Two privacy coins, Zcash (ZEC) and Dash (DASH), are now supported by blockchain and analytics specialist Chainalysis - but it's the addition of the former that caused discussions online about privacy and responsibility.
Chainalysis launched support for Dash and Zcash in their investigation software Chainalysis Reactor, as well as in Know Your Transaction (KYT), said the announcement. This means that the two products will be tracking these privacy coins, enabling investigation into illicit activity. The two coins account for over USD 1.5 billion of reported daily trading volume, according to the firm.
The firm went on to say that the two coins enable greater privacy, "but that doesn’t mean they provide total anonymity," and the way they're built and used in real world allows for the investigation of suspicious activity. Dash has its optional, no-fee PrivateSend functionality, essentially a built-in mixer, but Dash transactions are unmixed by default. "This means from a technical standpoint, Dash’s privacy functionality is no greater than Bitcoin (BTC)’s, making the label of "privacy coin" a misnomer for Dash."
Zcash has zk-SNARKs, shielding (a process that allows users to encrypt blockchain activity), and shielded pools (a collection of encrypted addresses) - which are again optional. "By default, transactions don’t take place in a shielded pool and are public and unencrypted, similar to Bitcoin." Only 0.9% of all Zcash transactions are completely encrypted. They write that "though the obfuscation on Zcash is stronger due to the zk-SNARK encryption, Chainalysis can still provide the transaction value and at least one address for over 99% of ZEC activity," adding that "shielding is not bulletproof."