Arkham’s 'Misleading' Zcash Tracking Claims Spark Outrage

Blockchain forensics platform Arkham Intelligence has sparked outrage in the crypto community after posting a new update claiming it can now track Zcash transactions, apparently including shielded ones.

In an X thread on Monday afternoon, Dec. 8, Arkham said it has identified more than half of Zcash transactions, including "shielded and unshielded transactions," representing $420 billion in ZEC-related volume. The firm said it has linked half of Zcash transactions to “known individuals and institutions.” Arkham specified that now 53% of all Zcash transactions are labeled, 48% of inputs and outputs are linked to entities, and 37% of balances are tagged.

The backlash to Arkham’s post was nearly immediate. Helius CEO Mert Mumtaz‏ called out the firm for using a “scummy clickbait title.” Mumtaz said in replies to Arkham’s announcement that the blockchain analytics firm hasn’t been able “to do jack all to shielded txns but you include in there for a few clicks.”

Others also accused Arkham of using misleading wording, saying the announcement gave the impression that shielded activity on the leading privacy-focused chain was being tracked when that wasn't the case.

Zcash has two transaction types, transparent and shielded, and transactions aren't shielded, or private, by default. Shielded transactions use ZK-proofs to hide sender and receiver addresses and amounts so that on-chain observers can’t link them to specific identities.

But the privacy guarantees of Zcash also highly depend on how users actually move funds on-chain. As documented in academic analyses, it’s still possible to shrink Zcash’s anonymity set “considerably by developing simple heuristics based on identifiable patterns of usage.”

Arkham Backtracks

Amid the backlash, Arkham clarified that shielded transactions “are not accounted for in the 50% of Zcash transactions labeled.” The clarification came after Zcash founder Zooko Wilcox responded to Arkham’s thread, agreeing that the firm’s language was misleading but clarifying that Arkham is “just tracking wallets that opted into public transparency.”

Amid the outrage, ZEC is up 5% on the day and 24% on the week, trading at $440, per The Defiant’s price tracking page. The privacy asset is recovering some of its losses after reaching as high as $700 late last month, following a multi-month rally.