Zcash Expert Warns Against 'Pass-Through' Use as AI Threatens Transaction Privacy

A prominent privacy advocate, identified as Sacha, has issued a stark warning regarding the use of Zcash's shielded pool, cautioning that rapid "pass-through" transactions could be vulnerable to deanonymization by artificial intelligence. The expert emphasized the critical role of time in maintaining privacy, stating, "The longer you keep something in the shielded pool, the more privacy you get. But if you just use Zcash as a pass-through, you can be deanonymized by AI." This statement underscores a significant concern within the cryptocurrency's privacy features.

Zcash, a privacy-focused cryptocurrency, leverages zero-knowledge proofs (zk-SNARKs) to enable optional shielded transactions, which conceal sender, receiver, and transaction amounts. Unlike Bitcoin's transparent ledger, Zcash offers users the choice between public (t-addresses) and private (z-addresses) transactions, with the shielded pool designed to provide a high degree of anonymity for funds held within it. This dual system aims to balance regulatory compliance with user privacy.

Sacha's warning highlights a potential weakness when users quickly move funds into and out of the shielded pool without allowing sufficient time for transactions to "mix" with others. Advanced AI and analytical techniques can potentially correlate transparent transactions entering and exiting the shielded pool, thereby compromising the anonymity of the "pass-through" funds. Experts often refer to this as the difference between "privacy at rest," where funds remain shielded for extended periods, and "privacy in flight."

Research has consistently pointed to challenges in achieving widespread shielded adoption. A 2022 study from University College London indicated that only 6.3% of Zcash transactions were shielding, while Chainalysis noted in 2020 that less than 1% of ZEC transactions were fully shielded. These low figures suggest that the anonymity set, or the pool of indistinguishable transactions, might be smaller than ideal for casual users, making correlation attacks more feasible.

Despite these concerns, Zcash developers and proponents maintain that fully shielded transactions, when used correctly, offer robust privacy. Zcash engineer Sean Bowe has argued that fully shielded transactions ensure sensitive data "never even touches the ledger," making it resistant to future deanonymization efforts, even by powerful AI. Furthermore, wallets like Zashi are now designed to default to shielding funds, aiming to encourage better privacy practices and expand the shielded pool's effectiveness for all users.