Galaxy Research Report: What's Behind the Zcash Surge?
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Galaxy Research Report: What's Behind the Zcash Surge?
Whether or not ZEC's price strength can last, this market rotation has already successfully forced the market to reevaluate the value of privacy.
Navigating Web3 tides with focused insightsAuthor: Will Owens
Translation: AididiaoJP, Foresght News
The term "cryptocurrency" literally means "hidden" or "secret" money. Yet for most of its history, privacy has long been overlooked by the industry—until recently, when things began to shift.
Over the past few weeks, the privacy narrative has regained prominence. As one of the oldest and most well-known privacy coins, Zcash (ZEC) has surged over 700% since September, as if overnight everyone in crypto became a privacy expert. However, some prominent figures in the Bitcoin space have criticized this rally as "artificially manipulated," warning buyers they may ultimately become "bagholders." Economist Lyn Alden cautioned investors against falling into a "coordinated pump" trap.
But investor Naval Ravikant quickly pushed back, offering a fundamental rationale for Zcash: "Transparent cryptocurrencies cannot survive under intense government crackdowns."
Don't forget, Bitcoin's anonymous creator Satoshi Nakamoto acknowledged the limitations of Bitcoin's privacy in the 2008 whitepaper.
While CoinJoin services like Samourai and Wasabi were once popular on Bitcoin, they now face increasing regulatory pressure. Samourai was effectively shut down following the arrest of its founder, and Wasabi discontinued its CoinJoin functionality and blocked U.S. users in June 2024 due to regulatory concerns.
Payjoin, a simple tool that breaks the assumption that multiple inputs belong to the same person, is gaining attention—but it still requires interaction between users. The broader issue highlighted by Satoshi in the quote above stems from Bitcoin’s inherent transparency. Zcash, as a fork of Bitcoin, directly addresses this privacy limitation by allowing users to shield transactions using zero-knowledge proofs.
Satoshi also acknowledged Bitcoin’s privacy limitations in forum posts.
Key Takeaways
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After years of dormancy, ZEC has surged nearly 8x in the past month, outperforming the broader market and forcing a renewed serious discussion about "privacy features."
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This debate revives the early Bitcoin-era tension between "right to privacy" and "regulatory reality."
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Zcash's market cap has surpassed Monero (XMR).
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User experience for Zcash has improved (e.g., Zashi wallet).
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Cross-chain intent channels have lowered the barrier to use (NEAR Intents).
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The anonymity set is expanding.
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For the first time, more than 30% of ZEC supply is held in shielded pools.
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However, compared to Bitcoin, Zcash still has very few full nodes.
Development Journey and Network Upgrades
Zcash originated from academic research in 2013, when cryptographers at Johns Hopkins University developed the Zerocoin protocol. To improve efficiency, it evolved into Zerocash and was eventually launched in 2016 by cypherpunk Zooko Wilcox and his Electric Coin Company as a Bitcoin fork. Its goal was simple: retain Bitcoin’s monetary properties while fixing its most frequently cited design flaw—one even acknowledged by Satoshi himself—the lack of transaction privacy.
Unlike Bitcoin, where all transactions are publicly visible on-chain, Zcash uses a zero-knowledge proof technology called zk-SNARKs. This allows users to prove transaction validity without revealing sender, receiver, or amount. While Monero launched earlier and used techniques like ring signatures for privacy, Zcash was the first mainstream blockchain to implement zk-SNARKs at the protocol level.
Zcash adopted an on-chain funding model that allocates part of block rewards to community-driven projects rather than specific organizations. Under ZIP 1016, 8% of block rewards go to the Zcash Community Fund, and 12% to a fund governed by coin holder voting. Neither the Electric Coin Company nor the Zcash Foundation automatically receives a share; they must apply for funding through these mechanisms.
Zcash has undergone multiple network upgrades:
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Sapling (2018): Significantly improved the efficiency of shielded transactions.
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Heartwood (2020): Introduced shielded miner payouts, enabling miners to privately receive block rewards.
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Canopy (2020): Accompanied the first halving and completely reformed the funding model, replacing the original founder's reward with a four-year development fund jointly managed by ECC, the Zcash Foundation, and community grants.
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NU5 / Orchard (2022): The most important milestone since launch, replacing the complex trusted setup ceremony with Halo 2 recursive proofs and introducing unified addresses to simplify privacy operations. The Orchard shielded pool launched at this time.
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NU6 (2024): Implemented an in-protocol treasury lockbox, managing funds in a decentralized manner and enhancing transparency in the use of the development fund.
The protocol is now preparing for the NU7 upgrade.
Market Performance and Current State
For most of its history, ZEC performed poorly, underperforming BTC and being overshadowed by Monero. Monero provides basic privacy by default but relies on small decoy anonymity sets—its ring signature design mixes real inputs with 15 decoys, an intermediate-level anonymity that has been successfully de-anonymized in several studies.
Regulators often scrutinize Monero more closely because its privacy is mandatory by default. In 2020, the U.S. IRS even hired companies like Chainalysis to study methods for tracking Monero transactions. In contrast, Zcash offers optional privacy via zk-SNARKs, fully encrypting data and providing a larger anonymity set when shielded addresses are used.
This dual-mode design also makes it easier for users to make operational security mistakes (e.g., accidentally using transparent addresses), but when used correctly, Zcash's cryptography provides significantly stronger and mathematically more robust privacy. Moreover, Zcash's privacy layer is quantum-resistant, whereas Monero's current ring signature scheme is not (its developers have acknowledged this and plan to fix it in future upgrades).
Today, ZEC’s price action alone tells a completely different story.
ZEC price performance over the past year.
(Original caption: ZEC price over past year; ZEC vs XMR price; ZEC/BTC daily chart.)
Technical Details
Zcash follows Bitcoin’s monetary model: a fixed supply of 21 million ZEC, proof-of-work consensus, and approximately halving every four years. It uses the Equihash algorithm, designed to be more ASIC-resistant than Bitcoin’s SHA-256. Block time is around 75 seconds, about 8 times faster than Bitcoin. Zcash halves roughly every four years, with the next halving expected in November 2028, reducing block rewards to 0.78125 ZEC.
Zcash has two types of addresses:
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Transparent addresses: Functionally identical to Bitcoin, with balances and transfers publicly visible.
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Shielded addresses: Use zk-SNARKs to hide transacting parties and amounts, while proving no counterfeiting occurs.
When users transfer between shielded addresses, the network verifies cryptographic proofs rather than transaction details. The proof asserts: "I am authorized to spend these coins, and the math checks out," without revealing any extra information. The essence of privacy lies in sharing only the minimal information necessary to establish trust.
The larger the shielded pool, the harder it is to trace fund flows. This is why the recent milestone of over 30% of total supply entering shielded pools is so significant. The largest shielded pool is Orchard, launched on May 31, 2022. It replaced older pools, adopted the trusted-setup-free Halo 2 proof system, and introduced unified addresses to streamline user experience.
Currently, the Orchard shielded pool holds over 4 million ZEC (about 25% of circulating supply), making up the vast majority of the roughly 4.9 million shielded ZEC.
(Original caption: Growth of shielded supply.)
Transparent supply has decreased by nearly 3 million ZEC, dropping from about 14 million at the start of the year to around 11.4 million today (approximately 70% of total supply).
(Original caption: Decline in transparent supply.)
Nodes and Future Development
The Zcash network currently has around 100–120 full nodes, up from a low of about 60 earlier this year. But compared to Bitcoin (~24,000) or Monero (~4,000), this number remains very small, primarily because running a Zcash node is far more resource-intensive (shielded transaction verification demands more resources), and the multi-pool architecture along with frequent network upgrades increases complexity and maintenance costs.
In the future, developer Sean Bowe is advancing the "Tachyon Project," a scaling solution that dramatically improves shielded transaction throughput by restructuring synchronization and storage. Bowe claims Tachyon can achieve a performance leap without new protocols, solving all bottlenecks with relatively simple cryptography. In many ways, Tachyon is to Zcash what Firedancer is to Solana.
What is NEAR Intents?
NEAR Intents is a cross-chain coordination layer built on the NEAR protocol. It allows users to express their intentions without manually operating bridges, swaps, or wallets.
Intent executors automatically route liquidity, execute trades, and complete cross-chain settlements behind the scenes.
For Zcash, integrating Intents means users can easily move assets into and out of Zcash’s shielded pool from transparent chains without exposing each step. This enables traders or institutions to bring assets from transparent chains (like Ethereum) into Zcash to restore privacy, conduct shielded transactions, and then—if desired—return to the original chain, with no direct link between the two ends.
After Zashi Wallet (the official ECC wallet and most widely used Zcash wallet) integrated NEAR Intents, it abstracted away the technical friction of cross-chain and shielding operations. Zcash also natively supports viewing keys, which can be used for auditing or compliance purposes, allowing selective disclosure of shielded transaction details. These features make Zcash’s privacy both user-friendly for individuals and compliant with institutional requirements.
Why Now?
Zcash’s sudden surge appears to reflect a shift within crypto culture. As highlighted in a16z’s 2025 State of Crypto Report, Google search interest in privacy-related terms has spiked recently.
Many Bitcoin critics lament its "institutionalization," dominated by ETFs and centralized custodians. Bitcoin itself has always been transparent—ETFs merely add intermediaries without changing its fundamentally transparent nature. In contrast, Zcash supporters position it as the "crypto-native Bitcoin," a return to cypherpunk ideals, resonating in today’s environment where surveillance—from Chainalysis to on-chain detectives—is ubiquitous. Zcash’s rise has reopened the old divide between "privacy as a right" and "transparency for regulation."
As its privacy tech stack finally reaches consumer-grade usability (with the March 2024 launch of the Zashi wallet simplifying shielded operations) and shielded supply continues to grow, Zcash is attracting renewed attention. More ZEC being shielded means a larger anonymity set, making Zcash as a whole more private.
Another clear signal that Zcash is "back" came weeks ago when Hyperliquid launched perpetual contracts for ZEC, allowing traders to leverage privacy coins on this popular decentralized exchange. This indicates strong market demand for this long-forgotten gem. The introduction of perpetuals increased ZEC’s market liquidity, with open interest peaking at around $115 million, amplifying spot price volatility.
From a technical fundamentals standpoint, Zcash hasn’t changed overnight. But the market’s perception of it has. This rally has been fueled both by sustained vocal support from top figures in crypto and by a renewed recognition that privacy is essential for permissionless money.
Regardless of whether ZEC’s price strength endures, this market cycle has already succeeded in forcing the market to re-evaluate the value of privacy.
After years of silence, this surge has brought Zcash back into the spotlight. Whether it can convert speculative momentum into sustained network growth remains to be seen. But the resurgence of privacy as a focal point reveals a deeper truth: in an increasingly transparent financial system, the ability to transact privately is once again being recognized as a valuable feature.
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