Grayscale Research suggests that advances in artificial intelligence may heighten privacy risks on public blockchains by making address labelling more effective and widespread. The firm’s Head of Research, Zach Pandl, expects AI to drive demand for new privacy solutions, with Zcash emerging as a potential option. Zcash uses zero-knowledge cryptography to shield transaction details, a feature Grayscale says could become a must-have. The report follows Grayscale’s conversion of its Zcash Trust into a spot ZEC ETF trading on NYSE Arca. ZEC has gained nearly 80% in the past month and trades around $850, with one analyst targeting $1,800.
Artificial intelligence could usher in a new wave of concern over financial privacy, according to a Grayscale research report. The firm’s Head of Research, Zach Pandl, expects AI to create new privacy threats and drive demand for new solutions.
He sees Zcash as one potential option. Public attention to financial privacy has historically increased alongside major technological changes, with a third wave now beginning as AI becomes more widely used.
Pandl said AI tools are likely to create new privacy challenges across the economy. The issue is particularly pressing for public blockchains that are transparent by default, such as Bitcoin, where every transaction is recorded on a public ledger.
When blockchain activity is linked with off-chain information, user addresses could be de-anonymized. While that risk existed before AI, Grayscale said advances in the technology could make address labelling more effective and widely available.
Unlike Bitcoin, Zcash offers additional privacy features through shielded transactions that use zero-knowledge cryptography. Grayscale said this privacy feature could become a “must-have” for users who prioritize financial privacy.
The firm also noted that ZEC had surged about 20 times in the past year but was still worth less than 1% of Bitcoin’s market cap. Grayscale said Zcash’s privacy features and other advantages may not be fully reflected in its current valuation.
The comments come days after Grayscale converted its Zcash Trust into a spot ZEC ETF. The fund began trading on the NYSE Arca on August 25.
ZEC has posted a strong performance, gaining nearly 80% over the past month alone. Following the rally, ZEC is trading around $850, but crypto analyst Ali Martinez is betting on further upside.
He said that “Zcash is about to melt faces,” while identifying $1,800 as the “first stop.”
