Chainalysis’ compliance software offerings now support privacy coins

Chainalysis recently revealed that it added support for two privacy coins — Zcash (ZEC) and Dash (DASH) — in two different products.

Chainalysis reveals that its software can track DASH and ZEC

According to new information, Chainalysis’ investigation software, Chainalysis Reactor, as well as its Know Your Transaction (KYT) offering can now track two new coins. The company announced as much yesterday, June 8th.

In other words, anyone who uses this software can easily track compliance for the combination of these coins’ daily trading volume, which sits at $1.5 billion.

Of course, both of these are privacy coins — cryptocurrencies that focus on the privacy and anonymity of transactions. Zcash offers a unique feature known as shielding, which lets crypto users encrypt their activities on the blockchain. As for Dash, the coin has a PrivateSend feature, which is optional for any trader. This is basically an integrated crypto mixer which hides the coins’ origin address for free.

After Chainalysis studied both crypto projects, it found that encryption used by Zcash offers better privacy than mixing. Despite the privacy feature, the company believes that it is able to connect inputs and outputs on some transactions that use PrivateSend. In some cases, it can even identify an address from which the coins arrived.

How can Chainalysis track privacy coins’ transactions?

This is a groundbreaking discovery, which shows that it is still possible to successfully investigate a transaction using PrivateSend. Not only that, but 0.7% of transactions using Dash and its PrivateSend and mixing only make around 9% of all DASH transactions.

As for Zcash, around 14% of its transactions use one of its protocol’s shielded pools. But, only around 0.9% of all ZEC transactions are completely encrypted. In other words, less than 1% of uses have their sender, receiver, and the transaction itself protected. The obvious conclusion is that people simply don’t use the privacy features of the protocol that much. This, in turn, means that Chainalysis can still keep track of these transactions in spite of significantly stronger security features that Zcash has.