Privacy Coins, Into the Institutional Sphere

Zcash rose more than 800% as of last year, showing strength in the crypto market.

The rise of such privacy coins began from the awareness that, because of Bitcoin's pseudonymity, names are not revealed but all transactions are public, making crime tracking actually easy.

The attempt to address Bitcoin's limitation, in which an individual's asset scale or transaction history is transparently exposed through address labeling, was the main driver behind the development of privacy coins.

In real financial environments, if all transactions are transparently disclosed, important personal financial information such as salary is exposed, making it unsuitable for everyday financial transactions.

The current institutional financial system requires privacy protection to function in the asset circulation process, and privacy coins play a role in compensating for this flaw in institutional finance by guaranteeing asset anonymity.

In the past it moved in sync with Bitcoin halving cycles, but since last October it has shown an independent upward trend, reflecting expectations for entry into the institutional sphere after Bitcoin ETF approval and for growing on-chain financial demand.

This rise is interpreted as expanding demand for privacy coins due to strengthened KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations.

After delisting, accessibility for ordinary investors declined, and privacy coins were used mainly by highly skilled users through methods such as atomic swaps.

As DeFi became more active, privacy coin trading became possible without centralized exchanges, and Zcash acquired a structure that allows users to choose whether to apply privacy.

Zcash is evolving in a direction that accommodates regulators' KYC (Know Your Customer) and AML (Anti-Money Laundering) structures, so it is highly likely to be used in the institutional financial system.

Unlike Monero, which anonymizes all transactions, Zcash was designed so that users can selectively adjust privacy by using both transparent addresses and anonymous (shielded) addresses.

The share of anonymous (shielded) transactions within Zcash was once around 10% of all transactions, but it began rising sharply around July 2024.

The anonymous transaction share is currently maintained at about 24%, and the higher the anonymous transaction share, the stronger the anonymity protection effect across the entire network.

As transaction volume grows, it becomes easier for users to secure anonymity, and this structure makes Zcash's price rise actually increase its valuation appeal.

During Zcash's price collapse, the holdings once held by a small foundation spread more evenly through the market.

Major influencers such as the Winklevoss brothers and Barry Silbert also participated in accumulating Zcash, and unlike other coins where the foundation holds excessive amounts, selling pressure is dispersed, giving it relatively stable investment appeal.

Monero aims to process all transactions completely anonymously and pursues perfection in terms of anonymity.

It is used mainly on the dark web and steadily maintains an average of 30,000 on-chain transactions per day, and unlike Zcash, Monero is growing based on unique demand for complete anonymity.

Zcash has a four-year halving cycle and a 21 million issuance structure similar to Bitcoin, providing high understandability for institutional investors, and by offering a clear solution that can turn anonymity on and off, it broadens the range of choices.

When users use shielded addresses, the anonymity of transaction records is guaranteed, enabling private financial transactions.

Once the 2027 roadmap is completed, its appeal as a technical contrast to Bitcoin is expected to become even more prominent.

In the future, AI agent brokers are expected to intermediate all transactions.

If AI agents handle transactions, the entry barriers to advanced coins that had low technical accessibility may be eased.

Accordingly, the technical value of privacy coins including Monero is highly likely to be reevaluated in the market.