Key Points
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Zcash is going strong after its 10th birthday.
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Its privacy features will likely soon be extended to allow for the private holding of tokenized assets.
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If that happens, it’ll set up investors for an even larger set of catalysts down the line.
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Originally launched on Oct. 28, 2016, and now a week past its 10th birthday, Zcash (CRYPTO: ZEC) is the largest privacy coin in crypto by a wide margin, with a market cap of about $23 billion. Over the next 10 years, holders can expect to see a scarcer coin and more capital held privately on its network, and they might even see the blossoming of a private ecosystem of financial services if a few things go as planned.
Here’s what’s coming and what might play out.
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The shielded pools will continue to grow, and likely by a lot
The point of Zcash is that it lets someone mask how much money they have and who they’re transacting with, so long as that money and their counterparty are on Zcash’s network and operating within one of its shielded (private) pools instead of outside them.
The blockchain’s shielded addresses use an increasingly popular cryptographic scheme called zero-knowledge (ZK) proofs to hide the sender, receiver, and amount being exchanged, while still retaining the ability to voluntarily prove the validity of a given transaction to a third party without revealing any of these details. As of Nov. 6, 29.2% of Zcash’s circulating supply was held in one of its shielded pools, so opt-in privacy capabilities are used by only a minority of the coin’s circulating supply. But that proportion is up from just 8% in early 2024, indicating a positive trend toward more value being shielded over time.
It’s possible that a majority of Zcash’s circulating supply could ultimately be shielded over the next 10 years if that growth continues, though it’s unlikely to move in a straight line. And, importantly, moving coins back out of a shielded pool exposes the amount and destination, giving holders a reason to leave them in.
Zcash largely copies the 21 million coin hard supply limit used by Bitcoin, as well as Bitcoin’s halving mechanism, which makes mining 50% less rewarding approximately every four years. What’s more, the latest Zcash network upgrade, NU7, adds a mechanism that removes 60% of the Zcash transaction fees from circulation.
Putting these pieces together, Zcash’s supply can be reasonably expected to become much tighter over the next 10 years, with new issuance shrinking at each halving.
Private tokens could be next
While Zcash’s supply dynamics likely bias its price to the upside over the long run, they may not matter as much as one possibility in particular.
The wild card is Zcash Shielded Assets (ZSAs), an as-yet-unimplemented proposed upgrade to the network that would enable the issuance and holding of private tokens, such as stablecoins or even tokenized assets. It’s possible that ZSAs will be included in the next network upgrade, which would be a major unlock because it’d open the door for some of the $292.4 billion in capital stored in stablecoins to flow in and then live in the private pools. And if ZSAs are launched and the chain also adds private smart contract capabilities down the line, it could ultimately become the future of crypto, and the home of an entire private decentralized finance (DeFi) ecosystem.
Will this (very bullish) future actually arrive for Zcash by 2036?
At least some of it, yes. And that’s why I’ll keep buying more over time.
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Alex Carchidi has positions in Bitcoin and Zcash. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
