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BTC 
ZEC Grayscale Research warns that artificial intelligence will expose transparent blockchain to more severe monitoring risks, and points out that Zcash is one of the solutions.
Grayscale Research warns that artificial intelligence technology will greatly improve the monitoring capabilities of transparent blockchain, and names Zcash as a response. In the past year, the Zcash token price has increased approximately 19 times.
Core Points:
Grayscale research director said that artificial intelligence may be able to associate anonymous wallet addresses with off-chain records on a large scale, marking the third wave of financial privacy issues.
Zcash's blocked transfer function uses zero-knowledge proof technology to hide sender, recipient and amount information, and at the same time supports selective disclosure when needed for audits.
This comment comes days after the company had converted its Zcash trust fund to a spot fund listed on the New York Stock Exchange Arca.
Grayscale report reveals blockchain monitoring risks
The asset management company published a commentary article titled "Zcash and the necessity of privacy" on August 31. Its research director Zach Pandl puts artificial intelligence at the core of the argument. Pandl pointed out that machine analytics technology can correlate anonymous wallet addresses with exchange records, wallet behavior, and information collected off-chain. He calls this the third wave of privacy issues-the first two waves were the digitization of financial records by computers in the 1970s and the popularization of the Internet in the 1990s.
Every transfer made in Bitcoin is recorded on the public ledger, which has been marked as a de-anonymization risk in the Bitcoin white paper. Zcash supports two transfer methods at the same time. Its blocked transfer option uses zero-knowledge proof technology to hide the sender, recipient and amount, while still allowing selective disclosure to audit institutions or regulatory agencies.
Zach Pandl talks about Zcash privacy needs
Pandl said: "For privacy conscious users, this could become a 'must-have' feature. "He believes that address tagging technology existed before the advent of artificial intelligence, but artificial intelligence can make this operation cheaper and faster, and make it available to more people in need. Grayscale previously reported that as of July 20, about 90% of Zcash trading activity was blocked transfers.
Federal researchers described a similar mechanism, with the National Institute of Standards and Technology pointing out that while artificial intelligence creates new de-anonymization risks, it also strengthens behavioral tracking and monitoring capabilities across data silos. Private assets themselves are also facing resistance as exchanges and banks in multiple jurisdictions impose restrictions or conduct additional reviews on tokens based on cloaking features.
These studies do not directly target blockchain records, and the rising attention to privacy does not in itself guarantee that more people will use the blocked transfer feature.
ZEC's rise vs. Grayscale's Zcash ETF
Grayscale has commercial interests in this area. The company converted its Zcash trust fund established in 2017 into a spot product and listed it on the New York Stock Exchange Arca on August 25 under the trading code ZCSH, six days before the review article was published, providing a listing transaction vehicle for privacy protection themes.
ZEC tokens performed strongly before listing, rising nearly 80% in the past month. In the past year, the price of the token has increased about 19 times, which coincides with the growth in the use of Zcash blocking technology and the period when new funds have flowed into wallet development and mining. Even so, as of August 29, ZEC's market value was still less than 1% of Bitcoin's market value.
