Should Zcash have privacy pools?

General
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This is going to be uncomfortable. Bear with me.

Privacy pools let users prove their funds came from a “clean” set without revealing which specific transaction. You get privacy within the set, plus a proof that satisfies compliance requirements. Vitalik co-authored a paper on this in 2023. The idea: solve the Tornado Cash problem. Privacy that institutions can actually touch.

For most Zcash users, this probably sounds like a betrayal. We’re here because we believe financial privacy is a right, not a privilege. Adding compliance tooling feels like giving ground to the surveillance state.

I get it. But here’s the strategic problem.

ZSAs are coming with NU7. Zcash will soon support shielded stablecoins, tokens, whatever. That’s huge. But who’s going to issue a shielded stablecoin if Circle and Coinbase can’t touch it? Who’s going to build on ZSAs if every institutional player has to pretend Zcash doesn’t exist?

We can have the most advanced privacy tech in crypto. If nobody uses it because compliance teams won’t approve it, what’s the point?

Privacy pools offer a middle path. You can still transact privately. You just have the option to prove your funds aren’t from a sanctioned address. Optional compliance, not mandatory surveillance.

This came up in Zcash NU7 into a JAM service . @sourabhniyogi asked for “a privacy pools design from Zcash protocol engineers” as one of two things Zcash needs to plug into next-gen infrastructure. The other was token economics for a multi-chain world.

There was also a CompZ - Grant Application (cc @Mharris40) last year that tried to build compliance tooling. It got rejected. I don’t know the reasons, but it suggests this conversation hasn’t found traction yet.

Maybe that’s correct. Maybe Zcash should stay pure and let adoption happen on its own terms.

Or maybe ZSAs without privacy pools is like building a highway with no on-ramps. Technically impressive. Practically empty.

I don’t have a firm position. I’m genuinely torn. But with NU7 still being shaped, now is the time to have this conversation.

What do you think? Is this a necessary strategic move? Or a line we shouldn’t cross?

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IMO, if Zcash cannot be used by political dissidents, then Zcash has not succeeded. Privacy pools would make Zcash fail this test, so I am strongly opposed.

In all but the most oppressive jurisdictions, there is nothing legally different about accepting Zcash compared to any other form of cash. Zcash does not need to compromise its core values. Businesses will adopt where there is user demand.

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To clarify: I’m not suggesting privacy pools for ZEC itself.

ZEC stays pure. Full privacy. No compliance layer. Dissidents can use it exactly as they do today.

Privacy pools would only apply to ZSAs where the issuer explicitly wants them. If Circle issues a shielded USDC and needs compliance tooling, that’s their choice for their asset. ZEC doesn’t change.

Different assets, different rules. ZEC remains the freedom money. ZSAs give issuers flexibility to meet their own requirements.

Does that address your concern?

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Even for ZSAs, I do not support the addition of privacy pools. If ZSAs are worth shipping, then they are worth shipping with uncompromising privacy. There will always be some level of trust for a centrally issued ZSA, but users should at least still be confident that using the Zcash network affords them the best privacy possible.

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Maybe I have a fundamental misunderstanding but why cant both of these be true? Can’t we have some ZSA’s be “pure” and some be “hybrids” that have more reach yet where they settle is the same → ZEC ?

In otherwords, why can’t both co-exist without issue?

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I don’t think it’s valuable to build technologies into the protocol that facilitate discrimination. IMO every human should have equal access to the Zcash network, and privacy pools just create a (cleverly branded) way to discriminate.

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I dont like it either, full stop. The critical issue however, is access. IMHO, access trumps everything and I want the most folks to have access as possible. I see ZSA’s enabling more access, in particular with DEX’s, and this is why I support them.

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One of Zcash’s fundamentals, as @zooko has often expressed, is that privacy is about choice. The choice to stay private or to selectively disclose. Privacy pools fit that philosophy. You’re not forced to prove anything. You have the option.

I’ll be honest. I’m not a huge fan of privacy pools either. Creating this thread was uncomfortable. But my priority is Zcash succeeding at bringing financial privacy to the masses. A maximalist approach might feel pure, but it could slow that goal down.

Here’s my theory: someone starts with zUSDC and its privacy pool compliance layer. They use Zcash. They see how it works. They realize that while they’re at it, they might as well hold some ZEC too. No compliance layer. Full privacy.

Privacy pools on ZSAs could be the on-ramp. ZEC stays the destination.

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I’ve taken a moment to consider your points and make sure I’m not misunderstanding your arguments. I think we want the same things, but I still disagree that privacy-pools are useful as a means to those ends.

ZSA’s don’t require privacy pools. My argument is only opposing privacy pools. I agree with the idea of making Zcash more accessible, but IMO accessibility can and should be improved without introducing permissioned ledgers into the protocol.

And I 100% agree, but privacy pools do not increase user choice. Let me explain..

Zcash gives users have the ability to choose the level of privacy they want for their ZEC. A user may send/receive ZEC privately on a shielded pool, transparently on the transparent ledger, or even selectively reveal their activity with view keys. That is maximum choice for how to use your ZEC.

ZSAs are not ZEC though. For a given ZSA token in a privacy pool, there is no equivalent permissionless ledger that also trades that ZSA token. If a user builds her life’s savings in a ZSA privacy pool token, then she does not have a choice to remove her token from the privacy pool for a permissionless pool. Instead, if she wants to exit the permissioned pool, she is forced to sell her tokens and find an entirely new token she prefers.

This doesn’t give the user more choice. This backs the user into a corner, where they have to walk away from their assets if they wish to choose permissionless money.

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:100:

I agree they don’t require privacy pools, but we also shouldn’t force ONLY “pure” ZSA’s either.

This seems like a seperate problem that probably doesn’t have solution. I’m focusing on the good that comes from this, and you on the negative.

Appreciate your thoughts! :heart_suit: :shield: :zebra:

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should radbro radbro if a radbro could?

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There’s a strategic angle we haven’t discussed.

Privacy coins are easy to ban. What does a government lose by banning Zcash today? Nothing. It’s not integrated into anything they care about. No political cost, no economic disruption, easy win for “tough on crypto” politicians.

Now imagine zUSD and zEUR exist on Zcash. Institutions use them. Regular people hold them. Zcash becomes part of the financial plumbing.

How do you ban that?

You can’t ban “the network that hosts the Euro stablecoin” the same way you ban “that privacy coin criminals use.” The political calculus changes completely.

Privacy pools on ZSAs aren’t just about adoption. They’re about making Zcash ungovernable by making it indispensable.

Pure privacy coins are easy targets because they’re isolated. Connected networks are resilient.

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The fact this is even being suggested is a sign to kill ZSAs

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What’s interesting is with comments it’s truly impossible to differentiate someone that wants to slow Zcash down from someone that wants to see it succeed. Nothing against your comment or you personally @colludingnode. The way I see if is if we do not to do this others will. It’s about vision.

I also respect your vision, to be clear. It’s tricky to gather enough understanding to be able to “compute” the one that leads to success. It’s easy to get caught in traps of misunderstanding too.

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If others want to play with this silly stuff, let them. The evidence that something like this would lead to “institutional adoption” is slim to none. In fact, there is slim evidence that “institutional adoption” is even a desirable goal at all.

The way ZCash succeeds is by leading with its convictions- not by blindly following every unproven and wildly speculative meme from the industry.

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