Crypto Forensics Firm Chainalysis Adds Tracing Support for Zcash, Dash

The blockchain intelligence firm says it has added zcash and dash to its transaction-tracing products.

AccessTimeIconJun 9, 2020 at 10:00 a.m. UTC
Updated May 9, 2023 at 3:08 a.m. UTC

Blockchain intelligence firm Chainalysis is drawing back the curtain on privacy coins.

Chainalysis announced Monday its Reactor and Know Your Transaction (KYT) products can now trace zcash and dash, two privacy coins whose technical underpinnings theoretically make their transaction flows difficult for investigators to follow. Both have been delisted by global exchanges wary of regulatory scrutiny. 

Chainalysis’ support poses a likely challenge to their secretive reputation, however. Chainalysis said that it can partially trace over 99% of zcash transactions and perform “successful investigations” on the handful of dash transactions transferred through “PrivateSend.”

The coins, which together account for $1.5 billion in daily crypto trading volume, broadens the reach of Chainalysis’ two key products: Reactor, an crypto investigations platform whose clients include the U.S government, and KYT, a real-time transaction monitor for exchanges that previously covered 90% of all crypto transactions. 

In a blog post that downplayed how private these “privacy coins” actually are, Chainalysis said it can follow dash and zcash transactions without completely co-opting user privacy or leaving investigations at dead ends.

“The two cryptocurrencies’ privacy features – both in how they’re built as well as how they’re used in the real world – leave room for investigators and compliance professionals to investigate suspicious or illicit activity and maintain compliance,” Chainalysis said.

Dash’s PrivateSend mixes multiple fund transfers together as an optional core feature. But dash is technologically similar to bitcoin, and the techniques that Chainalysis said prove successful on CoinJoin bitcoin mixers also work on dash.

Zcash, a privacy coin by design, offers a “shielded pool” service that encrypts wallet addresses, balances and transactions via the zero knowledge proof zk-SNARK. Chainalysis said this encryption is hardly insurmountable; only about 0.9% of zcash transactions are shielded right now.

“So even though the obfuscation on zcash is stronger due to the zk-SNARK encryption, Chainalysis can still provide the transaction value and at least one address for over 99% of ZEC activity,” Chainalysis said.

Additionally, Chainalysis said zcash usage patterns could serve to undermine their party’s anonymity.

Jonathan Levin, chief of strategy at Chainalysis, said the additions may prompt exchanges to consider relisting or adding dash and zcash, both of which have been delisted from global exchanges in the past.

“We seek to provide transaction monitoring software to anyone who wants to be able to transact in different currencies, and I think that we may see businesses become more comfortable with these coins as a result,” he said.


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