Zcash explained: how shielded transactions hide sender, amount

Zcash (ZEC) is a privacy-focused cryptocurrency launched in October 2016 that lets users choose between transparent transactions and shielded ones, the latter concealing the sender, recipient and amount behind zero-knowledge proofs known as zk-SNARKs. Built from Bitcoin's original codebase, the network keeps proof-of-work mining and a fixed supply cap of 21 million ZEC. Roughly 29% of issued ZEC was held in shielded pools as of October 2026, according to the official network dashboard, after a sharp 2026 rally and renewed institutional interest pushed the decade-old project back into the spotlight.

Why it matters

Shielded transactions work by representing private funds as cryptographic records called notes inside shielded pools. When a user pays privately, the wallet spends existing notes and creates new ones for the recipient, publishing only a zk-SNARK proof and a public commitment, so observers can verify the chain stayed valid without seeing who paid whom or how much. A cryptographic nullifier blocks double-spending, and viewing keys let holders selectively disclose activity to tax authorities or auditors without giving up control of their funds, a compliance feature Monero's default-anonymity model does not offer.

The technology has had to prove itself. In 2026 developers discovered and patched a vulnerability in Orchard's zero-knowledge proofs that could have let an attacker mint ZEC. The Ironwood upgrade followed with enhanced safeguards, restricted activity in the original Orchard pool and introduced a turnstile mechanism that migrates existing funds while enforcing supply-integrity checks. The earlier Orchard upgrade in 2022 had already removed the trusted-setup requirement through the Halo 2 proving system.

Market impact

New ZEC enters circulation through Equihash proof-of-work mining, with the block subsidy at 1.5625 ZEC after the November 2024 halving. A funding model introduced in November 2025 splits new issuance 80% to miners, 8% to community grants and 12% to a development fund controlled by ZEC holders.

Adoption still faces friction. EU legislation will prohibit crypto service providers from maintaining anonymous blockchain accounts from July 2027, and some exchanges have delisted privacy coins or restricted shielded deposits and withdrawals. Neither ZEC nor XMR guarantees complete anonymity, since transfers crossing pool boundaries can leak amounts and exchange records can expose users. Watch whether the shielded-pool share keeps climbing and whether exchange access to shielded transfers widens or narrows.