1. Similar to Bitcoin

Grayscale’s first reason for getting behind Zcash is that it doesn’t try to reinvent the wheel. The paper praises Zcash for “preserving what Bitcoin got right.” That includes various aspects of the economic model (limited supply, disinflationary), which seem to make Zcash a potential store of value, like gold, as well as the technology (decentralization, immutable record-keeping), which helped Bitcoin achieve its place at the top of the crypto kingdom with a price exceeding $10,000 at press time.





Grayscale describes Zcash’s attributes as “similar to precious metals, BTC [Bitcoin], and ETC [Ethereum Classic], making it an inflation hedge over long-term investment horizons.” (Fortune detailed this argument—the analogy between cryptocurrencies and gold—in depth for a January cover story.)

But anyone can clone Bitcoin—it’s as simple as copying the codebase and hosting an ICO, or initial coin offering. The differences between Zcash and Bitcoin (and other cryptocurrencies) are where the analysis gets more interesting.

2. Privacy

Zcash has pioneered a cutting-edge privacy technology, called “zk-SNARKs,” which enables everyone on the Zcash network to verify financial transactions as legitimate even where portions of the blockchain, or the shared record of Zcash payments, remain encrypted, thus masking details such as origin, destination, and sum exchanged from view. Grayscale suggests that this innovation improves upon the Bitcoin blockchain which, in contrast, leaves all those data visible. “We think of ZEC as the first globally accessible ‘offshore’ investment opportunity or a Swiss bank account in your pocket, so to speak,” Grayscale says.









In other words, the cryptocurrency has added privacy assurances similar to those traditionally afforded in foreign jurisdictions like Switzerland. In fact, Grayscale says Zcash can be considered an improvement on Swiss banking since the network is more accessible to less wealthy individuals and is decentralized. With Zcash, “there is no single point of failure. Investors are not bound to the success or failure of a single entity, political regime, or economy”—as they are in Switzerland. This is the major argument in support of Grayscale’s eye-popping $60,000 hypothetical price projection.





3. Fungibility

An added benefit of Zcash’s optional privacy is that it enables any Zcash token to be traded like any other Zcash token. So-called private transactions allow users to obscure the details of their payments and therefore help prevent anyone from discriminating between coins based on their history. This property, known as fungibility, is “necessary in order for [a currency] to become a liquid medium of exchange,” Beck says.

This is how traditional cash works; no one should know where past dollars were spent. “Since the absence of knowledge about the source or prior use of ZEC is generally accepted as a feature of the Zcash Network, the costs of accepting all ZEC are the same,” Beck writes. Bitcoin, on the other hand, forever records the provenance of its coins, thereby opening up the possibility for discrimination.





Grayscale includes other reasons for betting on Zcash: the expertise of the team behind it, its partnership with J.P. Morgan Chase (JPM, +0.68%), and the potential for Zcash to be used in global trade.





There are, of course, reasons to steer clear of cryptocurrencies aside from the vertiginous price swings: security risks, market adoption uncertainties, unsettled regulations. But investors with an appetite for risk may want in any way.

One investor, Linda Xie, founder of Scalar Capital, a cryptocurrency hedge fund, an alum of the Bitcoin exchange Coinbase, tells Fortune, “I’m bullish on Zcash.”





“Privacy is one of the most undervalued and misunderstood features of cryptocurrencies,” she adds.





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Grayscale seems to agree. “ZEC could become the dominant digital currency for privatized wealth storage and transactions,” Beck writes in his paper. “On the other hand, BTC may continue to be the dominant peer-to-peer digital currency, but will likely require users to sacrifice more privacy as it gains mainstream adoption and regulatory acceptance around the world.”





Grayscale says it plans to provide a public quotation on the share prices for its Zcash Investment Trust by the end of 2018. The company has plans to create five new cryptocurrency funds (four single asset-specific and one basket) by the end of the first quarter of the year.



