Yeah, side channel attack is a bit of a misnomer, but I saw it as a government attack channel: Anyone showing interest in (private) cryptocurrency by having Zcash/Bitcoin listed on a tax return could be audited, and demanded to show records, which will bring up: date, time, and likely also the nature of the transactions.
Being unable to destroy transaction records for 7 years (auditable timeline) also adds a privacy/data storage burden. And trusting one or more third parties with this information (IRS, accountant/tax software) who may be breached is also asking for trouble. Practically, an audit attack may be unlikely to happen today, and at least in the US, if someone hasn’t left an identity trail on an exchange, it’d be difficult for a government to identify someone as a cryptocurrency user.
Thanks @Autotunafish for bringing up the summation idea. Are you saying it’s OK to just combine all the transactions into one, even if they all occurred on separate dates? Unfortunately, I don’t think current rules allow you do to this. The instructions for filling out form 8949 for capital gains seem to read that only if there is a 1099-B with reported basis e.g. from a stock broker, can just the combined gain/loss be reported. If it does work though, combining is a much better way to preserve privacy. Agree with @garethtdavies that some sort of de minimis currency-style exemption is probably in order to make practical use e.g. goods exchange easy to do legally.
I’m guessing you’re referring to this thread: TAXES mining reward, buy sell (capital gain/loss) Is there a section/link with the summation?