Important: Potential Binance Delisting

General
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I want to bring an important issue to the community’s attention and discuss possible solutions to address the challenges it presents. Binance is under increased regulatory pressure and is considering delisting certain privacy coins, including Zcash, in the coming months unless certain measures are taken to enhance the transparency of transactions and ensure compliance with evolving regulatory standards.

Background

A representative from Binance’s listing team recently approached the Zcash core teams about a way to prevent users from sending ZEC from a shielded address to a transparent address on the Binance exchange.Their concern is that they lack the ability to determine the origin of these funds, such as whether they originate from an OFAC-sanctioned country or individual. The representative inquired about the possibility of blocking z-addresses from sending to their deposit t-addresses or rejecting those deposits and returning them to the sender. Currently, the protocol does not have a mechanism to prevent a user from transferring funds from a shielded pool to a transparent address, and there is no method in place to determine the sender’s source address when it is sent from a shielded pool.

The broader context involves regulatory and compliance concerns related to transaction monitoring, particularly in light of MiCA regulations. To address these concerns, regulated exchanges like Gemini often employ Enhanced Due Diligence measures to verify the source of a user’s funds. However, the Binance representative emphasized that implementing such measures is operationally burdensome and costly, and therefore not a long-term solution. Additionally, the Binance representative expressed a concern that other non-European jurisdictions are likely to adopt regulations similar to MiCA in the future. As a result, if Zcash is delisted from Binance, the delisting will be global and extend beyond jurisdictions under the scope of MiCA.

Potential Solution

One potential solution Binance suggested is developing an “exchange-only” address type that restricts transfers to and from a separate transparent pool. While this is technically feasible, there are two notable challenges. First, it is not clear whether the core engineering teams have the capacity and resources to undertake this initiative given their current focus on internal organizational priorities. Second, the implementation of an “exchange-only” address type depends on the collective consensus of the Zcash community, and the community’s willingness to support a network upgrade that incorporates this functionality is uncertain.

Firo is facing a similar risk of delisting with Binance and has already taken proactive steps a to create an “exchange-only” address type, which is expected to be deployed later this year. You can read Firo’s discussion about this issue here. Firo’s situation is somewhat different than Zcash. Most notably, according to CoinGecko [1], Binance accounts for more than 50% of Firo’s trading volume, and maintaining a partnership is crucial to ensure the ongoing accessibility of the Firo token. For Zcash, Binance represents approximately 15% of current trading volume. Firo also has a much smaller and less decentralized community than Zcash, which makes it easier to implement the change to their protocol.

Next Steps

While a delisting is not imminent and we have several months to find a solution, this issue demands immediate consideration and thoughtful discussion within the community. It is not a matter to be taken lightly, as the potential delisting carries the risk of slowing user adoption and adversely affecting the price of ZEC. There is also the possibility of a ripple effect where other exchanges consider similar actions in the future. However, it is worth noting that both Coinbase and Gemini have recently reaffirmed their commitment to supporting Zcash. Nevertheless, engaging in this discussion now and finding solutions will help us get ahead of potential challenges and work towards ensuring the long-term accessibility of Zcash.

To make progress on this issue, please use this thread to discuss the proposed “exchange-only” address type and seriously consider the implications of implementing this solution or the potential consequences if it is not implemented. Furthermore, please explore other technically feasible solutions that address Binance’s concerns. I also encourage you to share your thoughts on the value and necessity of maintaining a partnership with Binance. Your comments and feedback are essential to resolving this issue in a timely and effective manner.

Thank you.

[1] Please note that CoinGecko’s reported trading volumes may be subject to inaccuracies, as some exchanges may inflate their figures due to various factors such as wash trading, potentially leading to understated percentages in this context. In other words, with regard to Zcash, Binance’s percentage of total trading volume may be significantly greater than 15%.

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This seems stupid. What does Binance gain from having users move funds from their zaddr to a temporary taddr and then on to binance’s taddr, compared to those users moving funds directly from their zaddr to binance’s taddr? It just seems to create extra unnecessary friction.
It doesn’t change anything of essence about what Binance knows about the source of funds.

If Binance really wants ZCash to jump through pointless loops, then just let them go ahead and delist…

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From the OP, it is probably because it allows the exchange to return the funds if it feels they were illegally obtained.

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Prelude

Before I say anything, I’d like to bring this up, which I read on Twitter / X when Vitalik proposed that “privacy pools” thing to make regulators happy.

The “compliance” dilemma.
Regulators offer no other bargain options than the regular thugs and bullies: “Comply to our demands, or you will see what will happen to you”.

Unlike thugs and bullies, regulators show a friendly face, they smell nice, have nice clothes and communicate their demands over nice lunches and dinners. But the end result is the same: Their desires are met, or a catastrophe will happen to those who don’t meet their end. They sprinkle their actions with niceties and the “false sense of free will and choice”. But in the end it’s always “lunch money or I break your arm”.

I can’t find the tweet, but someone called bs on Vitalik’s Idea of “privacy pools” back in September.

This user argued that validating regulators’ power enables the to keep the door open for more demands and that “compliance” is always redefined and changed over-time, so there’s no way of doing something and be sure “it will be enough”. And that the only way of getting out of this “false sense of free will and choice” is to say NO, fight back and risk the arm.

There is nothing that can guarantee that some project jumps through hoops to comply and there’s still “one more thing” tomorrow.

End of prelude

Reject idealism, embrace sadness of reality

Binance is one of the most prominent exchanges in Latin America. If ZEC is delisted from there, it will have big implications for our communities in the region. Binance is used quite a lot both as Fiat <> Crypto on-ramp and as financial resource. Most people that won’t qualify for a debit or credit card from a traditional bank can get Binance cards and get a payment card for everyday use. Being delisted from Binance is a big deal.

That being said. I think an “exchange-only” type receiver is a bad idea and detrimental to the evolution of the Zcash protocol and the “payment” of the tech debt that our teams suffer because of having to maintain the UTXO model and the shielded notes model.

As @aquietinvestor mentioned, Binance could be just the beginning and all the rest of the exchanges could follow it lead. I think that reasoning is quite accurate.

A few alternatives I could think from the top of my head:

A short term approach with no action from Zcash:
Binance solely takes action on its own and does not let users spend funds from transactions that come from shielded addresses and take two approaches:

  1. require further information to make those funds available:, such as requesting viewing keys or payment keys (these are specified on the protocol but not available as features if I recall correctly)

  2. block those funds and do nothing and treat the funds as “lost”.

Mid-long term approach requiring cooperation between Zcash and Binance:

All teams gather and make a technical assessment on efforts needed to actually implement payment disclosures in many granularities that allow users to extend some visibility over a group of transactions, accounts, addresses or keys to “comply” with these regulations.

Disadvantages:

  • it will take time and effort from other goals
  • it will delay decentralization
  • it will delay other protocol advancements such as PoS, ZSAs, etc.

Advantages:

  • Zcash only implements already available protocol features
  • Can push a narrative of that does not make Zcash “obedient”, but feature-rich and versatile.
  • Compliance tasks are delegated who those in need to comply: Exchanges.
  • Zcash uses this as a forcing function make payment disclosures better and easier for users.
  • May also raise funds to from interested parties, aka exchanges, because they make money of ZEC on ramps too.

I have a CRAZY IDEA but I won’t share it for now.

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To suggest Binance can’t afford this seems crazy. I guess I’m not sure I believe an exchange with arguably more volume than Coinbase can’t afford it. Maybe I’m missing something obvious? This screams political fallout from the FTX vs Binance drama that is still playing out in real-time. :face_vomiting:

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I’m just wondering what would satisfy Binance. If somehow we gave them a T-address that can only receive T->T ZEC, would that be enough?

Or are they expecting to trace that ZEC as far as they could/would on non-private chains?

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A “Super T-Address” (or what I refer to in my post as an “exchange-only address”) that can only receive t-to-t ZEC was Binance’s suggestion. Their concern is that users are sending funds from a shielded address to a transparent address on the exchange and they have no way to confirm where the funds are coming from (e.g. an OFAC sanctioned country or individual).

@tromp brings up an important point when he states:

My guess is it allows them to determine that the immediate source of funds did not come from something like a sanctioned account. However, there is no guarantee that at some point in the future Binance won’t ask for additional limitations that further restrict transfers (e.g. a user cannot deposit ZEC that has been in a shielded pool within a certain period of time).
.

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Thank you for sharing information about the possible delisting of Zcash in Binance. I will share the content with korean community members and then, we’ll share our opinions. Most of us use Binance to buy Zcash…

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Giving a viewing key reveals the entire history of all the funds from the source wallet. That’s MUCH more information than needed. One could argue: Tough luck, you should have used a t-address, but an alternate solution would be to give the plaintext note (address, value, memo, etc), and a zk-proof that its nullifier is the one that was spent to fund the exchange wallet.
For sapling, it is a bit troublesome due to the trusted setup. For orchard, it should not be too hard to extract the circuit for the DeriveNullifier function.

By the way, I don’t understand how getting rid of t-addr helps.

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I am against “exchange-only” addresses mainly for the reasons @pacu listed.

I like very much @hanh 's solution, although I understand that it might require considerable effort in development but especially the technical difficulties for exchanges to adopt this solution once it is developed.

The short-term solution could be easy, which is to alert users when they generate their deposit address that only ZECs from “t” addresses will be credited. If an user accidentally deposits the shielded ZEC, he or she will be able to retrieve the funds in a similar manner to users who submit an ERC-20 token that is not supported by exchanges, i.e. pay the exchange a fee for manually retrieving the funds.

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Thanks for raising and reporting this!

Unfortunately, Binance is in the ecosystem a necessary evil.

But, even if an imminent delisting of Binance is coming, I think we can make an effort from the communities to teach users the altenatives we have, so that we don’t rely only on Binance and centralized alternatives.

Education and information is of vital importance at this time within the Zcash ecosystem, and to teach potential users and businesses the benefits of a circular economy in ZEC. I know it sounds utopian, and this is going to take time, but we have to keep spreading and teaching!

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I was going to ask on another previous comment if that super address for Zcash transactions will be still T…
I don’t believe that Binance can think of accepting Zcash z/u addresses holding that *transparency flag.

When CoinEx had the backing issue (and being aware of ECC cooperation on solving that out):I asked if Z or U Zcash addresses would be included and no answer received.

So, I guess that Bibance new address for Zcash will still be T.
I strongly believe CoinEx is the best option at hand now.

  • No kYC.
  • Easy platform to use. No complications.

Other option for me is SideShift.ai (No registration. No KYC.) Here you candy send your Shielded o transparente address, which is great.

About T- addresses, they’ll be always useful while and in the way CEX exist.

I edited this comment once I realized it didn’t go public complete.

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CoinEX is a better option than Binance now days. We don’t need a KYC process, and it has an enough liquidity for almost all users, especially those in Latam.

I think Zcash exchange process need to evolve, and for us the better alternatives are Swaps or DEXs or not KYC exchanges.

The problem is not Binance deslisting Zcash, but how the Zcash community will deal with a new global scenario for Zcash adoption without mainstream exchanges like Binance.

This is why marketing and community building with education at the epicenter of this process is so important.

This scenario opens up new challenges and opportunities, not to see how to prevent Binance from delisting Zcash, but how we can make Zcash a widely adopted privacy currency without mainstream exchanges.

This was going to happen sooner or later.

The question is: are we going to give in to privacy-busting regulatory pressures or are we going to help build an ecosystem alongside other players seeking to preserve the right to privacy?

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100% likely correct.

The illogical feature use cases created by the Zcash T and Z address ecosystem has once again made a nearly unresolvable mess :(. (similar to the unresolvable mess where 90% of all ZEC remain stuck in the transparent pool)

Now the ecosystem is once again forced to cater even further to Centralized Power Brokers, or we’ve got to rip-off the band-aid so to speak… And suffer the consequences of additional CEX delisting.

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I don’t think an exchange only address will make things better. It will take more time, resources and effort, like some of you guys suggested. Also, it will make things even more confusing for new or ocasional users, who already have it quite hard to understand what’s T, Z and U and how do they work.

Like Yoditar said and Roosevelt said, this might prove our point that education and communication play a better role than ever: letting people understand how to fully use a DeX or a Non-KYC exchange to swap our ZEC for other assets.

If we need FIAT currency from Binance or, potentially, any other Centralized Exchange, we can swap our ZEC for stablecoins like USDT, or any other non-privacy asset, and then send it to Binance and complete our P2P, FIAT exchange that way.

We really will never be able to comply with what governments want, precisely because, like pacu very well said, there will always exist the possibility of a government saying: “yup, that right there is cool, now can we also comply to this?”

If the Zcash Community tries to comply, the corporate system will win, all our predicaments about freedom and privacy will be abandoned and the cat and mouse race will never end. If we embrace DeX and Non-KYC exchanges, we can preserve some of the privacy we are always defending and talking about and the system will have it harder to win.

So no, I don’t think a Super T address is really a good idea. If Binance wants to leave well, farewell buddy, it was nice meeting you.

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I cannot believe i have to say this regulators or rulers (wearing suit) don’t care about you and hate you.
Any kind of pandering with transparent address, exchange only address, backdoor address, super (duper) surveillance address will not be enough.
Just get rid of t-address already and embrace de-listing.
That way zcash will have the spine to actually be mandatory default private only coin.

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I don’t like how polarizing this discussion is, but with your point I agree.

It’s time to deprecate the transparent pool.

Ideologically, the majority of Zcashers agree with that notion, but our problem is that the two organizations that control the protocol & infrastructure require the existence of KYC transparent coins.

It’s the nastiest of the conflicts of interest in Zcash that exists between the power brokers of today vs the everyday user seeking a simple fully private feature set.

Deprecating the transparent pool would unfortunately render the ECC, ZCG, and ZF incapable of legally (in USA) taking and then selling their ZEC block rewards.

This is the Catch-22 of having these well organized, American Based non-profits!

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correct if zcash want to actually do some good best to remove t-address

and let nature and free market fix the problems

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At best implementing an exchange address type will delay the delisting of Zcash, not prevent it. How much of delay I don’t know, but I’d guess 1-2 years before regulators require any coin that ever touched a shielded pool to be denied unless they provided extensive documentation. I don’t think it’s worth it even though CEX support is pretty important. We don’t have any resources or time to spare.

I have been saying for a while that Zcash needs to prepare to be run as an underground network. Delisting is only the first wave of attack. If delistings don’t kill Zcash they will begin going after the validators and arresting the developers like they did with Tornado Cash. In practice that means integrating network privacy soon and not switching to a PoS protocol with few validators.

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yea correct they will not stop at that they only care about total control.

zcash need mandatory default network level privacy too along with default protocol level privacy.

or else it will never work.

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