Crypto Long & Short: Zcash and the Case for Privacy in the Age of AI

October 7, 2026, 11:03 a.m. EDT

6 min read

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Happy Wednesday,

This is your institutional newsletter, Crypto Long & Short. This week:

Michael Zhao of Grayscale Research on the privacy problem AI created for public blockchains, and how Zcash addresses it
Top headlines institutions should pay attention to by Helene Braun
“ORE Weekly Revenue Picks Up as Price Responds” in Chart of the Week

Thanks for joining us!

– Kim Klemballa

Zcash: Money for an Age of Financial Privacy

– by Michael Zhao, Grayscale Research

Bitcoin demonstrated that moving value does not require a traditional bank. Yet it accepted a compromise: every single ledger entry remains public indefinitely. Anyone can inspect who transferred funds to whom, the exact sum, and the timestamp. While wallet addresses are not inherently bound to actual names out of the box, the transaction trajectory is never concealed. Zcash was engineered to bridge this exact gap, serving as a cryptocurrency formulated around the premise that future digital money requires confidentiality rather than universal exposure.

For many years, the transparent nature of Bitcoin carried little practical consequence because translating an anonymous wallet address into an authentic identity demanded intensive labor, including subpoenas, exchange registries, or costly forensic investigations.

That dynamic is shifting rapidly. Artificial intelligence excels precisely at the complex pattern recognition required for this type of task, such as connecting addresses to trading platform accounts, information leaks, social media footprints, and temporal habits. Because distributed ledgers retain data permanently, this capability operates retroactively as well: a transfer executed in 2019 can be deanonymized by algorithms that were non-existent until 2026. AI does not need to break any encryption keys; it simply reads public records with far greater speed and lower cost than any human could manage.

Grayscale Research contends that artificial intelligence is catalyzing a third wave of societal anxiety regarding financial privacy. The initial wave emerged during the 1970s as bank records underwent digitization, followed by a second wave in the 1990s coinciding with commercial internet expansion. As a greater volume of real-world financial operations migrates onto transparent ledgers—whether stablecoins, enterprise disbursements, or trading operations—these worries will only intensify. Very few commercial entities desire their payroll details or vendor rosters exposed to rival firms. This objective is not about masking illicit activities; it mirrors the fundamental reason traditional financial institutions refrain from broadcasting account balances to the public. Confidentiality implies retaining the authority to decide who views financial data, rather than abandoning oversight entirely.

This is the gap Zcash was built to fill

Introduced in 2016 utilizing foundational Bitcoin source code, Zcash maintains Bitcoin’s core architecture, including the 21-million coin supply ceiling and identical mining consensus security, while introducing a capability Bitcoin lacks: the option for confidential transactions. Within a “shielded” Zcash transfer, the protocol successfully validates transaction validity—preventing fraud and double-spending—without disclosing the sender, recipient, or transferred amount.

Should an individual need to demonstrate compliance to a regulatory body or commercial counterparty, they can distribute a specialized “viewing key” that unlocks solely that designated information, without transferring custody of their funds. A complete viewing key provides visibility into incoming deposits and standard outgoing payment metrics to whoever receives access. Disclosure thereby transforms into a selective privilege granted by the user rather than an inescapable default imposed on everyone by the system.

Interestingly, this conceptual approach predates Zcash by several years. Bitcoin architect Satoshi Nakamoto referenced this cryptographic methodology in a 2010 forum post, though acknowledging at the time that an implementation pathway for Bitcoin remained unclear.

Current metrics indicate that market participants are actively utilizing this functionality rather than merely hoarding the asset. Shielded transfer volume has expanded significantly over the preceding two years, while ordinary visible transactions remained level. Approximately 4.9 million Zcash (ZEC)—representing nearly 29% of all mined tokens—currently reside within the shielded pool. Concurrently, the valuation of ZEC advanced approximately 2,300% between September 2025 and September 2026. Grayscale listed a spot Zcash investment instrument on the NYSE in August 2026, pulling in nearly $1 billion in capital within a month.

Furthermore, confidentiality reinforces itself as adoption scales: every new shielded transaction augments a collective pool of activity, making it increasingly difficult to isolate any specific participant. This dynamic diverges from typical software features, where elevated user numbers usually increase network congestion rather than enhancing security for existing participants. Because blockchain records cannot be erased, confidentiality must be embedded from inception rather than retrofitted subsequently. Zcash continually refines its framework, exemplified by the Ironwood upgrade deployed in July 2026, which overhauled a segment of the cryptographic architecture and patched a known security vulnerability.

Worth noting: Zcash’s confidentiality features provoke legitimate regulatory inquiries—not concerning whether privacy itself violates laws, but whether selective-disclosure frameworks will appease regulators accustomed to total transaction transparency. This dilemma intensifies as international anti-money laundering frameworks and the European Union’s Markets in Crypto-Assets regulation (MiCA) push for automated reporting mechanisms instead of reduced oversight. The resolution of this friction will heavily dictate how deeply this technology penetrates traditional finance.

If the foundational ethos of Bitcoin was absolute visibility as a core feature, Zcash bets that the next evolution of digital currency will center on personal choice: transparent when desired, private when necessary. Zcash has spent a decade building toward that solution while the broader industry debated the relevance of the question. It remains highly relevant.

Headlines of the week

– By Helene Braun

Several of crypto’s biggest market, regulatory and tokenization stories converged this past week as the SEC cleared the way for 3x leveraged bitcoin BTC$83,199.85 and ether ETH$2,552.68 ETFs, more than 60 U.S. stocks including Nvidia and Tesla moved closer to trading onchain, BlackRock outlined how tokenization could reshape entire investment portfolios and the Clarity Act’s setback tested whether regulatory uncertainty will slow record crypto dealmaking.

SEC approves a 3x fix for bitcoin and ether traders who miss the wild swings: On Oct. 2, the agency approved a Cboe BZX rule change to allow six ETFs issued by Volatility Shares, each aiming to deliver three times the daily return of the underlying asset.
More than 60 U.S. stocks including Nvidia and Tesla are headed onchain. Here’s how it works: The planned 24/7 venue will offer dozens of tokenized U.S. stocks, with trades conducted against stablecoins through blockchain-based liquidity pools rather than a traditional order book.
BlackRock offers a glimpse of how tokenization may change your investment portfolio: Tokenization is not just about putting individual stocks and funds onchain. The next step could be entire investment portfolios that can be traded, rebalanced and eventually managed in real time.
The Clarity Act stalled. Bankers aren’t hitting the brakes yet on crypto dealmaking: Crypto M&A has hit record levels, but the Clarity Act’s Senate setback leaves dealmakers weighing how much regulatory uncertainty still matters.

Chart of the Week

ORE Weekly Revenue Picks Up as Price Responds

ORE’s weekly protocol revenue has rebounded from a $319,000 low in early April to $818,000 last week, and the token has followed, up from about $39 to $111 over the same span. Since January 2026 it has had roughly 1.5x the weekly beta of SOL, and it has outperformed SOL since October 2025 (+27% versus −39%), with revenue-funded buybacks as a plausible cushion.

Looking for more? Receive the latest crypto news from coindesk.com and market updates from coindesk.com/institutions.

This information must be preceded or accompanied by a current The Zcash ETF prospectus, which may be obtained by clicking here. Please read the prospectus carefully before investing. The Zcash ETF (“ZCSH” or the “Fund”), an exchange traded product, is not registered under the Investment Company Act of 1940 (or the ’40 Act) and therefore is not subject to the same regulations and protections as 1940 Act registered ETFs and mutual funds. An investment in ZCSH is subject to a high degree of risk and heightened volatility. ZCSH is not suitable for an investor that cannot afford the loss of the entire investment. An investment in the Fund is not a direct investment in ZEC.

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