The Horizen community has voted to support a new update for deprecating the Horizen mainchain shielded pools. The upgrade will remove shielded transactions with transparent inputs from the Horizen mainchain, eliminating all privacy features of the protocol’s native token, ZEN. 

Horizen Community Approves Update to Remove Privacy Features

In a Tuesday blog post, the team behind the Horizen blockchain revealed that the community had approved the ZenIP 42204 upgrade. This will result in removing shielded transactions with transparent inputs from the Horizen mainchain, eliminating support for shielded transactions (T addresses to Z addresses) at the consensus level. 

Following the upgrade, ZEN will no longer be considered a privacy coin after this change. The deprecation is intended to mitigate potential regulatory threats while promoting sustainable growth within the ecosystem. The team wrote:

“It proposes a solution to eliminate technical debt and avoid regulatory threats that can prevent the greater Horizen community from fully and freely participating in our ecosystem.”

The team claimed that removing privacy features at the mainchain level does not mean that Horizen will abandon its commitment to privacy. Instead, the project will focus on achieving data integrity and privacy freedom through its decentralized mainchain while leveraging its sidechain platform to enhance data privacy on a more scalable and resilient basis.

The team wrote that one of the key drivers behind the deprecation is the reliance on ZCash’s “outdated” Sprout technology for implementing shielded transactions. By moving away from this technology, Horizen aims to create space for improving and innovating privacy technologies, ensuring it stays at the forefront of the industry.

In a recent episode of the “Beyond the Horizen” podcast, Rob Viglione, co-founder of the Horizen blockchain, and Jordan Calinoff, Head of Strategy at Horizen Labs, claimed removing privacy features can facilitate the growth and competitiveness of the Horizen ecosystem, positioning it to overcome future challenges.

The deprecation of the Horizen mainchain shielded pools will come as part of the upcoming mandatory software upgrade, ZEN 4.1. The target release windows for this upgrade are set for August 2023 for the Testnet and September 2023 for the Mainnet.

Horizen is a blockchain ecosystem that enables privacy-preserving decentralized applications. Using ZEN as its native asset, Horizen has a main blockchain and a sidechain platform that enables developers to build custom private or public blockchains and decentralized applications.

Horizen Ditches Privacy Features Amid Growing Regulatory Pressure

Horizen’s decision to deprecate mainchain shielded pools comes amid growing regulatory scrutiny of privacy cryptocurrencies. For one, the European Union lawmakers have approved the Markets in Crypto Assets (MiCA), a set of crypto-related regulations intended to close existing EU financial services legislation gaps. 

As part of the MiCA regulations, crypto-asset service providers must gather and keep a sizable amount of personal data. This includes personal identification data, transaction history, and other sensitive data.

Likewise, the Travel Rule, adopted by the Group of Seven (G-7), requires financially identifiable data to be included in each transaction step. This is expected to make it more challenging to launder money and channel criminal proceeds through legal and financial transactions.

These regulations have forced Binance to consider delisting so-called “privacy coins” such as Monero and Zcash in several countries, including France, Italy, Spain, and Poland. Last month, the exchange said it could no longer offer enhanced anonymity crypto assets, or CAE, in several European countries due to local regulatory requirements.

However, following discussions with some projects, the world’s largest crypto exchange has ostensibly reversed decisions to delist some tokens. “You spoke, and Binance listened,” privacy project Secret Network tweeted. “Binance will not be delisting SCRT, along with six other privacy-focused cryptocurrencies, in European countries,” it added. 

Nevertheless, Horizen’s ZEN token is trading at $7.08, down 1.4% over the past 24 hours. The token is up around 7% over the past week and more than 12% over the past 14 days. 

Do you think ZEN’s decision to remove privacy features will benefit the blockchain? Let us know in the comments below. 

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