Bitcoin heralded triumphant success as the first peer-to-peer currency, yet its profound transparency quickly sparked the search for a cryptocurrency capable of a confidential transaction. A hard fork of Bitcoin, Zcash sidled up to the likes of Dash and Monero to enter the heated privacy coin race in 2016, toting a unique cryptographic proposition allowing users to choose between public and private transactions.
With its radical usage of zero-knowledge cryptography, Zcash offers its users the ability to send and receive funds with optional privacy, anonymity, and untraceability.
What is Zcash?
The struggle of Bitcoin’s privacy problem laid the context for the open-source, decentralized Zcash. In exposing all transaction information to the public, Bitcoin lacks the sufficient level of privacy demanded by all mass-scale financial systems.
In the wake of this dilemma, Zcash surfaced with an engineered solution claiming privacy, and with it and the inevitable assurance its users would be guaranteed anonymity if they so desired.
The artist formerly known as “Zerocash” asserts these qualities in a space where most cryptocurrencies fall short as an adequately confidential means of exchange. Businesses require confidentiality to protect their supply chains and interests, while individuals must have privacy to uphold the most basic of human values.
Zcash’s most notable rival, Monero, solves this problem by committing all of its users and their transactions to total privacy. While this a technically sound solution, it renders Monero off-limits for businesses that have even the smallest sentiment of compliance – consider the tax-man’s opinion of a blank business ledger. The answer?
Optionally-shielded transactions – Zcash enables users to transact without disclosing any identities or values.
One wouldn’t be naive to consider Zcash a privacy-enhanced version of Bitcoin, with the team itself affirming this comparison with a suitably ‘techy’ analogy:
If Bitcoin is like http for money, Zcash is https- a secure transport layer.
That is, whereas Bitcoin is an open ledger, Zcash’s encrypted open ledger offers an additional layer of privacy to the existing blockchain – recording all transactions on-chain while masking the sender, receiver, and transaction sum.
While the concept of “anonymity” may conjure up images of nefarious dark web cybercrime akin to the infamous Silk Road, there are many legitimate use cases for Zcash’s anonymous transactions.
An individual may use Zcash to make a sensitive purchase such as medication, access a confidential service such as legal advice, or a business may employ shielded transactions to protect its valuable trade secrets (such as suppliers).
Crucially, Zcash users can send funds with or without anonymity, making the cryptocurrency fully compatible with any tax/anti-money laundering regulations that might arise along the way. According to Zcash:
Yes, but bad guys will use anything. Bad guys use cars, bad guys use the Internet, bad guys use cash, bad guys use the current banking system. Our goal is not to invent something that bad guys can’t use, it is to invent something that can empower and uplift the billions of good people on this planet.
Strictly speaking, Zcash is a pseudo-open-source project; the outcome of a collaboration between a public team and the Zcash Electric Coin Company. With these complex dynamics in mind, it can be said the project’s 2016 genesis was somewhat unorthodox – the team opting for a private $2 million crowdfund from a select group of investors.
While the rapid progress of Zcash is admirable given this modest sum, the team’s privatized appropriation of capital ruffled feathers amongst advocates of more open-source funding practices.
How Zcash Works
Unlike the bulk of privacy coins, Zcash transactions are not ‘private’ by default. Its ecosystem is comprised of both “transparent” and “shielded” addresses, whereby Zcash held and transacted by a transparent address is visible, and invisible in the case of the latter.
The novel dynamism of Zcash’s optional privacy may be both its greatest strength and weakness. While optional privacy makes Zcash appropriate for a number of usage cases, it raises the concern of fungibility; one of the founding principles of the Zcash project.
Whereas Monero guarantees the value of its coins by masking all transactions, the exposure of transparent addresses may compromise the integrity and fungibility of the Zcash network – with the vast majority of Zcash coins patently held by transparent addresses on the Zcash blockchain record.
In spite of this flaw, Zcash stacks up well against its contenders, with its only other significant shortcoming being its inability to conceal IP addresses, a feature offered only by Verge.
At its core, Zcash is a proof of work-based hard fork of Bitcoin with 2.5-minute block confirmation time (versus Bitcoin’s 10 minutes). The Equihash algorithm used to mine Zcash demands notoriously large quantities of RAM, yet the 200 Watts per day the process uses makes Bitcoin’s 1293 Watts seem an insatiable power-hungry leviathan.
The echoes of Bitcoin’s supply model resonate throughout Zcash; both bear a cap of 21 million coins, both have a rate of issue that is halved every two years, and naturally, both are underpinned by a thriving PoW-mining economy.
Yet unlike its bigger brother, Zcash mining features a contentious rewards structure, allocating 10% of all ZEC solely to founders, investors, the Zcash company, and the Zcash foundation, a Delaware-based not-for-profit organization which boldly commits itself to “serving the Zcash community and promoting financial privacy.”
Essentially a ‘mining tax’, this “founder’s reward” has once again deeply disturbed cryptocurrency enthusiasts, who see this as a “rich get richer” type mentality. Those in favor of more decentralized practices would point to Bitcoin or Ethereum as fairer, more equitable models, both of which are established as truly open-source organizations (versus the Zcash company).
Zcash’s core mechanism to construct transaction privacy is its revolutionary zero-knowledge proof mechanism, Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, or Zk-SNARK, for short.
The term may appear intimidating, but in practice the function of the Zk-SNARK is simple enough to grasp, allowing the Zcash network to ensure the ledger’s balances are maintained without the details of parties or transaction amounts being disclosed.
During transactions, Zk-SNARK records ‘shields’ on the blockchain, essentially placeholders that obfuscate the real addresses and transaction quantities of both parties.
News & Online Presence
Zcash maintains a respectable well-rounded presence with a dedicated following typical of open-source projects. Their blog is regularly and respectfully maintained with technical developments, HR announcements, and general commentary on the progress of the project.
Weekly update – March 30: rounding out review for the next release (scheduled for April 9); roadmap visual; audits announcement; next phase of Sapling MPC; presentations at various technical and developer events https://t.co/5l9niTvNel
— Electric Coin Company (@zcashco) March 30, 2018
The Zcash Team
As founder and CEO, Zooko Wilcox stands as the beating heart of the Zcash project. Wilcox, a battle-hardened cryptographer with some 20 years experience, has roots in the intimate 1980s/90s origins of cryptocurrency, having worked on the fabled DigiCash project, the very first attempt to create a digital currency.
In a similar vein to Cardano, Zcash proclaims status as having a “science-driven” team, with an academically-studded cast fairly warranting this claim. The team’s scientists are acclaimed alumni of a chorus of renown academic institutions, most notably Berkeley and MIT.
Perhaps two of the world’s weightiest advisors lend their experience to the Zcash project, Bitcoin Chief Scientist Gavin Andresen, and Ethereum’s Vitalik Buterin.
The improvement that the Zcash team is working on is the addition of privacy. We have assembled a world-class team of cryptographers and engineers, made scientific advances in the underlying mathematics, and built a working, privacy-preserving variant of the Bitcoin software.
In partnership terms, all is quiet on the Western front, bar one prolific announcement in May 2017.
Despite their CEO’s vitriolic blasting of cryptocurrency, JPMorgan shunted Zcash into the spotlight after unveiling the decision to leverage their technology, with Zcash implementing an instance of its zero-knowledge security layer for JPMorgan’s Quorum project.
With a minute 3.5 million coins in circulation, Zcash has traditionally offered immense value to its investors, despite the outlandish “pump and dump” price action is seen when it went live in November 2016, surging to $6864, only to arrive at $30 but a month later.
After plummeting from this short-lived high, the coin stayed well above the $200 mark before erupting once again in late May 2017 spurred on by the JPMorgan announcement. Seeing a near, $900 climax in early January, the coin has succumbed to the plight of an extended bear market, once again arriving below $200.
Where is Zcash Trading?
Zcash is currently trading on nearly every noteworthy exchange imaginable, including Huobi, HitBTC, Bitfinex, Binance, Poloniex, Bittrex, and Kraken.
The Zcash project boasts technological prowess with its breakthrough zero-knowledge cryptography, even seducing the seemingly crypto-conservative JPMorgan.
Yet despite its sound scientific footing and attractive valuation, Zcash does not have first-mover advantage in the competition for privacy; an increasingly vicious battle amongst a number of equally well-armed warriors.
It is crystal-clear then that technology alone will not see Zcash, or any other coin for that matter, secure its place as the preferred privacy solution. A whole host of factors will decide the fate of this project, whether it be their securing prominent partnerships, a more expansive community, or their ability to market themselves in the fiercely cut-throat space that is consumer society.
While Zcash may have claimed its fair share of battles, it must win the war to take a seat in the hall of fame.
For more information about Zcash including price, market cap, technical information and social media links, please see our Zcash coin profile.Filed Under: Coin Intros
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