Privacy coins are cryptocurrencies that prioritize user privacy. In recent years, it has become clear how important financial privacy can be for individuals, companies, and institutions. While most blockchains are completely transparent and every transaction remains publicly visible, privacy coins address the need for confidential payments and protected asset management.
Zcash is one of the best-known representatives of this category. Interest in privacy coins increases particularly in phases when the debate about surveillance, government control, and data collection intensifies. At the same time, the acceptance of such technologies is repeatedly questioned, as they can also be misused for illegal activities. Nevertheless, the market shows that privacy coins fulfill an important technological and social function.
Market position and historical price development of Zcash
Zcash was introduced in October 2016 and is based on a further development of the Bitcoin protocol. As with Bitcoin, the maximum amount is limited to 21 million units. Despite similar fundamentals, the price development and market structure have evolved differently.
Cash Price Chart
After its launch, there was a sharp drop in price, followed by several upward phases. The most significant price increase occurred in early 2018, when the entire altcoin market experienced a speculative bubble. At that time, Zcash reached prices close to $700. The key difference between price and market capitalization is that over time, more and more units have entered circulation. The circulating supply is now around 77.5 percent of the maximum amount. This allows market capitalization to rise even when the price is below previous highs.
Most recently, market capitalization reached significantly higher values than in the early stages of the project, rising to around $8 billion. This makes Zcash one of the larger cryptocurrencies on the market.
The current market environment and the role of short-term speculation
In addition to long-term investors, short-term capital is increasingly influencing price developments. This is particularly evident in the trading data of the derivatives markets. The trading volume of Zcash perpetual futures is significantly higher than one would expect in relation to market capitalization. Open interest, i.e., the total volume of open positions, recently reached values of around $800 million.
It is noteworthy that the majority of these positions are betting on falling prices. This is evident from the fact that the funding rate is negative. Traders who bet on falling prices have to pay fees, while long positions receive these fees. This is rather unusual in the crypto market, as the majority of traders traditionally bet on rising prices during upward phases.
This situation can lead to a so-called short squeeze. When many market participants bet on falling prices, but others are actively buying, the price rises rapidly. Those who have bet on falling prices must close their positions, which creates additional demand and reinforces the upward movement.
Narrative shifts and their significance for price movements
The crypto market is often driven by narratives. In the past, the focus was on decentralized financial applications, cryptocurrencies with animal characteristics as objects of speculation, or blockchain scaling. Currently, the topic of privacy is coming more into focus.
Zcash is a central component of this development. Other privacy coins such as Dash or Monero show different dynamics. While Dash has also experienced price increases recently, Monero has remained more stable at times. Zcash has shown a particularly significant price development in this phase. However, if market sentiment changes again, the trend may reverse.
Outlook and possible future developments
Short-term market movements will continue to be strongly influenced by speculative capital. As long as the negative financing rate persists, the risk of a continuation of the short squeeze remains. In the long term, however, the development of privacy coins depends on regulatory conditions and user acceptance.
Zcash is technologically sound, thanks in particular to zero-knowledge proof technology, which enables confidential transactions without having to disclose information. Optional privacy is an approach that can accommodate both technological and regulatory interests.
Whether the current phase of price increases will lead to a sustainable trend depends on whether privacy will continue to play a central role in the crypto market in the long term or whether new issues will take over this position.
Zero-knowledge technology using the example of zkSync
The basis for technological developments in the field of data-efficient blockchains is what is known as zero-knowledge proofs. These are cryptographic methods that can be used to confirm the validity of information without having to disclose the underlying data. This technology is not only a core mechanism in privacy coins such as Zcash, but also plays an important role in the scaling of blockchains.
A striking example of this is zkSync. zkSync is a scaling protocol for Ethereum that was developed by an independent team of developers. The goal is to make transactions faster and more cost-effective without reducing the security of the Ethereum main network. Technically, this is achieved through so-called rollups. In a rollup, many transactions are processed outside the main network and then brought into the main network in compressed form.
The key difference between zkSync and conventional scaling solutions is that zkSync uses zero-knowledge proofs to cryptographically confirm the correctness of off-chain calculations. This means that the Ethereum network does not have to recheck every single transaction, but only verifies the correctness of the cryptographic proof itself. This significantly reduces the load on the network and transaction costs can be significantly reduced.
Another advantage of zkSync is that the protocol derives security directly from the Ethereum network. The integrity of transactions is not maintained by a separate validator system, but remains connected to Ethereum’s security architecture. This is a key difference from sidechains or separate layer networks, which require their own security logic.
However, the zero-knowledge technology in zkSync pursues a different goal than Zcash. While Zcash primarily ensures the confidentiality of transactions, zkSync is primarily concerned with scalability. Nevertheless, both applications show a common trend: zero-knowledge methods are becoming a key tool for making cryptocurrencies more suitable for everyday use. With Zcash, this is achieved by protecting personal data, and with zkSync by optimizing transaction speed and network capacity.
Although the use of zero-knowledge proofs in blockchain development is still in an active research phase, the progress made in recent years already demonstrates the potential of this technology. In the future, zero-knowledge approaches are expected to be used in many different applications, from digital identities and decentralized financial markets to publicly viewable systems with selective transparency.
Regulatory developments and their impact on privacy coins
The regulatory perspective plays a key role in the future of privacy coins. In several major markets, there is intense debate about how cryptocurrencies that enable complete or optional anonymity can be embedded in a legal environment. The central area of tension lies between the protection of individual privacy and the fight against money laundering and terrorist financing.
In recent years, there have been repeated delistings of privacy coins on centralized trading platforms. Some trading venues temporarily removed Zcash, Monero, or Dash from their offerings to avoid regulatory uncertainty. These decisions had less to do with technical weaknesses and more to do with concerns that regulatory authorities could enforce stricter requirements.
The challenge is that financial privacy is interpreted differently internationally. While data protection is a clearly protected right in some regions, other countries argue that too much concealment of transaction data poses a risk. Despite these discussions, the demand for confidential payment mechanisms remains. In countries with uncertain political or economic conditions, the need for uncensorable and private transactions is particularly pronounced.
Zcash is in a position where technological capabilities can be combined with the option of voluntary disclosure. This selective transparency could open up a long-term path that takes into account both user interests and regulatory requirements.
Long-term importance of privacy in the digital financial world
The question of what role privacy coins will play in the long term is closely linked to the general development of digital financial systems. Work is underway worldwide on digital central bank currencies, which in many cases are intended to enable complete transparency of payment flows. If this model becomes widely accepted, a large part of financial activity would be centrally monitored.
In this environment, the debate about privacy is gaining importance. Financial transactions are not only economic but often also personal acts. They provide information about lifestyle, health, political affiliation, career decisions, and social connections. Without protective mechanisms, such data can be used to create profiles or influence decisions.
Privacy coins such as Zcash show that technological solutions exist that combine privacy and digital efficiency. The basic idea is to give users the freedom to choose whether their transactions should be publicly traceable or not. This choice could become a central element of digital financial systems in the future.
If privacy is understood as a fundamental right, further technological development in this area is inevitable. The long-term significance of privacy coins therefore lies not only in their function as a payment instrument or asset class, but also in the question of how digital freedom can be preserved in modern societies.
Author
Ed Prinz is Chairman of DLT Austria, Founder & CEO of 21base.ai, Founder of Web3 Hub Vienna, and Co-Founder of DLT Germany and DLT Switzerland. With years of experience in research and analysis of tokens, protocols, and markets, as well as in portfolio management, he brings in-depth knowledge in the areas of blockchain technology and EVM. Since 2017, he has been advising blockchain startups and companies and is actively involved in the development of innovative Web3 solutions. In this guest article, he analyzes current developments in the crypto sector.
Disclaimer
This is my personal opinion and not financial advice.
For this reason, I cannot guarantee the accuracy of the information in this article. If you are unsure, you should consult a qualified advisor you trust. This article does not make any guarantees or promises regarding profits. All statements in this and other articles are my personal opinion.
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