Zcash is not “Private Bitcoin”

The Wall Street Journal released a puff piece earlier this year promoting the cryptocurrency Zcash and associating it with bitcoin. About 7 years ago, I believed this narrative until I truly understood Bitcoin and I truly understood Zcash.

Zcash is a cryptocurrency that has been around for a decade, but over the past year, a narrative pushed by influential voices in tech, crypto, and media has been “private bitcoin,” or some flavor of it. This narrative is a falsehood —to be bitcoin, an asset must be immutable. Immutability, the property of being highly resistant to change, is what makes bitcoin— bitcoin. Immutability is what bitcoin has that nothing else does.

Simple narratives spread far, so I don’t expect the Zcash narrative to end anytime soon. However, the gap between narrative and reality will show up in bitcoin’s value relative to Zcash over the long run. Short-term speculation is one thing, and long-term allocation is another. This writing explains that distinction for those considering the merits of the Zcash hype.

The Zcash Narrative

Here’s a sample of the recent prevailing Zcash narrative:

The general thesis is that Zcash has a shot at taking significant market share from bitcoin, and, given its scale, this is a reasonable risk-adjusted bet because the upside could be tremendous. In particular, these narratives focus on privacy and quantum resistance, which institutional capital allocators criticize Bitcoin for lacking.

Baked into the prevailing Zcash thesis is that it is hard money because it has the same supply cap as Bitcoin and uses a similar mining algorithm that requires energy to create new supply. It has existed for a decade, expresses these properties qualitatively, and that is enough to call it Bitcoin.

It is unclear how many truly believe this narrative vs. how many own the asset in the hope that others might believe it. In my opinion, it must be the latter, as the quantitative reality will soon eclipse the qualitative expression in the media.

For Zcash to be “private bitcoin” it must have or be able to eventually adopt the immutability of bitcoin.

The Quantitative Reality of Bitcoin

When you look at the numbers, Zcash is nothing like Bitcoin. Now, that is not to say it could not eventually become an immutable asset —the network could grow, it could become more distributed, an entire ecosystem could build around it, and perhaps one day it could truly be considered an immutable monetary asset contending with Bitcoin for market share while also possessing superior technological properties. I believe this vision is utopian because Zcash’s technological advantages have fundamental trade-offs, and there is no such thing as a free lunch.

The following four considerations are why bitcoin is an immutable asset, and Zcash is something less than that:

(1) Network Scale

The scale of the network is what secures the asset, and Zcash is smaller in every direction that you can measure it.

It could take an entire research report to represent every figure, but most important is the scale of its security budget from mining costs. You can’t directly compare Bitcoin hash rate to the Zcash equivalent (solutions/second) but you can look at mining revenue:

Zcash is well behind Bitcoin when Bitcoin was 10 years old, and the scale of security from mining revenue is paramount for a permissionless network. An adversarial 3rd party attempting to control or attack the Zcash network needs to spend roughly $90,000 for 1 hour of control (~5% of Bitcoin’s). On March 11th this year, Foundry announced its Zcash mining pool and immediately had 30% of the hash rate because of its small scale.

Zcash has been around for a decade, and its scale is well behind Bitcoin’s at 10 years old; it was backed by some of the most influential people in tech and crypto from the beginning ( Naval, Barry Silbert, et al.) and still couldn’t outpace Bitcoin.

(2) Network Concentration

Decentralization is a spectrum, and it does not mean permissionless. One node is not decentralized, but 2 nodes are, 3 nodes are, and n nodes are. Just because a network is decentralized does not mean that it cannot be controlled by a 3rd party. Somewhere far enough along the decentralization spectrum, a network can reach the point of being permissionless - which Bitcoin has proven (so far to date).

You can assess this by looking at various stakeholder groups. A good framework on this topic was written by Ren Crypto Fish, @moneyball, and @LynAldenContact: https://bitcoin-cap.github.io/bcap/. They describe 6 distinct stakeholder groups, and the degree of decentralization in each matters for the network to remain permissionless.

The question of whether or not a network is truly permissionless is so complex that it is really an observable phenomenon. Bitcoin, being the first cryptocurrency to emerge, enabled it to grow in all of the right ways without any competition - no other cryptocurrency emerged in an environment without direct competition which acts as a centralizing force. This is a breakdown of some measurable concentration metrics:

Zcash has a significant degree of decentralization but is less so than bitcoin across every metric. These differences are important when considering the governance of the protocol.

(3) Governance

Bitcoin has no foundation, no trademark, no treasury, no vote, and no entity whose approval is required for consensus changes. Zcash has all of these things.

The protocol pays 20% of every block subsidy (miner revenue) to entities other than miners until the year 2028. This effectively funds five legal entities today and used to fund its original founders and investors up until 2020. 10% of 21 million cap went to the original founders and investors.

You can read into the control and drama issues that have occurred (e.g., Electric Coin Company and Zodl). ZODL raised $25 million this year, funded by many of the people who are pumping Zcash on Twitter: Paradigm, a16z crypto, Winklevoss Capital, Coinbase Ventures, Cypherpunk Technologies ($5M), Maelstrom (Arthur Hayes), Balaji Srinivasan and others.

These groups influence narratives, development, capital, and the ecosystem’s outcomes. Bitcoin was created with no entities, no block subsidy, no venture capitalists, and no trademarks. Ultimately, governance determines whether the protocol changes.

(4) Consensus changes

The extent to which a network can be influenced is a function of its scale as well as stakeholder concentration —this overlap is theoretical. Ultimately, the frequency and degree to which a protocol changes is the most concrete ex-post method to measure immutability (resistance to change).

Since Zcash began, it has had 10 consensus-rule changes while Bitcoin has had 3. Zcash also bundles its improvement proposals in these upgrades, so you can argue that the volume of changes is even higher.

Further, an emergency soft-fork was conducted this year. A bug was found, and within 3 days a handful of developers wrote a new consensus rule and shipped it without publishing a ZIP, holding a vote, or getting signaling from miners. Apprently the ability to update the code in Zcash required the developers to call the miners and deprecate the prior node implementation.

Anyone who ran a full node was forced to upgrade. Zcashd was the former full node implementation, and in July 2026 Zcashd was deprecated, and you now must run Zebra —the new (and only) node implementation for Zcash. In contrast Bitcoin has multiple reference clients, and its consensus changes are backward compatible.

Of course, many things could change about Zcash in the future. Perhaps it is simply too young. It is actually for these reasons, how the network is trending, that I believe best illustrate why Zcash will never be “private bitcoin”.

Why Zcash will never become “Private Bitcoin”

One can argue that Zcash is younger than Bitcoin and eventually will resolve these issues as its price rises and the network scales. My response is that it really isn’t much younger and is well behind Bitcoin’s pace in this regard despite significant capital resources backing it since inception.

But let’s put that aside and entertain the idea — could Zcash achieve the neutrality of the bitcoin network over time to eventually become a permissionless, neutral, scarce commodity?

There are two fundamental issues with the asset that prohibit this from ever occurring, in my opinion:

(1) Auditability:

You cannot fully audit the supply of Zcash. How does something become a reserve asset that is not auditable? Every bitcoin node recomputes the total supply from genesis. A post-mortem of the recent inflation bug written by Zcashs own cryptographers plainly states this issue:

“Undetectable counterfeiting vulnerabilities are only possible in Zcash because of its strong privacy”

Being auditable is paramount for money. Zcash traded this property for privacy. Bitcoin can be moved to layered protocols that enable privacy using ZK rollups, Lightning, Ark, or eCash. Privacy exists as a means of payment; it does not need to be inherent to the asset itself. Cash transactions are private; bank transactions are not —they both use the dollar.

(2) Transaction Sizes:

Implementing private payments isn’t cheap. A private Zcash transaction is can rnage from ~20-40x the size of a typical bitcoin transaction:

This has led to significantly greater hardware requirements for running a node that validates the ledger. Running a full (archival) node on Zcash does and will continue to grow at a rate that requires significantly more hardware than bitcoin.

When Bitcoin was 10 years old, about 350 million transactions had occurred on it. Zcash is 10 years old, and 18 million transactions have occurred (about 5% of Bitcoin for the same age). Even so, the chain size of Zcash is 274 GB, while Bitcoin was at about 190 GB at age 10. The Zcash chain size is outpacing bitcoin materially at only 5% of it’s transaction count.

In fact, if you assume that Zcash had the same amount of transactions conducted on its ledger as Bitcoin by age 10 here’s how much larger it would be 6-28x larger which ranges from 1-6 TBs of memory required to store it. Further, a Zcash node requires 8x the amount of RAM as Bitcoin.

This is a highly centralizing force. As node requirements go up, everyday users cannot independently verify the ledger themselves. Bitcoin had a war over this in 2015, and the side that chose to limit Bitcoin so node hardware requirements wouldn’t skyrocket won. The development community of Zcash knows that if Zcash were actually used by people, it would have a serious problem with runaway growth in the ledger.

Conclusion

I don’t doubt that Zcash will continue to run up in price. The simple narrative and the powers backing it will create a compelling narrative for Wall Street and retail investors alike. My guess is that Zcash achieves the highest ratio against Bitcoin that it ever will over the next year, and after that reality will set in as the market realizes you simply can’t recreate the fundamental monetary properties of Bitcoin.

If you want to play this game of guessing narratives, have fun. I’ve been in this industry long enough to see how quickly narratives change and how thin market liquidity becomes precisely when you need it most.

Early in my crypto journey, I mined Zcash to a zcashd node (which is now deprecated). I believe financial privacy is paramount in the technological age we are in and always believe it will have a place in the market. I presumed many of the narratives about Zcash that exist today would’ve driven a rally such as this back in 2019. Once I understood that all the value lies in a permissionless asset with immutable monetary properties, I focused all my attention on Bitcoin.

Privacy is a feature that comes through a private means of payment, but the underlying asset remains the same. Bitcoin can achieve this through layers over time and does so to a strong degree today. I’m sure there will always be a sliver of the monetary market for a completely private monetary asset at the base layer, but that will pale in comparison to the value of a neutral monetary system emerging around Bitcoin.

Zcash is Zcash. It is not “Private Bitcoin”.

Originally published on Substack.