Two of the world's biggest blockchains are converging

The Zcash Foundation, a nonprofit organization that develops the Zcash (ZEC) protocol and privacy-focused blockchain, has announced that its plans to bring privacy to the Cosmos (ATOM) ecosystem, and create a greater connection between the two chains. This will allow Zcash to effectively be moved from one chain to the other.

The Cosmos network aims to become the “Internet of Blockchains,” where any blockchain is able to communicate, share data and transact with each other. To achieve that, the project is implementing an Inter-Blockchain Communication (IBC) protocol, which facilitates interoperability.

The protocol is used for its so-called “pegzones”—that function as intermediaries between different blockchains. The Zcash Foundation plans to utilize this functionality, allowing Cosmos users to send and receive private and anonymous transactions.

“Zcash is unique among privacy solutions in that it has strong network effects: new users gain anonymity from all prior transactions of existing users, while in turn contributing to a greater anonymity set for the entire system,” stated the announcement on May 6, adding, “Our plan is to take advantage of these network effects by giving Cosmos users access to this anonymity set through an IBC-enabled pegzone.”

The project will be launched in two phases. In the first one, the pegzone will provide tokens backed by ZEC in an existing Zcash shielded pool—where coin information is kept private—the foundation noted.

"These tokens can be sent throughout the Cosmos ecosystem, allowing Cosmos users to trade and use ZEC," the announcement said.

In the second phase, the Zcash Foundation plans to add a shielded pool to the pegzone itself, providing shielded staking (a way of generating new coins), shielded IBC assets and shielded transfers across blockchains. This will bring Zcash's privacy features to the Cosmos ecosystem.

“This plan provides an increasingly useful privacy layer for the Cosmos ecosystem, while growing the anonymity set of Zcash. And our library-first design for Zebra will let us build the Zcash portions of the project using modular, reusable components,” the announcement concluded.

The project’s initial design document is already published in the “zcash-pegzone” repository on Github.

Recently, Decrypt also reported that Incognito, a somewhat similar project that allows users to anonymize—or “shield”—their Ethereum transactions, will expand its functionality to decentralized finance (DeFi) platforms, starting with Kyber Network’s mainnet in May.

But how far will privacy spread across the crypto ecosystem?