Artificial intelligence could trigger a new wave of concern over financial privacy, according to Grayscale research. The firm's Head of Research, Zach Pandl, expects AI to create privacy threats across the economy and drive demand for privacy-focused solutions, with Zcash emerging as a potential option.
Public attention to financial privacy has historically increased alongside major technological changes. Grayscale identifies three waves: the 1970s when computers enabled digitization of financial record-keeping, the 1990s with internet expansion and online privacy concerns, and now a third wave driven by widespread AI adoption.
Privacy Challenges on Public Blockchains
The issue is particularly pressing for public blockchains that are transparent by default. On the Bitcoin network, every transaction is recorded on a public ledger viewable by anyone. When blockchain activity is linked with off-chain information, user addresses could potentially be de-anonymized—a risk noted in the Bitcoin white paper.
While this risk existed before AI, Grayscale said advances in the technology could make blockchain address labeling more effective and widely available, increasing the need for privacy protection.
Zcash's Privacy Features
Unlike Bitcoin, Zcash offers additional privacy features through shielded transactions, which use zero-knowledge cryptography to conceal both the addresses involved in a transaction and the amount being transferred. Grayscale suggested this privacy feature could become a "must-have" for users who prioritize financial privacy.
Grayscale noted that while Zcash had experienced significant growth, it still represented less than 1% of Bitcoin's market cap, suggesting its privacy features may not be fully reflected in current valuations.
Recent Developments
Grayscale converted its Zcash Trust, launched in 2017, into a spot ZEC ETF that began trading on the NYSE Arca on August 25. Zcash has posted strong recent performance, gaining nearly 80% over the past month and trading around $850.
