For years, privacy projects have promised to provide completely confidential transactions, a feature that public blockchains have been unable to deliver. Most blockchains run a public ledger, and although identities are pseudonymous, balances and flows are still traceable.
Privacy has been a concern since the Bitcoin whitepaper, but recently reemerged as a narrative and has been positioned as crypto’s next moat. Even CZ said: “(Lack of) privacy may be the missing link for crypto payments adoption.
Privacy advocate and Ethereum co-founder Vitalik Buterin recently donated to Shielded Labs “to support the continued development of Crosslink, a security-focused upgrade to Zcash’s consensus architecture”, showing a broader industry recognition of the need for true transactional privacy.
Early privacy-focused networks were designed to conceal the identity of senders and recipients, while still enabling the network to verify the validity of transactions. They aimed to combine transactional confidentiality with cryptographic auditability.
Most of those projects adopted proof-of-work (PoW) as their consensus mechanism. However, proof-of-work is not what enables privacy. It is a method for securing and ordering the ledger in a decentralised manner. Privacy is achieved through separate cryptographic primitives. Monero, for example, uses Ring Signatures, Stealth Addresses and Bulletproofs. Zcash relies on zk-SNARKs. These constructions allow the network to verify correctness without disclosing key transactional details.
Monero and Zcash initially chose proof-of-work largely for pragmatic and security reasons. However, the recent selfish mining attack by Qubic illustrates the structural sensitivity of proof-of-work systems to economic incentive shifts. Qubic, led by Sergey Ivancheglo, reportedly accumulated a significant share of Monero’s global hashrate, which provided the team with the technical capacity to perform selfish (or “silent”) mining, intentionally withholding mined blocks before broadcasting them to trigger chain reorganizations, censor transactions through empty blocks, or potentially attempt double spends.
Notably, this was not a confirmed 51% attack. The precise hashrate percentage is difficult to measure, and the outcome is probabilistic. Qubic may have achieved the reorg with less than 51% through favorable timing, though CFB’s public warnings ahead of the event suggest a degree of deliberate coordination rather than pure luck.
That concentration was not achieved through a protocol exploit, but through market-based incentives. Qubic’s “useful proof-of-work” model redirected Monero mining rewards, converting XMR into USDT and using the proceeds to buy and burn QUBIC tokens. As a result, hashpower migrated towards the most profitable configuration, Qubic, granting them the ability to successfully pull off an 18-block-long reorg in September 2025, its deepest on record, replacing roughly 36 minutes of history and invalidating 118 previously confirmed transactions.
This dynamic underscores that security is a function of active hashpower in PoW blockchains, and hashpower is economically mobile. Miners optimise for yield. If an overlay model offers superior returns, computational resources can be rapidly reallocated, even on networks designed to resist ASIC centralisation, such as Monero’s RandomX.
Hybrid Consensus and Zano as a Working Example
One system addresses this gap. In hybrid consensus, mining provides computational security, while staking adds economic participation, resolving the conflict that only PoW systems face.
Zano presents one implementation of this approach. Since its launch in 2019, it has operated a hybrid PoW/PoS model in which the chain alternates between proof-of-work and proof-of-stake blocks.
Proof-of-stake provides an alternative consensus model in which stakers lock tokens to secure the network, reducing energy consumption and altering the economic security assumptions.
The tension for privacy-oriented designs is that traditional proof-of-stake systems often require visibility into stake amounts and validator balances. That requirement can conflict with architectures that deliberately conceal holdings. The resulting design challenge is how to reconcile stake-based security with strong on-chain privacy, without introducing a “visibility gap” that undermines either validator accountability or transactional confidentiality.
The core risk this structure seeks to mitigate is the economic mobility of PoW security. In a pure proof-of-work network, if an actor assembles a majority of active hashpower, whether owned outright or temporarily rented, they can attempt reorganisations, censorship or double-spend attacks.
Hybridisation acts as a cost escalator. Even if hashpower is redirected, meaningful control would still require acquiring a substantial share of the staked supply, which, with roughly 75% of Zano’s total supply currently staked, would be both operationally complex and economically prohibitive, particularly given the limited exchange liquidity of approximately 1 million.
Rather than adding staking as an afterthought, the Zano blockchain was designed to ensure that validators could participate without revealing their balances. In March 2024, it introduced its Zarcanum upgrade, the first Proof-of-Stake scheme to implement hidden amounts.
In a standard staking model, participation creates a public footprint. Zarcanum, however, uses a scheme where staking amounts are mathematically “blinded.” It allows a user to prove they hold a specific weight in the network without the network ever seeing the actual balance. This keeps the user’s financial situation completely off-ledger while enabling the blockchain to come to an agreement and award rewards.
Zano uses additional privacy protections in addition to Zarcanum. Ring Signatures and Stealth addresses prevent transactions from being linked to specific users, and Pedersent Commitments (ZK) conceal amounts and asset type transacted. When used in tandem, these techniques guarantee the privacy of both participation and transaction history. Without leaving behind traces that the public can detect, the network can confirm that consensus rules are being followed.
While Monero has increasingly been forced to confront the structural limitations of pure proof-of-work, particularly in light of hashpower concentration risks, its community remains divided on whether and how to transition to a more secure consensus mechanism. Governance by rough consensus, while decentralised in ethos, has slowed decisive action on fundamental architectural change.
Zcash has signalled a move toward PoS, but implementation of a materially different consensus model is complex and likely to unfold over a multi-year horizon. By contrast, Zano has already operationalised hybrid consensus and, following its Zarcanum upgrade, is positioned to complete its transition toward a fully privacy-preserving proof-of-stake model in the near term, introducing significantly faster finality, giving it a potential first-mover advantage in aligning stake-based security with default on-chain confidentiality.
