Research Paper Finds Transaction Patterns Can Degrade Zcash Privacy

Just recently researchers from the University College London published a paper about the patterns found in “shielded” and “unshielded” Zcash transactions. The study explains when users switch between these types of addresses anonymity is degraded. The team concludes that while Zcash transactions can be private, it’s also possible to diminish privacy if certain usage patterns are chosen by the Zcash user.

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Researchers from London Publish a Paper That Reveals It is Possible to Shrink the Zcash Anonymity Set

A group of researchers have found Zcash anonymity can be degraded through certain usage patterns. Sarah Meiklejohn, Mary Maller, George Kappos, and Haaroon Yousaf from University College London published a paper called “An Empirical Analysis of Anonymity in Zcash” which finds certain patterns of Zcash use can “shrink” the cryptocurrency’s anonymity set. Essentially Zcash transactions can be used in a private manner (shielded) and a completely transparent (unshielded) manner. Users that move their Zcash back and forth between unshielded and shielded may be losing quite a bit of the anonymity they desire.

“We investigate all facets of anonymity in Zcash’s transactions, ranging from its transparent transactions to the interactions with and within its main privacy feature, a shielded pool that acts as the anonymity set for users wishing to spend coins privately,” explains the researchers’ paper.

We conclude that while it is possible to use Zcash in a private way, it is also possible to shrink its anonymity set considerably by developing simple heuristics based on identifiable patterns of usage.

Zcash Founder Responds Calling the Paper ‘Insightful’ and Recommends Users ‘Store Zcash in a Shielded Address’

The researchers conclude that ultimately in order for Zcash to fully preserve its anonymity set is to “require all transactions to take place within the shielded pool.” Otherwise, the study emphasizes the Zcash network must significantly expand the usage of the shielded pool. On May 8 the founder of Zcash, Zooko Wilcox, and the team’s marketing director, Josh Swihart, responded to the research and called it an “insightful new paper.” Further, the Zcash team members explained another analysis was released a few months ago with similar findings.

“This research demonstrates different ways to pierce the veil of your privacy if you, or the people that you transact with, move money from a transparent address to a shielded address and then move some of that money back to a different transparent address — Similar analysis was released several months ago — However, this research includes new techniques that can heuristically link patterns of ‘unshielded to shielded to unshielded’ transactions,” explains the response from Swihart and Wilcox.

It is valuable to understand how much privacy is lost when using shielded addresses as a pass-through mechanism, but using it in that way is not recommended — Instead, store your Zcash in a shielded address. When paying someone, send Zcash from your shielded address to their shielded address — If Zcash is transacted in this way, the results of this paper do not apply and transaction privacy is maintained.

Users of Zcash on social media and forums like r/ZEC didn’t seem too phased about the paper published by the University College London researchers. One Zcash user writes on May 11, “I have read the original paper, I don’t think it will make a difference when all transactions are shielded, which is where we are headed to anyway — Furthermore, nobody is stopping anyone from using multiple shielded addresses now.”

What do you think about the paper released about Zcash from the researchers at the University College London? Let us know what you think about this subject in the comments below.

Images via Shutterstock, Pixabay, and the Zcash website.

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