technology, and Dash seeks a balance between instant payments and optional privacy. Projects at the infrastructure layer, such as Secret Network, Oasis Network, and Aleo, are providing foundational support for broader privacy applications.

The prosperity of the application layer is particularly noteworthy. Tornado Cash, despite facing regulatory crackdowns, has had its technical route widely adopted; Railgun and Aztec Protocol continue to explore DeFi privacy directions, while Orchid and Mask Network extend privacy to VPN and social media domains. The tool layer includes wallets (Cake Wallet, ZecWallet), browsers (MONERO, Zchain), and mixing services (CCE.CASH, MixingCash), forming the last mile for users to practically utilize privacy features.

The key information revealed by this ecosystem map is that privacy is no longer an exclusive characteristic of a single chain but is evolving into a foundational capability of Web3 infrastructure. From payments to DeFi, from identity to communication, the demand for privacy is ubiquitous, and the technological solutions to meet these demands are rapidly maturing. Investors need to understand that betting on the privacy sector is not just about buying a specific token but about positioning within a foundational paradigm that could profoundly change the operational rules of the digital world.

Regulatory Storm: The Industry Watershed of 2027

EU Anti-Money Laundering Regulations: A Transformation Already Finalized

In May 2024, after two years of debate and negotiation, the European Parliament officially passed the "Anti-Money Laundering Regulation 2024/1624" (AMLR). The full effective date of this regulation is set for July 1, 2027, leaving the cryptocurrency industry with less than two years to adapt. Unlike many previous regulatory proposals that were "loud but ineffective," the core provisions of the AMLR are fully locked in, leaving no room for substantial amendments. Vyara Savova, a senior policy official at the European Crypto Initiative (EUCI), stated in an interview, "These rules are the final version; what remains is merely the clarification of technical implementation details." This means that the privacy coin sector is facing a certain and irreversible regulatory shock.

Core Provisions Analysis

Article 79 of the AMLR is the most lethal part of the entire regulation, with concise wording that leaves no room for maneuver: all credit institutions, financial institutions, and crypto asset service providers (CASPs) are explicitly prohibited from maintaining anonymous accounts or processing "anonymity-enhanced crypto assets." The text specifically states that "anonymity-enhanced assets" include, but are not limited to: tokens using mixing technology, cryptocurrencies employing ring signatures or stealth addresses, and any digital assets that weaken transaction traceability through technical means. Projects like Monero, Zcash, and Dash are explicitly included in the regulatory scope, although Zcash's dual address design theoretically leaves it a glimmer of hope.

The design of the enforcement mechanism also reflects the EU's determination. The AMLR stipulates the establishment of a new Anti-Money Laundering Regulatory Authority (AMLA) in Frankfurt, which will directly supervise at least 40 large crypto service providers operating in the EU. The criteria for being included in the regulatory list include: conducting business in at least six member states, having over 20,000 EU resident customers, or an annual trading volume exceeding 50 million euros. This standard precisely covers all mainstream exchanges and wallet service providers, leaving almost no regulatory vacuum. More strictly, all cryptocurrency transactions exceeding 1,000 euros must undergo a complete KYC process, including collecting identity information of both the sender and receiver, transaction purpose explanations, and proof of fund sources. This threshold is far lower than the large transaction standards of the traditional financial system, meaning that the vast majority of crypto transactions will be brought under monitoring.

The costs of non-compliance are also significant. According to the provisions, companies violating the AMLR will face fines of up to 10% of their annual revenue or 10 million euros (whichever is higher), and in severe cases, their operating licenses in the EU may be revoked. More deterrent is the regulatory authority's "preventive suspension" power: if the AMLA determines that a platform poses a money laundering risk, it can freeze its operating qualifications before the formal investigation results are released. This "presumption of guilt" regulatory tool means that any company attempting to operate in the gray area will face enormous uncertainty costs.

3.2 Industry Response: Early Layout and Path Divergence

In the face of the impending regulatory upheaval, the response from the cryptocurrency industry has shown a polarized trend. On one hand, mainstream exchanges are accelerating their "cut-off" from privacy coins, attempting to complete compliance transformations before regulations take effect; on the other hand, some projects and service providers are exploring technical countermeasures, hoping to find a new balance between privacy and compliance.

As the largest platform by trading volume globally, Binance was the first to announce the delisting of Monero in early 2024, citing "to ensure compliance with evolving regulatory requirements." This decision sparked strong backlash from the community at the time, with many users accusing Binance of betraying the original intent of cryptocurrency. Ultimately, Binance established itself as a partner rather than an adversary in the eyes of EU regulators. Kraken followed suit, announcing it would delist XMR from Ireland and Belgium by the end of 2024, with plans to expand the delisting to the entire European Economic Area in 2025. Coinbase's stance has been more cautious: the platform has refused to list completely anonymous coins from the start, only providing trading services for Zcash's transparent addresses, while the shielded address feature has never been opened.

This wave of early delistings has had a substantial impact on Monero's liquidity. Data shows that the average daily trading volume of XMR on centralized exchanges has significantly declined. While over-the-counter trading has partially filled this gap, the widening bid-ask spread has greatly increased the cost of frequent trading. More seriously, some payment service providers have also begun to refuse to accept transfers related to Monero, fearing being seen as facilitating money laundering. A CEO of a European crypto payment company candidly stated at an industry conference, "We have no choice. If we continue to support XMR, banks will directly close our accounts, and we will be completely out of the game."

In contrast to Monero's predicament, Zcash has received relatively mild treatment. Most exchanges have adopted a partially reserved strategy: they have closed the deposit and withdrawal functions for shielded addresses but retained trading services for transparent addresses. This compromise satisfies regulatory requirements for "traceability" while preserving user access to ZEC. Users can purchase transparent ZEC on exchanges, withdraw it to their controlled wallets, and then manually transfer it to shielded addresses. Although this adds an extra step, it at least maintains asset availability. The Zashi wallet launched by Electric Coin Co. further reduces the complexity of this process: users only need to input the receiving address, and the wallet will automatically determine its type and handle the conversion, with the entire process taking no more than three clicks.

The Zcash community's response to regulation has also been more constructive. Electric Coin Co. and the Zcash Foundation have communicated multiple times with EU regulatory bodies, emphasizing that the viewing key mechanism can meet legitimate audit needs, while shielded addresses are necessary tools to protect ordinary users from privacy breaches. In June 2025, the AML compliance manual released by EUCI specifically mentioned that "privacy technologies with selective disclosure capabilities" might receive exemptions in the future. Although not explicitly named, it is widely believed in the industry that this leaves policy space for Zcash. If this hint ultimately translates into formal provisions, ZEC will become the only mainstream privacy coin that can circulate legally in the EU, significantly enhancing its strategic value.

However, optimism should be approached with caution. The EU is not the only regulatory force globally; major economies such as the United States, Japan, and South Korea are also brewing similar policies. In October 2025, a joint statement from the G7 finance ministers' meeting explicitly called for "coordinated responses to the anonymity risks in crypto assets," suggesting that a cross-border regulatory framework may emerge in the future. If countries follow the EU model, even if Zcash gains some exemptions due to its technical advantages, its market space will be significantly reduced. The greater uncertainty lies in the attitude of the United States. Although the Trump administration was relatively friendly to the crypto industry, the hostility of the Treasury Department and the IRS towards privacy coins has not diminished. In early 2025, the IRS announced it would increase audits of "high-risk crypto transactions," with privacy coin trading explicitly listed as a focus area. This means that even if privacy coins are technically legal, holders may face enormous compliance costs due to tax scrutiny.

3.3 Global Regulatory Coordination and Geopolitical Divergence

The EU's tough stance is not an isolated case but part of a global tightening wave of regulation. The U.S. Treasury requires all virtual asset service providers (VASPs) to report suspicious activities, formally incorporating crypto assets into traditional anti-money laundering frameworks. The Japanese Financial Services Agency (FSA) has explicitly prohibited licensed exchanges from listing completely anonymous coins, leading to Monero's complete disappearance from the Japanese market. The Monetary Authority of Singapore (MAS) requires all digital payment token service providers to implement the "Travel Rule," meaning that cross-border transfers must include complete identity information of both the sender and receiver. The commonality of these policies is that they do not oppose blockchain technology itself but firmly reject completely untraceable asset flows.

However, the other side of the regulatory map presents a starkly different picture. After El Salvador designated Bitcoin as legal tender, it has taken a relatively tolerant stance towards privacy coins, arguing that "financial privacy is a fundamental human right." In Argentina, following hyperinflation, public trust in government credit has significantly declined, leading to a notable increase in the use of privacy coins, with regulators choosing a "see no evil, hear no evil" strategy. Traditional offshore financial centers like the UAE and Switzerland are attempting to find a balance between compliance and competitiveness, neither fully banning privacy coins nor relaxing KYC requirements, but instead providing differentiated services for clients with varying risk appetites through tiered regulation. This geopolitical divergence has resulted in a polarized market for privacy coins, characterized by "tightening in developed economies and openness in emerging markets."

4. In-Depth Analysis of Core Projects

After understanding the evolution of the regulatory landscape, we need to return to the projects themselves and assess which assets possess the ability to traverse cycles. The following is an in-depth analysis of the core targets in the privacy coin sector from three dimensions: technical route, market performance, and institutional endorsement.

4.1 Zcash: The Technical Paradigm of Compliant Privacy and Business Prospects

Fundamental Data (Source: Ju.com Market Data)

Zcash currently has a market capitalization of approximately $10 billion, ranking among the top 20 cryptocurrencies globally. Its circulating supply is 16.38 million coins, with about 22% of the total issuance capacity remaining until the 21 million coin cap is reached. As mentioned earlier, the second halving completed in November 2024 has compressed the annual inflation rate to below 1.8%, nearing Bitcoin's scarcity level.

On-chain data reveals deeper structural changes: the amount of ZEC locked in shielded pools has surpassed 4.9 million coins, accounting for 30% of the circulating supply, a proportion that was only 5% two years ago. This indicates that the recent influx of buying is not from short-term speculators but from long-term holders genuinely utilizing privacy features. The distribution of holding time shows that over 60% of ZEC addresses have held their coins for more than a year, a figure that was only 35% at the beginning of 2023. The increase in concentration of holdings typically signals a growing reluctance to sell.

Technical Roadmap: From Payment Tool to Privacy Infrastructure

The Zashi wallet developed by Electric Coin Co. has achieved a qualitative leap in user experience. By integrating the Intents mechanism of the NEAR protocol, users can directly exchange Bitcoin or Ethereum for shielded ZEC without leaving the wallet interface or needing to understand complex cross-chain bridging concepts. Zashi also defaults to transferring all outgoing transactions to shielded addresses unless users actively choose the transparent mode, thereby implementing a "privacy-first" philosophy at the product level. Data shows that within three months of Zashi's launch, the average daily number of new shielded transactions increased from 150 to over 800, demonstrating that ease of use is key to breaking the adoption bottleneck for privacy features.

The Crosslink upgrade, planned for launch in 2026, will layer a proof-of-stake layer on top of the existing proof-of-work consensus, allowing ZEC holders to participate in block validation and earn rewards through staking, while also shortening transaction confirmation times and enhancing the network's resistance to attacks. More ambitiously, the Tachyon project aims to elevate the throughput of privacy transactions to a "planetary scale" through innovative technologies like "proof of carrying data," enabling Zcash to support the daily payment needs of billions of users globally. These technological reserves indicate that Zcash is not content with being a "niche privacy tool" but is attempting to build a privacy infrastructure that can compete with mainstream public chains.

Institutional Endorsement and Capital Flows

Although Grayscale's Zcash trust product is not large (with AUM of about $120 million), its symbolic significance is substantial: it proves that traditional financial institutions recognize ZEC as a legitimate investment target. Pantera Capital, one of Silicon Valley's most influential crypto funds, has held ZEC since 2016 without ever reducing its position. More notably, some sovereign wealth funds and family offices have begun to include ZEC in their "alternative asset" allocation baskets. Although specific information cannot be disclosed due to confidentiality agreements, industry rumors suggest that these institutions hold over 100,000 coins. If Grayscale's ZEC trust eventually converts into an ETF, it will further open the inflow channel for institutional funds.

4.2 Monero: The Cost and Resilience of Upholding Idealism

Technical Advantages and Ideological Value

Monero currently has a market capitalization of approximately $7 billion. Its circulating supply is about 18.44 million coins, theoretically with no total cap, but it has designed a "tail emission" mechanism: after the main emission period ends, each block will permanently produce 0.6 XMR as miner incentives to maintain network security. This design philosophy runs counter to Bitcoin's "scarcity" narrative, but supporters argue that continuous small inflation is a necessary cost to sustain a decentralized mining ecosystem.

Monero's technical advantages lie in its maturity and stability. Since its launch in 2014, it has undergone multiple bull and bear cycles without any major security incidents. Its mandatory privacy design ensures the integrity of the anonymity set: each transaction is mixed with 16 decoy signatures, making tracking exponentially more difficult. The Fluorine Fermi upgrade, launched in October 2025, further optimized the node selection algorithm, significantly enhancing resistance to Sybil attacks. The upcoming deployment of full-chain member proofs (FCMP++) in 2026 is particularly significant, as it will grant Monero quantum resistance, ensuring that privacy protection remains effective even in the era of quantum computing.

Liquidity Crisis and Survival Challenges

However, the challenges facing Monero are also evident. Liquidity shrinkage is the most direct threat: among the top ten exchanges globally, only two retain XMR trading pairs, with average daily trading volume dropping from a peak of $500 million in 2021 to $180 million in 2025, a decline of over 60%. While over-the-counter trading has partially filled the gap, the 8-12% bid-ask spread makes frequent trading costly. In August 2025, the Monero network faced a 51% hash power attack threat, which was ultimately mitigated by a $925,000 defense fund raised by the community, but this incident exposed the vulnerability of small PoW networks. A longer-term risk is that as AI analysis capabilities improve, the probabilistic anonymity of ring signatures may be gradually compromised, and Monero's mandatory privacy design prevents it from gaining policy space through a "compliance mode" like Zcash.

Investment Positioning: An Ideological Hedge Tool

For investors, Monero is better viewed as an "ideological hedge tool" rather than a mainstream asset. It represents the fundamentalist route of cryptocurrency: decentralization, censorship resistance, and complete anonymity. In the event of extreme scenarios such as large-scale monitoring of the financial system or a currency crisis, Monero may become the last refuge. However, under normal market conditions, its liquidity disadvantages and regulatory risks make it difficult to play a major role in an investment portfolio.

4.3 Exploration of Emerging Privacy Infrastructure

In addition to the established projects ZEC and XMR, the privacy sector has also seen a surge of emerging forces attempting to provide differentiated solutions in specific scenarios.

Railgun: The Privacy Layer of the Ethereum Ecosystem

Railgun serves as the privacy layer of the Ethereum ecosystem, utilizing a zk-SNARKs smart contract system that allows users to interact with mainstream DeFi protocols like Uniswap and Aave while maintaining privacy. Its uniqueness lies in its proactive integration with the OFAC sanctions list, preventing blacklisted addresses from using its services, thus leading in compliance compared to mixers like Tornado Cash. However, the complexity of smart contracts also brings security risks, as a small attack in 2024 resulted in a loss of approximately $500,000.

Aztec Network and Secret Network

Aztec Network, as an Ethereum Layer 2, provides a fully encrypted smart contract execution environment, supporting innovative applications such as private NFTs and private lending. However, it also faces significant challenges regarding network effects, with its TVL far below mainstream Layer 2s like Arbitrum and Optimism. Secret Network adopts a cross-chain privacy solution within the Cosmos ecosystem but faces similar adoption bottlenecks.

The common challenge for these projects is how to persuade users to pay additional learning and transaction costs for privacy features within public chain ecosystems that have already formed strong network effects. From an investment perspective, these emerging projects are more suitable as satellite allocations to capture the beta returns of technological innovations rather than as core holdings.

5. Investment Value Analysis: Structural Demand and Scarcity

5.1 Structural Rigidity of Privacy Demand

The investment logic of privacy coins fundamentally depends on the proposition of whether "privacy demand has long-term rigidity." From an individual perspective, as on-chain finance becomes increasingly popular, the risk of privacy breaches for high-net-worth individuals rises exponentially. An early investor holding 1,000 Bitcoins, if their address is linked to their identity, faces multiple threats such as targeted phishing attacks, kidnapping for ransom, and social engineering scams. By transferring assets to a ZEC shielded address, the external world cannot ascertain the scale of their holdings, significantly reducing security risks.

From a corporate perspective, the protection of trade secrets is a rigid demand. When two companies settle on-chain, if they use a transparent public chain, competitors can reverse-engineer cost structures, and suppliers can gain access to pricing information. By using privacy coins, the transaction amount and counterparty information remain confidential, maintaining fairness in business negotiations.

A deeper demand arises from the contradictory situation of financial institutions: they wish to leverage the 24/7 liquidity and instant settlement capabilities of blockchain but do not want their trading strategies and positions visible to competitors. Zero-knowledge proofs and viewing key mechanisms precisely resolve this contradiction: complete confidentiality externally, with optional disclosure to regulators. In 2022, JPMorgan collaborated with the Zcash team to explore enterprise-level privacy solutions; although it ultimately did not materialize, it proved that the demand is real. As the wave of RWA (Real World Assets) on-chain progresses, scenarios like private equity on-chain will have even more urgent privacy requirements, as the prices and participants of these transactions often involve highly sensitive information.

5.2 Explosive Potential of Supply-Demand Imbalance and Valuation Repair Space

Supply Side Analysis

From the supply side, the supply curve of ZEC is identical to that of Bitcoin, just delayed by seven years. After Bitcoin's second halving, the supply-demand relationship entered a long-term imbalance, with prices rising from $650 to nearly $20,000, an increase of about 30 times. If ZEC follows this path, a conservative target from a bottom of $35 would be $1,050. Of course, history does not repeat itself simply, but the underlying logic of supply shocks remains the same.

Adding the effect of locked ZEC in shielded pools (4.9 million coins, accounting for 30% of the circulating supply), the actual tradable supply further tightens, providing structural support for price increases. Once this positive feedback loop of "locking - scarcity - increase - more locking" is formed, it will significantly amplify price elasticity.

Valuation Comparison Analysis

From a valuation perspective, according to data from Delphi Digital, ZEC's FDV-to-earnings multiple is only 20.34x, significantly lower than Hyperliquid's 68.66x and Jupiter's 29.48x. While it is not appropriate to directly compare valuation multiples of different types of projects, this data at least indicates that ZEC is not being overly hyped by the market. If the narrative of the privacy sector is further strengthened, there is considerable room for valuation repair.

More critically, the qualitative change in the holder structure, as mentioned earlier, with a significant increase in shielded pool locking and long-term holding ratios, leads to a continuous contraction of actual circulating chips. An increase in the concentration of holdings typically signals a growing reluctance to sell, making it easier to trigger rapid price increases driven by supply shortages when demand rises.

6. Future Outlook: Privacy as the Underlying Paradigm of Web3

6.1 Technical Spillover of Zero-Knowledge Proofs

Zero-knowledge proof technology is permeating various levels of Web3 from privacy coins, and this diffusion will reshape the underlying architecture of the entire crypto ecosystem:

Scalability Direction: ZK Rollup has become the mainstream solution for Ethereum scalability, with projects like zkSync, StarkNet, and Scroll accumulating a TVL of over $4 billion. These Layer 2s enhance throughput while inheriting the privacy capabilities of zero-knowledge proofs, laying the foundation for future private DeFi.

Smart Contract Direction: zkEVM supports a zero-knowledge execution environment for general smart contracts, allowing developers to build complex applications without sacrificing privacy. Aztec's Noir language and Aleo's Leo language are becoming the new standards for privacy smart contract development.

Identity Direction: ZK identity has become the core technology of decentralized identity (DID). Users can prove "I meet a certain condition" (such as being over 18, holding a certain NFT, or having certain assets) without revealing specific identity information. This "minimal disclosure" identity system will be a prerequisite for large-scale adoption of Web3.

AI Direction: ZK machine learning protects the privacy of AI model inference. Users can send data to AI models for predictions, while the model provider cannot see the original data, and users cannot reverse-engineer model parameters. This technology will resolve the core privacy contradiction in the AI era.

As a pioneer of ZK technology, Zcash's Halo 2 proof system has been adopted by multiple projects, and its research results are spilling over into the entire industry. From this perspective, investing in ZEC is not only a bet on privacy coins themselves but also a bet on the long-term value of the underlying technological paradigm of zero-knowledge proofs.

6.2 Three Scenarios of Regulatory Evolution

Pessimistic Scenario (Probability 30%)

The EU completely cuts off the liquidity of privacy coins, G7 countries fully follow suit, and Zcash fails to obtain exemptions. In this scenario:

• ● All mainstream CEXs delist ZEC and XMR
• ● The project becomes a tool exclusively for the dark web and gray economy
• ● Only DEX and P2P retain a small amount of trading

Neutral Scenario (Probability 50%)

Regulation is executed mildly, providing a transition period, and the market shows differentiation. In this scenario:

• ● ZEC obtains partial exemptions through the viewing key and can be used compliantly under specific conditions
• ● Mainstream CEXs retain trading for transparent addresses but restrict shielded addresses
• ● XMR shifts to complete decentralization, maintaining circulation through DEX, P2P, and OTC
• ● The overall market size shrinks by 30-50%, but core users become more determined

Optimistic Scenario (Probability 20%)

ZEC is viewed as a compliant privacy solution and receives clear exemptions. In this scenario:

• ● Traditional financial institutions begin to adopt ZEC for cross-border settlements
• ● Grayscale's ZEC trust converts into an ETF, leading to a large inflow of institutional funds
• ● Zcash becomes the "enterprise-level blockchain privacy standard"
• ● Monero remains banned, but XMR holders convert their assets to ZEC

Analysts at Ju.com believe that the neutral scenario is the most likely outcome, and investors should formulate strategies based on this while preparing risk hedges for the pessimistic scenario.

6.3 Prediction of Adoption Turning Points for Enterprises

Enterprise-level adoption may see a turning point in 2026-2027, with triggering conditions including:

Settlement Needs of Multinational Companies: Currently, cross-border payments through the SWIFT system take 3-5 business days and incur high fees. If multinational companies use ZEC for instant settlements, they can enjoy the efficiency of blockchain while protecting trade secrets through shielded addresses, avoiding competitors analyzing the flow of funds. The first adopters are expected to emerge in supply chain finance and bulk commodity trading.

Privacy Services from Payment Companies: The demand for privacy payments from high-net-worth clients continues to grow. Payment giants like PayPal and Stripe may launch "privacy payment" value-added services, using ZEC for backend settlement. This B2B2C model will hide the complexity of privacy coins beneath the user interface, significantly lowering the adoption threshold.

Compliance Tools from Audit Firms: The Big Four accounting firms may develop auditing tools based on Zcash's viewing key, allowing companies to meet privacy needs while proving compliance to regulators. This demand for "auditable privacy" will become more urgent after RWA (real-world assets) are brought on-chain.

Once a positive feedback loop is formed, privacy coins will shift from being "speculative targets" to "production tools," and their value logic will transition from "price speculation" to "cash flow discounting."

6.4 The Inevitable Combination of RWA and Privacy

Bringing real-world assets (RWA) on-chain is the next trillion-dollar market for the crypto industry, and privacy technology is a necessary condition for the large-scale adoption of RWA:

Tokenization of Real Estate: When real estate shares are traded on-chain, buyers do not want sellers to know their other assets, and sellers do not want to disclose transaction prices. By using shielded transactions, market information asymmetry can be maintained, thereby improving transaction efficiency.

On-Chain Private Equity: The LP list and share distribution of traditional private equity investments are highly confidential. If shares are tokenized, privacy technology must be used to protect investor identities. The combination of ZK identity and shielded addresses precisely meets the dual demand of "verifiable qualified investor identity + not disclosing specific holdings."

Supply Chain Finance: Accounts receivable, inventory value, and procurement costs of enterprises are all trade secrets. When supply chain finance is brought on-chain, smart contracts can automate processing, but data must be encrypted. Zero-knowledge proofs allow financial institutions to verify that "the enterprise indeed has sufficient collateral" without knowing the specific amount.

ZK technology precisely enables both "on-chain verifiability" and "non-disclosure of details," making privacy technology no longer optional but an essential module of RWA infrastructure. From this perspective, Zcash's future competitors are not other privacy coins but traditional public chains that lack privacy capabilities.

7. Core Conclusion

Analysts at Ju.com believe that under the triple surveillance of AI, big data, and CBDC, financial privacy is becoming a scarce resource. The technology has matured, and products like Zashi prove that user experience is no longer a barrier. Regulation is a double-edged sword; the EU ban poses a threat but also forces the industry towards compliance, and ZEC's dual-track system provides a breakthrough approach. Valuation may not have peaked, but one should be prepared for a drawdown of 50% or more. Portfolio allocation and long-term holding are rational strategies, and privacy coins should serve as hedging tools within the portfolio, with a holding period of at least 2 years.

The revival of privacy coins in 2025 is essentially the latest chapter in the eternal struggle between freedom and surveillance, transparency and confidentiality. As Arthur Hayes said, "Gold is a tool for the state to combat inflation, Bitcoin is a tool for the people to combat inflation, and Zcash is humanity's last line of defense for financial privacy." Whether ZEC ultimately rises to $1,000 or falls back to $100, the privacy technology itself will profoundly impact the Web3 infrastructure of the next decade. Investing in privacy coins is not just about investing in a currency; it is a vote in support of a value system: in an increasingly transparent world, we still need to retain the right to be unobserved.

Disclaimer

This report is for informational reference only and does not constitute investment advice. Cryptocurrency investments carry extremely high risks, with significant price volatility. Investors should fully assess their risk tolerance and only invest funds they can afford to lose. The views and forecasts in this report are based on currently available information, and future market trends may differ significantly from expectations. Investment decisions should be based on independent judgment, and professional financial advice should be sought when necessary.

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