In brief:
- Chainalysis recently introduced investigation and compliance support for Dash and ZCash.
- The two digital assets of ZEC and DASH have privacy features that users can opt to use.
- The ZCash team at the Electric Coin Company have clarified that Chainalysis cannot track shielded transactions.
News of Chainalysis extending its reach of investigation and compliance to the ZCash and DASH blockchains stirred a few tough questions about the future of privacy in the digital asset industry. The announcement by Chainalysis was made yesterday with the team explaining that privacy features on both the ZCash and Dash blockchains were not entirely immune to scrutiny by investigators.
Dash and Zcash allow users to conduct transactions with greater privacy, but that doesn’t mean they provide total anonymity. The two cryptocurrencies’ privacy features — both in how they’re built as well as how they’re used in the real world — leave room for investigators and compliance professionals to investigate suspicious or illicit activity and maintain compliance.
ZCash Team Clarifies Chainalysis Cannot Track Shielded Transactions
It is with the above background that the team at the Electric Coin Company has clarified that not all ZCash transactions can be tracked. In an elaborate Twitter thread, the Electric Coin Company, which supports the development of ZCash, explained that only transparent transactions can be tracked. However, if users of ZEC opt to use the privacy feature on ZCash, shielded transactions are completely anonymous.
Zcash is designed to give users options, by allowing them to choose Bitcoin-style (“transparent”) addresses or privacy-protecting (“shielded”) addresses. Transparent addresses work like Bitcoin transactions, which are also supported by Chainalysis.
Users of Zcash shielded addresses get stronger protection against data leakage than they would get with any other cryptocurrency today.
Chainalysis cannot trace shielded addresses, unless a specific user were to opt-in and let Chainalysis view their transaction data using their own Viewing Key (“Selective Disclosure”).
More Users of ZCash (ZEC) opt for Privacy
The team at the Electric Coin Company ended the Twitter thread by highlighting an increment in shielded transactions on the ZCash blockchain.
The size and growth of the Zcash privacy set is reflected in this graph. (end) pic.twitter.com/DQPNSBVGTY
— Electric Coin Company 🛡️ (@ElectricCoinCo) June 8, 2020