Default Privacy: Lets talk about it
What does it really mean?
Default Privacy refers to cryptocurrencies that offer base layer privacy within the protocol. With examples such as Monero or Piratechain, all users on the chain are performing private transactions, cool!
Is this entirely necessary for strong user security? Are there benefits to having the freedom to selectivly use transparency? Let's find out...
Just before we get started, some basics:
Zcash provides privacy at the protocol level - There is a 222 page document (mostly specifying how privacy is achieved).
There are 3 privacy preserving protocols on Zcash today. Sprout(2016), Sapling(2018) & Orchard(2022).
NU5 Protocol Specification: https://zips.z.cash/protocol/protocol.pdf
Default Mode
What the 'Default' mode is for users doesn't depend on the protocol - It depends on the Wallet!
Almost all Zcash wallets give users immediate access to privacy by default. Out of 19 wallets listed on ZecHub, 11 are Sapling/Orchard enabled with @Brave and @Ledger & @Metamask activating shielded capability in the next few months.
Where is the Leak?
Zcash, Litecoin MWEB & Monero each achieve user privacy in different ways.
Litecoin, Zano & Monero each have a transaction graph that all reveal the (encrypted) source of funds.
This can be used to determine the FLOW OF TRANSACTIONS. Combined with off chain metadata, using AI pattern recognition and/or comprimised exchanges & points of sale, users can be deanonymized.
@Zcash & projects such as @penumbrazone, @namada & @RAILGUN_Project do not have a transaction graph. Their Anonymity Set is all transactions that have ever* occured within each shielded pool (Largest Possible).
They do however reveal transaction AMOUNTS between transparent pools and shielded pools. Similarly, this can be combined with off-chain data, time based analysis or pattern recognition to deanonymize users.
To better understand where fully private, partially private and transparent transactions happen on Zcash, study this image...
The green circles indicate transactions which do not reveal any sender or amount information onchain.
Sending shielded $ZEC to a transparent address does not reveal the sender*
Sending Transparent $ZEC to a shielded address does not reveal the recipient*
Managing User Error
If a user deposits Transparent Zcash into @zashi_app they must first shield their ZEC before it is spendable.
#Ywallet indicates Transaction Privacy Levels Low (full transparent) Medium (amount revealed) High (fully shielded).
Freedom of Choice
Transparent Addresses have notable advantages.
They allow for auditability into exchange balances, protecting customers from fraud.
@GrapheneOS, @InternetArchive @zkavclub and many others have open fundraisers that show donation goals & amounts!
Even fully regulated exchanges such as @Gemini enable both Transparent & Shielded Withdrawals.
A bonus, its all user friendly - You can transfer any amount of $ZEC between private and transparent at the swipe of a QR code.
The Elephant in the Room
Transparent Exchanges (TEX) Addresses
- Do all exchanges require its use? No, only Binance.
- Are they available on Zcash mobile/desktop wallets? No.
- Does it impact Zcash user privacy? No.
Wallets compatible with ZIP-320 are able to spend from shielded->exchange in an automatic two-hop transaction using an intermediate T-address.
Exchanges do not gain any additional information than they otherwise would have previously.
Here is a graph showing the growth of the Zcash Shielded Pools.
As more platforms and Decentralised Exchanges like @BisonWallet support shielded addresses, Zcash users are given a wider shielded economy to participate in.
An Unexpected Conclusion
Zcash's Transparent Pool does not diminish the "amount of remaining privacy" there is for users transacting privately.
Deanonymising Onchain Transactions involves off chain data, comprimised Points of Sale, Onchain Metadata, AI Pattern Recognition & possible future Quantum Attacks.
Its best to avoid sweeping generalisations. Privacy extends to network level, hardware level and even the places of purchase. The key is to be aware of what data is leaked by which chains and WHY.
Zcash is aiming far beyond niche markets - it offers accessible, robust privacy to all, having optional transparency & defualt privacy brings that goal closer to reality.
