Privacy Coin Fork Projects' Breakthrough: How ZEC Emerges from Among Many Forked Coins

In the evolution of cryptocurrency, forked projects often carry a certain mission—improving the original protocol, adapting to specific scenarios, or exploring new ideas. As a representative privacy-focused forked project, ZEC has recently attracted significant attention. Over the past 60 days, ZEC has nearly increased tenfold, carving out its own path and rhythm. The debate around ZEC has also escalated, shifting from early endorsements of privacy concepts by industry figures like Naval, Arthur Hayes, and Ansem, to a deeper dialogue between bullish views based on real-world applications and bearish views centered on miner economics and network security.

What has driven ZEC to stand out among forked projects? And what hidden risks should be watched out for?

Privacy Demand Awakens, Regulation Becomes an Unexpected Catalyst

At first glance, tighter regulation might seem to suppress the privacy coin ecosystem, but the actual logic is quite the opposite. It is precisely because of increasing regulatory pressure that the market’s demand for privacy has been fully stimulated.

The EU Anti-Money Laundering Directive draft explicitly states that privacy coins will face complete restrictions by 2027; the US Financial Crimes Enforcement Network (FinCEN) is also strengthening scrutiny of “high-risk self-custody wallets.” As spot ETFs for Bitcoin and Ethereum come under regulatory review, all on-chain transactions face unprecedented tracking pressures. In this context, compliant assets are becoming more transparent, and privacy assets are becoming increasingly scarce. Western media have even dubbed this market trend the “Crypto Anti-Surveillance Wave”—a wave of resistance against monitoring.

Market is re-defining ZEC and XMR as the “last line of on-chain anonymity.” Social media consensus is more straightforward: “Privacy is not just a feature, but a fundamental human right.”

On-chain data confirms the genuine growth of this demand. ZEC’s shielded pool balance has grown from less than 2 million coins at the start of the year to about 4.8 million now, a 140% increase; the number of privacy transactions (shielded transactions) has also risen with network activity, accounting for about 10% weekly.

Notably, during the recent “BTC whale asset case,” involving over 180,000 BTC, the market re-examined Bitcoin’s true boundaries in the “anti-surveillance” narrative. With the launch of BTC ETFs and institutional deep involvement, Bitcoin’s original narrative centered on anonymity and anti-monitoring is gradually fading. Who will become the new symbol of privacy assets and on-chain storage? The market’s answer: ZEC, which is moving against the trend and filling this gap.

Institutional Funds Quietly Reflow, Privacy Assets Regain Favor

Grayscale’s restart of the Zcash trust is the most significant signal in this market rally. In October 2024, Grayscale announced the reopening of the ZEC trust (ZCSH) for new subscriptions, with two major upgrades: first, exemption from management fees; second, addition of staking with an annual yield of 4-5%. This combination greatly improves the risk-reward profile.

As a primary bridge for traditional institutions entering crypto assets, Grayscale has nearly defined how institutions allocate crypto over the past decade. Its trust products issued in the US have long provided exposure for pension funds, family offices, hedge funds, and others, serving as a key window into institutional preferences.

Since launching its first Bitcoin trust in 2013, Grayscale has expanded to include ETH, SOL, LTC, BCH, ETC, FIL, XLM, and more. Many projects have experienced the “Grayscale Effect”—institutional inflows pushing prices higher, premiums widening, and consensus narratives gradually forming. The ZEC trust was established in 2017 and saw a surge in premiums during the 2020-2021 bull market, once becoming a key institutional holding in the privacy sector.

However, from 2022 onward, regulatory pressures caused ZCSH to suspend subscriptions, and by 2023 it had entered dormancy. The recent restart not only signifies Grayscale’s renewed confidence in privacy assets but also sends a strong signal to the market.

Data shows that ZCSH’s assets under management (AUM) have grown from about $42 million a month ago to $269 million, accounting for roughly 2.4% of ZEC’s circulating supply. For an asset with daily trading volume in the billions, nearly 2.5% of the supply being locked in trust creates a clear supply-side constraint.

Deeper logic lies in the ETF’s derivative effects. The launch of Bitcoin and Ethereum spot ETFs has brought these assets into a strict regulatory framework, making every transaction traceable. Some institutional and high-net-worth investors, seeking to avoid this full transparency, are shifting funds into privacy assets. Grayscale’s ZEC trust offers a compliant solution—gaining privacy coin exposure while operating through traditional financial channels.

Illusory Prosperity of Miner Economics and Hidden Structural Risks

On the flip side, bullish voices, like analyst Lacie, raise deep skepticism. A core question: can ZEC’s miner economics, network security, and on-chain activity truly support a market cap exceeding $10 billion?

For example, the most common ZEC mining machine, Bitmain Antminer Z15 Pro, yields over $50 net daily per unit, with a static breakeven period of about 105 days and an annualized return close to 350%. Remarkably, this high return has persisted for at least a week.

Such data is extremely rare in PoW history—almost abnormal:

• Bitcoin miners typically take 12-24 months to break even during upswings
• Ethereum PoW miners generally see ROI in 300-600 days
• Projects with sub-120-day break-even periods (like Chia, KAS, FIL, XCH, RVN) have almost all collapsed within months

Lacie also reviews typical scripts of projects like Chia and KAS—“hardware-price scissors.” It’s a recurring story in mining history: miners buy mining hardware at high prices during FOMO peaks (seeming to break even in 4 months), only for network hash rate to surge (often with delays over 3 months), leading large holders to sell at high prices, leaving miners with “price and output halved” dilemmas—yesterday’s star miners turn into scrap.

Insufficient Hashrate, Network Security as a Core Hidden Risk

More concerning is ZEC’s network security. Recent on-chain data shows total network hash rate at about 12.48 GSol/s. Using the Z15 Pro’s hash rate of 0.00084 GSol/s, roughly 14,857 units would constitute the main network—equivalent to a 40MW operation, comparable to a medium-sized Bitcoin mine.

Controlling 51% attack requires over half of total hash power. If fewer than 16,000 machines dominate the network, an attacker could rent or buy a few thousand more to control over 50%. On a chain with a liquidity market cap near $1 billion, this could involve millions of dollars in hash power, enabling chain reorgs or double-spends—an inherent structural risk.

Alarmingly, ZEC’s current hash rate is much lower than mainstream PoW chains like Bitcoin, Litecoin, Kaspa, and even below chains like Ethereum Classic, Bitcoin Gold, Vertcoin, and Bitcoin SV, which have previously suffered 51% attacks. This indicates ZEC’s network security has entered a vulnerable zone.

Is Real Application Growth or Just a Speculative Bubble?

Lacie also questions the real-world privacy use cases of ZEC. Over the past month, average daily transactions are only 15,000 to 18,000—just 1-2% of large public chains’ transaction volume. As a privacy chain, most transactions remain transparent, with shielded transactions accounting for less than 10%.

BuyUCoin CEO Shivam Thakral has warned that ZEC’s recent rise is driven more by speculation than fundamentals. The key reason: growth in privacy transactions is limited, and there’s no breakthrough in real application scenarios.

Forked Projects’ Dilemma and Path to Breakthrough

As a representative privacy-focused fork, ZEC faces a critical test. Current market data shows ZEC at $226.41, with a market cap of $3.76 billion and a circulating supply of 16.58 million coins. While the short-term rally is impressive, long-term sustainability depends on three key breakthroughs:

First, whether the genuine demand for privacy transactions can continue to grow. With shielded transactions making up less than 10%, there’s significant room for actual usage to expand.

Second, whether network security can be strengthened. The small hash rate is a structural weakness that needs ecosystem development or technological innovation to improve.

Third, how the forked project can find its own ecosystem positioning. Among many forks, whether ZEC can go beyond riding the privacy wave and truly build infrastructure for privacy applications will determine its ability to stand out and achieve long-term value.

Currently, ZEC benefits from the dual drivers of regulatory-driven privacy demand and institutional capital allocation. But if real-world applications don’t catch up and network security risks aren’t addressed, this rally may just be a fleeting illusion of prosperity common among forked projects during bull markets, rather than a genuine breakthrough.