Privacy Market Track Deep Research Report: Value Reassessment from Edge to Mainstream

Abstract

Since September 2025, the long-dormant privacy coin sector has undergone a remarkable value reassessment. According to Ju.com market data, Zcash ($ZEC) soared from a low of $35 in August this year to a peak of $750 in November, an increase of over 2200% in less than three months, driving the entire privacy sector's market capitalization to exceed $64 billion. This seemingly sudden explosion is, in fact, the inevitable result of the interplay of four forces: technological maturity, regulatory pressure, on-chain monitoring expansion, 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 the blockchain, why has privacy become 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 speculation but should be integrated into the strategic level of portfolio management, serving as a defensive asset to hedge against the systemic risks of transparent public chains and to respond to the strengthening global surveillance environment. At the same time, the upcoming EU anti-money laundering regulations in 2027 will become a watershed 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 surged to a peak of $750 in just three months, with a cumulative increase of over 2200%. This performance also pushed its market capitalization above $10 billion, re-entering the top 20 cryptocurrencies by market cap. Meanwhile, according to Ju.com market data, another leading privacy coin, Monero ($XMR), also showed strong momentum, with prices fluctuating around $400 and a market cap stabilizing at about $7 billion.

According to CoinMarketCap market data, the overall market capitalization of the privacy coin sector has jumped from less than 1% at the beginning of the year to the current 2% of the total cryptocurrency market capitalization. More notably, there has been an explosive growth in trading volume: ZEC's 24-hour trading volume exceeded $750 million at its peak, growing over 20 times since the beginning of the year. This simultaneous rise in volume and price stands in stark contrast to the fleeting performance 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 outbreak of this market trend 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 essential 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, halving the speed of new coin issuance. 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, which drives the price into a sustained upward channel. ZEC adopts the same supply curve design as Bitcoin, with a seven-year delay in the timeline, so it can be reasonably speculated 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 and creating strong constraints 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 within the cryptocurrency community regarding privacy issues. 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 verification, all historical transaction records, asset holdings, and fund flows of that address can be completely restored by algorithms.

This cognitive shift is particularly evident among high-net-worth individuals. Once an on-chain address is linked to a real-world identity, anyone can query its asset scale through public blockchain explorers, exposing large holders to threats of extortion, phishing attacks, and even personal safety risks. Blockchain analysis firms like Chainalysis have already developed various 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, resolving 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 private transactions. The cumulative effect of these technological advancements has transformed ZEC's privacy features from experimental products into production-grade tools. 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 ease of use is a key bottleneck for large-scale adoption.

Narrative Side: Collective Endorsement by 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 has even marked ZEC as his second-largest bet, believing that the status of privacy coins in the next decade will be akin to Bitcoin's role 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 the 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 development 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, while also laying the groundwork for the next generation of innovations. Understanding this evolutionary trajectory 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 modifications to 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, time correlation, and amount matching. This makes CoinJoin-type solutions appear powerless in the face of 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. The ring signature technology mixes real transactions with a group of decoy transactions, making it impossible for observers to distinguish which one is the actual sender. Stealth addresses generate one-time receiving addresses for each transaction, completely severing the long-term association between addresses and identities. Ring confidential transactions go a step further by encrypting transaction amounts, making it impossible for external observers to see either the parties involved in the transaction or the transfer amounts. The combination of these three technologies makes Monero one of the most thorough privacy-protecting assets in the cryptocurrency world.

According to on-chain data analysis from DeFiLlama, Monero's share of usage in dark web markets has grown from 15% in 2021 to 45% in 2025, surpassing Bitcoin to become 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 aligned with the values of geeks, has placed Monero in a prolonged confrontation with global regulatory agencies. Jurisdictions such as the EU, Japan, and South Korea have explicitly stated that they will focus on regulating Monero, leading many centralized exchanges to be forced to delist it. More worryingly, with the deepening application of artificial intelligence 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 real 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 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 convince a verifier that a statement is true without revealing any additional information. For example, Alice wants to prove to Bob that she knows the password to a vault without telling Bob 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 assure 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 validation 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 piece of ciphertext. However, the transaction still needs to be validated 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 validation by making all data public, while zero-knowledge proofs replace this with 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 validation process takes only a few milliseconds, and the proof file size is only 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 and shielded address modes, allowing users to choose flexibly based on specific scenarios. For corporate settlements that require auditing, transparent addresses can be used; for individuals focusing on privacy, funds can be moved to shielded addresses. Zcash has also innovatively designed a "view 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 allows for a technical balance between the seemingly contradictory demands of "privacy and compliance."

2.2 Zcash and Monero: The Ultimate Divergence of Two Paths

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

Supporters of Monero insist that privacy must be mandatory, and 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 the shielded transaction itself becomes a marker, suggesting "this transaction has a hidden necessity." Only when all transactions are encrypted by default can a single transaction truly blend into the crowd, achieving the effect of being invisible. From a purely cryptographic perspective, this stance is indisputable. However, the complexity of the real world is that perfect privacy often conflicts with other needs of social operation. Businesses need to undergo audits to obtain 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 view 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. Cointelegraph's in-depth analysis points out that the reason the EU distinguishes between Monero and Zcash in its 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 trend of divergence in 2025. While Monero has also seen considerable price increases, its liquidity continues to shrink under regulatory pressure, with major exchanges delisting it 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 their 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: to maintain the effectiveness of anonymity in the context of increasingly enhanced AI analytical 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 expand privacy payment capabilities to a "planetary scale"; and integration with the NEAR protocol makes cross-chain privacy exchanges a reality. This difference reveals the two projects' different visions for the future: Monero aims to become cash for the digital age, while Zcash seeks to become the privacy foundation layer of Web3.

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

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 layers: core privacy coin layer, infrastructure layer, DeFi application layer, tool service layer, and the market data and trends that support the entire system.

In terms of market size, the total market capitalization of the privacy coin sector is approximately $64 billion, with a 24-hour trading volume of nearly $7 billion and a continuously rising search interest index. The current three core narratives—regulatory dynamics, ZK technology development, and institutional interest—are reshaping the valuation logic of the entire sector. At the core layer, Monero occupies the position of "privacy orthodoxy" 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 regulatory crackdowns, has had its technical route widely adopted; Railgun and Aztec Protocol continue to explore privacy in DeFi, 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 actually utilize privacy features.

The key information revealed by this ecological map is that privacy is no longer an exclusive feature 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 particular token but about laying out a foundational paradigm that could profoundly change the operational rules of the digital world.

III. Regulatory Storm: The Industry Watershed of 2027

3.1 EU Anti-Money Laundering Regulations: A Transformation Already Set in Stone

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 inconsequential," the core provisions of the AMLR are fully locked in, leaving no room for substantial amendments. Vyara Savova, senior policy officer at the European Crypto Initiative (EUCI), stated in an interview, "These rules are the final version; what remains is just 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 provisions specifically state 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 clearly 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 more than 20,000 EU resident customers, or an annual trading volume exceeding 50 million euros. This standard accurately covers all mainstream exchanges and wallet service providers, leaving almost no regulatory vacuum. Even stricter is the requirement that all cryptocurrency transactions exceeding 1,000 euros must undergo a complete KYC process, including collecting the 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 subject to monitoring.

The penalties for violations are also significant. According to the provisions, companies that violate the AMLR will face fines of up to 10% of their annual revenue or 10 million euros (whichever is higher), and in severe cases, may have their operating licenses in the EU revoked. More daunting 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 navigate the gray area will face enormous uncertainty costs.

3.2 Industry Response: Early Layout and Path Differentiation

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

Binance, as the largest platform by trading volume globally, was the first to announce the delisting of Monero in early 2024, citing "to ensure compliance with changing 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 front of EU regulators. Kraken followed suit, announcing that it would delist XMR from Ireland and Belgium by the end of 2024 and 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 outset, 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 XMR's average daily trading volume on centralized exchanges has plummeted. Although OTC trading has partially filled this gap, the widening bid-ask spread has significantly increased the cost of frequent trading. More seriously, some payment service providers have begun to refuse to accept transfers related to Monero, fearing being seen as assisting in 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 then we will be completely out."

In contrast to Monero's predicament, Zcash has received relatively mild treatment. Most exchanges have adopted a partially reserved strategy: closing the deposit and withdrawal functions for shielded addresses while retaining trading services for transparent addresses. This compromise not only meets regulatory requirements for "traceability" but also preserves 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 simplifies 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 agencies, emphasizing that the view 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" may receive exemptions in the future. Although not explicitly named, it is widely believed in the industry that this is leaving policy space for Zcash. If this hint eventually 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, optimistic sentiments also need to be approached with caution. The EU is not the only regulatory force globally; major economies such as the U.S., Japan, and South Korea are also brewing similar policies. In October 2025, the G7 finance ministers' meeting issued a joint statement explicitly stating the need to "coordinate 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, then even if Zcash gains some exemptions due to its technical advantages, its market space will still be significantly reduced. The greater uncertainty lies in the attitude of the United States. Although the Trump administration was relatively friendly towards the cryptocurrency industry, the hostility of the Treasury and the IRS towards privacy coins has not diminished. In early 2025, the IRS announced it would intensify audits of "high-risk crypto transactions," with privacy coin transactions explicitly listed as a focus of monitoring. This means that even if privacy coins are technically legal, holders may still face enormous compliance costs due to tax audits.

3.3 Global Regulatory Coordination and Geopolitical Differentiation

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, and crypto assets have been formally incorporated into traditional anti-money laundering frameworks. Japan's Financial Services Agency (FSA) has explicitly banned 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 the flow of completely untraceable assets.

However, the other side of the regulatory map presents a starkly different picture. After El Salvador designated Bitcoin as legal tender, it has maintained a relatively tolerant attitude towards privacy coins, arguing that "financial privacy is a fundamental human right." In Argentina, following hyperinflation, public trust in government credit has plummeted, leading to a significant rise in the use of privacy coins, with regulatory agencies choosing a "see no evil" strategy. Traditional offshore financial centers like the UAE and Switzerland are trying to find a balance between compliance and competitiveness, neither completely banning privacy coins nor relaxing KYC requirements, but rather providing differentiated services for clients with different risk appetites through tiered regulation. This geopolitical differentiation has resulted in a two-polar pattern in the privacy coin market: tightening in developed economies and openness in emerging markets.

IV. 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 navigate through cycles. The following analysis of the privacy coin sector's core targets will focus on three dimensions: technical routes, market performance, and institutional endorsements.

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 in the top 20 cryptocurrencies globally. Its circulating supply is 16.38 million coins, leaving about 22% room for issuance until the total cap of 21 million coins 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 level of scarcity.

On-chain data reveals deeper structural changes: the ZEC locked in shielded pools has exceeded 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 data shows that over 60% of ZEC addresses have held their coins for over a year, a figure that was only 35% at the beginning of 2023. The increase in concentration of holdings typically indicates a strengthening of 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 sending all outgoing transactions to shielded addresses unless users actively choose the transparent mode, thus implementing the "privacy-first" concept at the product level. Data shows that within three months of Zashi's launch, the average daily number of new shielded transactions grew from 150 to over 800, proving that ease of use is key to breaking the adoption bottleneck for privacy features.

The Crosslink upgrade planned for launch in 2026 will add 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 while shortening transaction confirmation times and enhancing network resistance to attacks. Even more ambitious is the Tachyon project, which 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 worldwide. 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 Endorsements 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 the legitimacy of ZEC as an investment target recognized by traditional financial institutions. 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 floodgates for institutional capital inflow.

4.2 Monero: The Cost and Resilience of Idealism

Technical Advantages and Ideological Value

Monero currently has a market capitalization of about $7 billion. Its circulating supply is approximately 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 withstood 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 its resistance to Sybil attacks. The upcoming full-chain member proof (FCMP++) deployment in 2026 is particularly significant, as it will give Monero quantum resistance, ensuring that privacy protection remains effective even in the era of quantum computing.

Liquidity Crisis and Survival Challenges

However, Monero faces significant challenges. The most direct threat is liquidity shrinkage: among the top ten exchanges globally, only two retain XMR trading pairs, with average daily trading volume plummeting from a peak of $500 million in 2021 to $180 million in 2025, a decline of over 60%. While OTC trading has partially filled this 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, although ultimately resolved by a $925,000 defense fund raised by the community, exposed the vulnerability of small PoW networks. The longer-term risk is that as AI analytical 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, anti-censorship, and complete anonymity. If extreme scenarios arise, such as large-scale monitoring of the financial system or currency crises, Monero may become the last refuge. However, in a conventional market environment, 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 ZEC and XMR, a number of emerging forces are attempting to provide differentiated solutions in specific scenarios within the privacy sector.

Railgun: The Privacy Layer of the Ethereum Ecosystem

Railgun serves as the privacy layer of the Ethereum ecosystem, enabling users to interact with mainstream DeFi protocols like Uniswap and Aave while maintaining privacy through a zk-SNARKs smart contract system. Its uniqueness lies in its proactive integration with the OFAC sanctions list, preventing blacklisted addresses from using its services, thereby 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 about $500,000.

Aztec Network and Secret Network

Aztec Network, as an Ethereum L2, provides a fully encrypted smart contract execution environment, supporting innovative applications like private NFTs and private lending. However, it also faces significant challenges regarding network effects, with its TVL far below that of mainstream L2s like Arbitrum and Optimism. Secret Network employs a cross-chain privacy solution within the Cosmos ecosystem but similarly faces adoption rate bottlenecks.

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

V. Investment Value Analysis: Rigid 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 is rising 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 extortion, and social engineering scams. By transferring assets to a ZEC shielded address, external parties cannot ascertain 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 bargaining information. Using privacy coins allows transaction amounts and counterparty information to 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 the view key mechanism precisely resolve this contradiction: completely confidential externally, with optional disclosure to regulators. JPMorgan collaborated with the Zcash team in 2022 to explore enterprise-level privacy solutions, and although it ultimately did not materialize, it proved that the demand is real. As the wave of RWA (real-world assets) on-chain progresses, the demand for privacy in scenarios like private equity tokenization will become even more urgent, as the prices and participants in 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, ZEC's supply curve is identical to Bitcoin's, 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 the low of $35 would be $1,050. Of course, history will not simply repeat itself, but the underlying logic of supply shocks remains the same.

Coupled with the lockup effect of shielded pools (4.9 million coins, accounting for 30% of the circulating supply), the actual tradable supply is further tightened, providing structural support for price increases. Once this "lockup-scarcity-rise-more lockup" positive feedback loop 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 advisable to directly compare valuation multiples of different types of projects, this data at least indicates that ZEC is not being overly pursued by the market. If the narrative of the privacy sector further strengthens, there is considerable room for valuation repair.

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

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

6.1 Technological Spillover of Zero-Knowledge Proofs

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

Scaling Direction: ZK Rollup has become the mainstream solution for Ethereum scaling, with projects like zkSync, StarkNet, and Scroll accumulating a TVL of over $4 billion. These L2s not only enhance throughput but also inherit 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 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 specific NFT, or having certain assets) without revealing specific identity information. This "minimal disclosure" identity system will be a prerequisite for large-scale adoption in 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 most critical privacy contradictions 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 about betting on privacy coins themselves but also about betting on the long-term value of the underlying technological paradigm of zero-knowledge proofs.

6.2 Three Scenarios of Regulatory Evolution

Pessimistic Scenario (30% Probability)

The EU completely cuts off the liquidity of privacy coins, and G7 countries fully follow suit, with Zcash failing 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 (50% Probability)

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

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

Optimistic Scenario (20% Probability)

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

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

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

6.3 Prediction of Adoption Turning Points for Enterprises

Enterprise-level adoption may see a turning point between 2026-2027, triggered by conditions including:

Settlement Needs of Multinational Companies: Currently, cross-border payments through the SWIFT system take 3-5 working 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 fund flows. 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 among high-net-worth clients continues to grow. Payment giants like PayPal and Stripe may launch "privacy payment" value-added services, using ZEC for backend settlements. This B2B2C model will hide the complexity of privacy coins behind the user interface, significantly lowering the adoption threshold.

Compliance Tools from Auditing Firms: The Big Four accounting firms may develop auditing tools based on Zcash's view key, enabling companies to meet privacy needs while proving compliance to regulatory agencies. This demand for "auditable privacy" will become even more urgent after RWA (real-world assets) are tokenized.

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

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

Real Estate Tokenization: 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. Using shielded transactions maintains market information asymmetry, thereby enhancing transaction efficiency.

Tokenization of Private Equity: The LP list and share allocation 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 + non-disclosure of specific holdings."

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

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

VII. Core Conclusions

Ju.com analysts believe that under the triple monitoring of AI, big data, and CBDCs, 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 idea. Valuation may not have peaked, but investors should be prepared to endure a 50%+ retracement; portfolio allocation and long-term holding are rational strategies, with privacy coins serving as hedging tools in the portfolio, held for at least two 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 nations to combat inflation, Bitcoin is a tool for 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 particular token but voting to support a value system: in a world of increasing transparency, we still need to retain the right not to be surveilled.

Disclaimer

This report is for informational purposes only and does not constitute investment advice. Cryptocurrency investments carry a high level of risk, with significant price volatility. Investors should fully assess their risk tolerance and only invest funds they can afford to lose. The views and predictions 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 if necessary.