Why I Support ZSAs

[artkor]

@thowar2

Interestingly, the market seems to value “digital gold” better than “oil for world computer” as evidenced by Bitcoin breaking new highs consistently within any 3 year period while Ethereum has not recovered from the peak price at “the merge” from proof of work to proof of stake.

Imo it would be a huge mistake to “try things” that have already been proven less valuable and possibly destroying the whole value prop that Zcash has established.

Since we’re talking about market valuations, I look at this from a very different perspective.

Before the move toward Proof of Stake, ETH was trading in the $100–200 range, with a bottom around $88 in 2020. During the PoS transition, it rallied to nearly $4,800 in roughly a year. That’s a ~50x move. It’s hard to argue that this wasn’t a strong market validation.

Bitcoin’s performance over the same period was roughly half as strong, still impressive, but largely driven by external narratives and, later, ETFs. That’s the price side. But what about the economics?

Ethereum appears to have largely solved its inflation problem. Thanks primarily to on-chain activity driven by tokens, it consistently processes around 2 million transactions per day. As a result, fee burns often exceed the net daily issuance, making ETH effectively deflationary at times.

Source

Bitcoin cannot claim the same. Its transaction activity is 4–5x lower, and fees currently make up less than 1% of block rewards after the fourth halving. Fee revenue is simply not sufficient to meaningfully support miners. This dynamic has been stagnating, largely because economic activity has shifted elsewhere, especially toward Ethereum.

Source

Miners have already been operating at or near breakeven for years. Issuance keeps declining. Time keeps moving forward.

It’s unclear why anyone assumes the future will simply be better by default, or that price growth alone will inevitably solve these structural issues as issuance declines and time runs out.

A similar comparison can be made with Litecoin, another Proof-of-Work chain. Its fourth halving is about a year and a half away, yet it still prices around the same levels it did in 2017. A solid PoW design and meaningful transaction activity did not guarantee long-term success or valuation growth.

Source

From my perspective, Ethereum is the first realistic candidate to overtake Bitcoin in market capitalization, and I believe this will happen relatively soon.

[Milton]

1. You’re assuming that we use some sketchy bridge instead of something trust-minimized and decentralized like IBC.
2. I don’t think your scenario makes any sense. Exchanges will support what there is demand for. If there is a civil war between ZEC holders and ZSA issuers, the ZEC demand is on the non-backdoor chain.

[outgoing.doze]

Thanks for your detailed answer, I appreciate it.

@thowar2

Its highly unlikely that anything short of visa issued stablecoins will change this behavior.

This is isn’t a narrative I can accept, even if it may be true. I have joined crypto with the hope that this US duopoly over most international transactions could be eliminated. Before Diners Club nobody thought much about card payments, it was a revolution. There’s going to be a next thing.

[Milton]

@nullcopy

For the point being considered in this thread, is bridged DAI all that different from a centrally issued fiat ZSA? If a Zcash fork is proposed, the bridge operator has to choose which fork to support. If many people/businesses transact with bridged DAI, then they will be strongly influenced to select the fork that the bridge operator chooses, right?

It is different because we have decentralized and trust minimized bridging protocols like IBC. This makes them more resistant to government pressure than centralized issuers. It is also harder for this bridge operator to organize any sort of hostile change to Zcash.

[thowar2]

Imo this is a timing problem. The “hyperbitcoinization” theory has yet to play out or be disproven. One could argue it has low velocity as an MOE in part because it lacks privacy and scale.

What is true is that stablecoins are not yet commonly used as daily spenders and given the massive amount of resources other ecosystems are putting into making that happen, it’s very presumptuous of the Zcash community to tackle this given the absolute naiveté of the logistics around this and the brittle state of the infrastructure.

If there ever is a future for ZSAs, the current timing is very much not in favor right now.

[outgoing.doze]

I generally agree. We do one thing and we’re the best at it.

I’m still going to be pending more feedback on the potential to integrate JAM. Nobody is into talking about it so far, that’s fine, I’m patient; they will understand the relevance eventually.

[thowar2]

Thats an interesting narrative. Here’s another one:

1. In 2020 - 2021 Ethereum saw a boom due to DeFi/Dex adoption, peaking in value at the end of 2021.
2. In 2022 the price dropped on the “road to the merge” which culminated in Sept 2022.
3. Since switching to proof of stake which also surfaced the stranglehold centralized issuers had on the chain.
4. ETH has never broken its ATH since 2021 while in the same period Bitcoin has nearly doubled it’s price ATH and ZEC has smashed through it’s Market cap ATH.

At the same time, chains that are purely tokens and do not have onchain trading have had minimal adoption and incredibly low margins from token fees. The majority of the transaction fee income from basically every chain comes from trading and DeFi, not token transfers.

Even with record breaking TVL, transaction volume, trade volume, txn fee revenue on all the token chains in the past few years - NONE have been able to keep up with Bitcoin in terms of sheer market cap size, and the large ones have not been able to outperform on ATHs.

Zcash is the outlier asset for 2025 in being basically the only good trade of the year, which it did without any extra features or tokens, but simply by being an “encrypted store of value”.

[thowar2]

Most validators are very scared of being classified as money transmission services and a good number of them already implement transaction censoring based on the sanctions list. There are various staking pools on Ethereum and Solana that let you choose how much censorship you want to stake towards.

Zcash should not open a backdoor to this weakness.

[Milton]

External validators censoring bridging transactions to Zcash is a different and much less harmful scenario than the one you presented earlier where centralized issuers were influencing fork choice on Zcash proper.

[conradoplg]

@thowar2

Zcash is the outlier asset for 2025 in being basically the only good trade of the year, which it did without any extra features or tokens, but simply by being an “encrypted store of value”.

If that was really the cause, why did this only happen now?

[daira]

@Chewbacca

And similarly, there is a better home for ZSAs than Zcash that is also called Ethereum. You can see this in Railgun. Not only does it support permissioned assets but you have access to all the Defi lego blocks on ethereum too. So here’s a question. Why would someone prefer their shielded asset on Zcash, which only offers payment functionality, over Ethereum where you can trade it, lend it and plug into the massive ethereum DEFI ecosystem?

One option does not exclude the other. You can have bridging between Railgun and Zcash. Zcash is superior for holding assets privately because it’s not going to make any compromises on privacy. Railgun doesn’t have that uncompromising stance (besides the inherent disadvantages of being layered on a transparent L1).

[daira]

@Chewbacca

I have so much to air about my concerns with Crosslink, but to give the simplest example of why it’s bound to be contentious: it has a safety mode. Unstoppable Private Money can’t have a mode where it stops because then it’s not Unstoppable.

This should really be a separate thread, but note that the rationale for Stalled Mode already answers this point thoroughly. There are several arguments, but to my mind the most compelling one is given in the section on Finality overrides:

Consensus protocols sometimes fail. Potential causes of failure include:

• A design problem with the finality layer that causes a stall, or allows a stall to be provoked.
• A balance violation or spend authorization flaw that is being exploited or is sufficiently likely to be exploited.
• An implementation bug in a widely used node implementation that causes many nodes to diverge from consensus.

That is, situations that are sufficiently serious that the best response is to stall the chain in order to decide what to do (which could include potentially overriding finality in exceptional cases), have a significant risk of occurrence over the long term — and in fact have occurred for Proof-of-work chains including Bitcoin. The fact that a pure PoW protocol can’t stop even in those exceptional situations is a bug, not a feature.

In Crosslink 2, a stall will only occur if at least a third of total stake stop voting for new proposals, which in my view is adequate defence against denial-of-service. (Recall that it can be proven that no partition-resistant stake-weighted consensus mechanism can achieve a rollback/fork safety threshold of greater than one-third of total stake being malicious. So modulo the difference between non-participation and malicious behaviour, this property of Crosslink 2 is essentially optimal for this class of consensus protocols.)

In any case, the Finality depth rule of Crosslink 2 is independent of the other rules, and omitting it does not affect the safety or liveness arguments. You can reasonably argue against including that specific rule if you would like.

[daira]

@aquietinvestor

Crosslink does not have a safety mode, pause button, or any mechanism that allows the protocol to be stopped.

The Crosslink 2 protocol absolutely does, as designed, and as I mentioned there’s a thorough rationale for that in the original design docs. You can choose not to include the Finality depth rule, but I wasn’t aware that Shielded Labs had decided to omit that rule?

In any case, @moderators please move the posts on this issue into a separate thread.

[aaal]

@thowar2

Most validators are very scared of being classified as money transmission services and a good number of them already implement transaction censoring based on the sanctions list.

I’ll just mention: NEAR intents too, at least via 1click.

[artkor]

Thank you! I try not to get carried away with price charts when making decisions, and I prefer to model future prices based on tokenomics. Therefore, I’m not inclined to make short-term decisions based on past price movements.

You know, a year ago, no one cared about ZEC, but modeling supply and demand often allows us to predict long-term price movements much better than past price charts. Ethereum will surprise everyone in the coming years.

[aquietinvestor]

@daira

@aquietinvestor

Crosslink does not have a safety mode, pause button, or any mechanism that allows the protocol to be stopped.

The Crosslink 2 protocol absolutely does, as designed, and as I mentioned there’s a thorough rationale for that in the original design docs. You can choose not to include the Finality depth rule, but I wasn’t aware that Shielded Labs had decided to omit that rule?

Correct, our implementation of Crosslink does not include Stalled Mode. It was removed to simplify the design and rely on an emergency patch process if needed.

[thowar2]

Because:

1. Zashi + Near Intents made it easy to buy, shield, and use Zcash.

2. There has been a concerted on the ground and on social media effort to effectively communicate the USP of Zcash and demonstrate it via Zashi. This effort was demonstrably successful, awareness of ZEC did not spontaneously happen.

[thowar2]

Theres a big difference between the risk one-of-many liquidity venues create for ZEC and a single issuer backing a ZSA creates for Zcash.

[thowar2]

A year ago a few people cared about ZEC.

Today, much more people care about ZEC as evidenced by the strong revaluation in the market.

The speed of the re-rating can not be solely attributed to token supply economics, it indicates something else must have happened to trigger the re-rating.

If you believe we should not make short term decisions based on recent price movements, then rushing to add new features like ZSAs because everyone now cares about ZEC is incompatible with your view.

[aaal]

@thowar2

Theres a big difference between the risk one-of-many liquidity venues create for ZEC and a single issuer backing a ZSA creates for Zcash.

I think I appreciate this point, and I was not trying to take away from any argument you are making.