There is a watershed in the privacy coin track—the Zerocash protocol. Mainstream projects like Zcash, PirateChain, Horizen, Komodo, and PIVX have all adopted this scheme, but why did they choose it? The story behind this is actually quite complex.

From a theoretical design perspective, Zerocash's appeal is obvious. Its promise of maximizing the anonymous set—covering all minted coins on the chain in theory—means transaction traceability is far more difficult than other schemes. Coupled with zkSNARKs technology, the proof size is astonishingly small, and verification is incredibly fast. Especially the complete hiding of transaction amounts, allowing users to transfer anonymously directly, without needing to convert back to the base currency first. This sounds like the ultimate solution for privacy coins.

But in reality, no perfect scheme exists. Zerocash's computational costs used to be a nightmare—the processing required for private transactions was enormous and headache-inducing. However, after upgrading to the Sapling version, this issue was significantly alleviated.

The real problem lies in the "trusted setup" phase. This is no small matter. The team must arrange a complex trust mechanism to initialize system parameters. If there are vulnerabilities in the code, flaws in cryptography, or issues with the trusted setup itself, the consequences could be catastrophic—attackers might generate unlimited coins out of thin air, and this additional supply would be completely undetectable. This is not just a mathematical problem but also a systemic design issue.

How does Zcash address this risk? They adopted multi-party ceremonies. In the initial Sprout phase, six individuals participated in the setup, cleverly designed so that only if all six colluded could they leak the initial parameters. In other words, you need to trust that these six people are honest and have truly destroyed the initial parameters, and that the ceremony was executed correctly.

However, the Sprout setup was later found to have flaws. Zcash decided to organize a new trusted setup ceremony, this time involving 88 participants. The more people involved, the exponentially harder it becomes to collude, theoretically reducing the risk.

From a cryptographic standpoint, Zerocash relies on relatively new theories—particularly on assumptions like KEA (Knowledge of Exponent Assumption), which are not standard cryptographic assumptions. What does this mean? It means the security of the entire system depends on these mathematical assumptions remaining unbroken in the future. If one day these assumptions are cracked, the risk exists.

Moreover, Zerocash's structure is so complex that few people truly understand all the cryptographic details and code logic involved. This black-box nature raises concerns—if only a few hold the core knowledge, errors could occur, and such errors might remain hidden for a long time.

Compared to its predecessor Zerocoin, Zerocash has indeed made progress. Zerocoin's shortcomings were large proof sizes and limited hiding capabilities. Zerocash, through zkSNARKs, shrinks proof sizes to negligible levels, achieves verification speeds that are astonishing, and can hide all transaction amounts, even allowing direct anonymous transfers without fixed denominations.

In terms of privacy schemes, Zerocash is indeed at the forefront. But its complexity, reliance on trusted setup, and potential cryptographic risks are things users need to truly understand. This is not simply a matter of "more privacy is better," but an eternal trade-off between privacy, usability, and security guarantees.