Optimisus
Live markets
BTC—— ETH—— SOL—— BNB—— XRP—— DOGE——
View all markets
CategoryBlockchain News

Two Privacy Coins Made Opposite Engineering Bets. The Regulators Decided Which One Paid

By Emma Davis • •4 min read
Two Privacy Coins Made Opposite Engineering Bets. The Regulators Decided Which One Paid

Monero hides every transaction by default. There is no transparent mode and no way to opt out.

Zcash lets users choose. Transactions can be transparent or shielded, and shielded ones can be selectively disclosed using viewing keys.

That single design decision, made years ago on cryptographic grounds, turned out to determine which coin regulated exchanges could keep listing.

What Monero Actually Does

Monero combines three mechanisms. Ring signatures mix a transaction with others so the true sender cannot be identified. Stealth addresses generate a one-time address for every payment. Confidential transactions hide the amount.

Because every transaction uses all three, every XMR coin has an identically private history. That produces fungibility in the strict sense: no coin can be distinguished from another by its past.

The FCMP++ upgrade, whose beta launched in May 2026, replaces the ring signature approach with full-chain membership proofs.

The practical effect is that the anonymity set expands from a small ring of decoys to the entire set of network outputs, reported as more than 150 million. Instead of hiding among a handful, a transaction hides among everything.

That is a substantial cryptographic improvement, and it moves in the opposite direction from what regulated venues want.

What Zcash Does Differently

Zcash uses zk-SNARKs. A shielded transaction is verified by the network without revealing sender, recipient or amount.

In shielded mode the cryptography is comparable in strength. The difference is that shielding is optional, and transparent addresses exist alongside it.

Viewing keys allow a holder to disclose specific transaction details to a chosen party without revealing anything else. That is the feature institutions and exchanges point to.

Optimisus has covered the underlying technology in the explainer on zk-SNARKs and the piece on zero-knowledge privacy.

PropertyMoneroZcash
Privacy modeMandatoryOptional
Core techniqueRing signatures, stealth addresses, FCMP++zk-SNARKs, shielded pool
FungibilityUniform across all coinsStrong within the shielded pool
Selective disclosureNot built inViewing keys
Exchange listingsHeavily reducedLargely retained
Main weaknessRegulatory exclusionDepends on people actually shielding

The Weakness in Optional Privacy

Zcash’s flexibility comes with a real cost that its price performance tends to obscure.

Optional privacy only works if people use it correctly. If most users transact transparently, or if funds move repeatedly between transparent and shielded addresses, the privacy set thins and patterns emerge.

Analytics firm Arkham demonstrated part of this. Its tracking covers transparent transactions and the flows between transparent and shielded addresses, not fully shielded transfers.

Zcash founder Zooko Wilcox clarified that no shielded ZEC had been deanonymized. That clarification is accurate and also illustrates the point: the boundary of what remains private depends on user behavior rather than on protocol design.

So the correct way to evaluate Zcash is not by the strength of its cryptography. It is by shielded pool usage, wallet adoption and how consistently people stay inside it.

The Weakness in Mandatory Privacy

Monero’s weakness is not technical. It is access.

No exchange can audit a Monero transaction, which is precisely why compliance teams have removed it. Reported delistings reached 73 centralized exchanges by mid-2026.

The Monero community’s response has been to treat that as a feature. Pushed off centralized venues, activity migrates to decentralized swaps and peer-to-peer markets, which is the terrain where uncensorable privacy is supposed to matter.

That is coherent as a position. It also means the asset is progressively harder to acquire and exit through regulated channels, and liquidity concentrates in venues with less oversight.

Optimisus has covered infrastructure serving that migration, including direct bitcoin to Monero swap services.

The Third Approach Now Emerging

A newer category is attempting to sidestep the tradeoff by building compliance into the protocol layer.

Fully homomorphic encryption allows computation on encrypted data without decrypting it. Optimisus covered one such project reaching mainstream distribution in the piece on Zama listing on Revolut.

Others pair privacy with regulatory features directly, as with Casper’s work on quantum-safe compliant privacy for regulated real-world assets.

Whether any of these satisfies supervisors is unproven. The EU’s Article 79 does not define anonymity-enhancing coins precisely enough to answer in advance.

The Lesson for Protocol Designers

The useful takeaway is not which coin is better. It is that a cryptographic design choice made on technical grounds became the decisive regulatory variable years later.

Mandatory privacy maximizes censorship resistance and accelerates exclusion from the regulated system. Optional privacy trades some anonymity for continued access.

Neither is wrong. They are answers to different questions about what privacy is for.

What the past two years established is that the answer has consequences the designers did not choose, and that the regulatory environment reads protocol architecture more literally than most builders expect.

Sources

This is not financial advice.

Optimisus covers crypto and technology news for readers who want the detail behind the headline.

Topics
#Cryptography #FCMP #Monero #Privacy #Protocol Design #ZCash #Zero-Knowledge