Monero, Zcash, and Canton Network: Who Is the King of Privacy?

Author: Tiger Research

Key Takeaways

• Blockchain’s core advantage—transparency—can expose corporate trade secrets and investment strategies, posing material risks to enterprises.
• Fully anonymous privacy models like Monero do not support KYC or AML, making them unsuitable for regulated institutions.
• Financial institutions require selective privacy that protects transaction data while remaining compatible with regulatory compliance.
• Financial institutions must determine how to connect with open Web3 markets to enable expansion.

1. Why Is Blockchain Privacy Necessary?

One of blockchain’s defining features is transparency. Anyone can inspect on-chain transactions in real time, including who sent funds, to whom, the amount, and when it was sent.

However, from an institutional perspective, this transparency presents clear challenges. Imagine a scenario where the market can observe how much NVIDIA transferred to Samsung Electronics, or precisely when a hedge fund deploys capital. Such visibility would fundamentally alter competitive dynamics.

The level of information disclosure individuals can tolerate differs significantly from what corporations and financial institutions can accept. Transaction histories and the timing of institutional investments constitute highly sensitive data.

Therefore, expecting institutions to operate on blockchains where all activities are fully exposed is unrealistic. For these participants, a system without privacy is less a practical infrastructure and more an abstract ideal with limited real-world applicability.

2. Forms of Blockchain Privacy

Blockchain privacy is generally divided into two categories:

• Fully anonymous privacy
• Selective privacy

The key distinction lies in whether information can be disclosed when another party requires verification.

2.1. Fully Anonymous Privacy

Fully anonymous privacy, in simple terms, hides everything.

Senders, receivers, and transaction amounts are all concealed. This model stands in direct contrast to traditional blockchains, which prioritize transparency by default.

The primary goal of fully anonymous systems is to prevent third-party surveillance. Rather than enabling selective disclosure, they aim to completely block external observers from extracting meaningful information.

Source: Tiger Research

The image above shows a Monero transaction record, a representative example of fully anonymous privacy. Unlike transparent blockchains, details such as transfer amounts and counterparties are not visible.

Two characteristics explain why this model is considered fully anonymous:

• Output Total: The ledger does not display specific numbers but instead shows values as "confidential." Transactions are recorded, but their contents cannot be interpreted.
• Ring Signature Size: Although a single sender initiates the transaction, the ledger mixes it with multiple decoys, making it appear as if multiple parties are sending funds simultaneously.

These mechanisms ensure that transaction data remains opaque to all external observers without exception.

2.2. Selective Privacy

Selective privacy operates under a different assumption. Transactions are public by default, but users can choose to make specific transactions private by using designated privacy-enabled addresses.

Zcash provides a clear example. When initiating a transaction, users can choose between two address types:

• Transparent Address: All transaction details are publicly visible, similar to Bitcoin.
• Shielded Address: Transaction details are encrypted and hidden.

Source: Tiger Research

The image above illustrates which elements Zcash can encrypt when using shielded addresses. Transactions sent to shielded addresses are recorded on the blockchain, but their contents are stored in encrypted form.

While the existence of the transaction remains visible, the following information is hidden:

• Address Type: Use of a shielded (Z) address instead of a transparent (T) address.
• Transaction Record: The ledger confirms that a transaction occurred.
• Amount, Sender, Receiver: All are encrypted and inaccessible to external observation.
• Viewing Permissions: Only parties granted viewing keys can inspect transaction details.

This is the essence of selective privacy. Transactions remain on-chain, but users control who can view their contents. When necessary, users can share viewing keys to prove transaction details to a counterparty, while all other third parties remain unable to access the information.

3. Why Financial Institutions Prefer Selective Privacy

Most financial institutions have Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations for every transaction. They must retain transaction data internally and respond promptly to requests from regulators or oversight bodies.

However, in environments built on fully anonymous privacy, all transaction data is irreversibly hidden. Because information cannot be accessed or disclosed under any conditions, institutions are structurally unable to fulfill their compliance obligations.

A representative example is the Canton Network, which has been adopted by the Depository Trust & Clearing Corporation (DTCC) and is currently used by over 400 companies and institutions. In contrast, Zcash, although also a selective privacy project, has seen limited real-world institutional adoption.

What explains this disparity?

Source: Tiger Research

Zcash offers selective privacy, but users cannot choose which pieces of information to disclose. Instead, they must choose whether to disclose the entire transaction or not at all.

For example, in a transaction where "A sends $100 to B," Zcash does not allow only the amount to be hidden. The transaction itself must either be fully hidden or fully disclosed.

In institutional transactions, different parties require different information. Not all participants need access to all data within a single transaction. However, Zcash's structure forces a binary choice between full disclosure and full privacy, making it unsuitable for institutional transaction workflows.

In contrast, Canton allows transaction information to be split into separate components for management. For instance, if a regulator only requires the transaction amount between A and B, Canton enables institutions to provide only that specific piece of information. This functionality is achieved through Daml, the smart contract language used by the Canton Network.

Other reasons for institutional adoption of Canton are covered in greater detail in prior Canton research.

4. Privacy Blockchains for the Institutional Era

Privacy blockchains evolve alongside changing demands.

Early projects like Monero were designed to protect individual anonymity. However, as financial institutions and enterprises begin entering blockchain environments, the meaning of privacy has shifted.

Privacy is no longer defined as making transactions invisible to everyone. Instead, the core objective has become protecting transactions while still meeting regulatory requirements.

This shift explains why selective privacy models like the Canton Network have gained attention. Institutions need more than just privacy technology—they require infrastructure designed to align with real-world financial transaction workflows.

In response to these needs, more institution-focused privacy projects continue to emerge. Looking ahead, the key differentiating factor will be how effectively privacy technologies can be applied in actual transaction environments.

Alternative forms of privacy that oppose the current institution-driven trend may arise. However, in the near term, privacy blockchains are likely to continue developing around institutional transactions.