Zcash was created to provide users with the utility of Bitcoin whilst also giving them the ability to protect their privacy.
Its team’s science-based approach with a strong focus on decentralization and privacy has helped Zcash compete in an increasingly crowded market.
5 Interesting Zcash Facts You May Not Know
- Zcash was founded in 2016 by Zooko Wilcox-O’Hearn. The team included experienced cryptographers and scientists.
- Until 2020 20% of all mined Zcash will go to the founders as part of a “founders reward”. They have agreed to donate 10% of this to the non-profit Zcash foundation. This foundation is designed to serve the interest of all Zcash users.
- When Zcash first launched, a combination of hype and low supply drove the value of the coin over $5,000. This was over 6 Bitcoins at the time.
- Zcash uses a custom built zero-knowledge proof construction called a zk-SNARK in order to help protect users privacy while also ensuring nobody is cheating the system or stealing.
- As Zcash uses an open source protocol it is impossible for the Zcash Company to control any aspect of the cryptocurrency beyond providing updates to the software behind the Blockchain. This helps to ensure that Zcash is truly decentralized.
A Brief History Of Zcash
The precursor to Zcash started its life in form of Zerocoin. This John Hopkins University (Baltimore, USA) project was designed to address one of the primary drawbacks of Bitcoin, its lack of privacy.
This eventually led to collaboration with cryptographers from MIT and Tel Aviv University in 2014, who improved the underlying protocol of Zerocoin.
In 2015 the first mentions of collaboration between the Zerocoin team and Zooko surfaced and the coin was rebranded Zcash and released on October 28th 2016 by the Zcash company.
The Launch Of Zcash
The launch of the coin was met with a lot of hype that resulted in the cryptocurrency being worth more than 6 Bitcoins (over $5,000) on the day of launch.
This speculation quickly died down and since then ZEC has grown at an organic rate.
The original launch was met with some controversy. Zcash was created using a “Parameter generation ceremony”. This involved 6 individuals who each created a fragment of the eventual “master passkey” necessary for Zcash to work.
These keys were described as toxic waste.
How Do The Zcash Master Keys Work?
A master key requires all 6 shards so theoretically if even one of the 6 was able to completely destroy their key then the process had worked.
This requires a lot of trust in the 6 individuals involved and the ceremony has been described as little more than security theatre.
If the passkeys were somehow leaked or the individuals involved had colluded then it is theoretically possible for somebody to acquire the master passkey, which would give them the ability to create their own ZEC.
It is impossible to prove the process worked. That being said, the security surrounding the event was particularly tight and there were no reported problems, bar a journalist’s phone acting very strangely.
Could Zcash Be Compromised?
Despite the potential problems, it is also worth keeping in mind that only a single participant needs to have successfully destroyed all trace of their shard in order to ensure the ceremony was a success.
So in order for someone to gain access to the master key, it would require all six participants to either be dishonest or compromised.
By May 2017 the Zcash foundation had launched as “A non-profit organization, serving the Zcash community and promoting financial privacy”.
This was a major milestone for Zcash which had always maintained that the currency was decentralized and for the public good, despite claims to the contrary.
What Is Zcash?
The creators of Zcash want to use the underlying technology of Bitcoin and improve it by giving their users the ability to make their transactions untraceable and thus maintain their privacy.
The privacy coin market is highly competitive and Zcash sets itself apart with its focus science-backed technology and a team that is dedicated to decentralization and privacy.
Zcash Is Led By Academics And Scientists
As the origins of Zcash lie in academia it’s not particularly surprising that the team behind the cryptocurrency contains a number of experienced computer scientists and cryptographers.
This highly experienced team used breakthroughs in cryptography to design a way to “shield” ZEC transactions and thus protect user privacy.
Zcash gives users the ability to engage in two types of transactions. The first is a transparent transaction, which works essentially the same way as a Bitcoin transaction.
Users also have the option to store and send their currency from a shielded address. This allows users to hide the metadata behind their transactions and thus maintain control over their privacy.
A user can send money to a shielded wallet from a transparent wallet and this will only reveal the funds sent and not the funds received, this also works in reverse.
What Is Zcash zk-SNARK?
These shields are created using zk-SNARKs (the mercifully short acronym for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). These are an interesting form of zero-knowledge cryptography.
They allow one party (the prover) to prove to another (the verifier) possession of data (e.g. a secret key) without ever revealing the information or directly interacting with each other.
This means that rather than directly validating the sender and receiving addresses, Zcash is able to instead validate a transaction without revealing any of the underlying information.
What Proof Is Required To Validate A Zcash Transaction?
In order to validate the transaction, the sender of a “shielded transaction” constructs a proof to demonstrate that:
- The input values sum to the output values for each shielded transfer.
- The sender proves that they have the private spending keys of the input notes, giving them the authority to spend.
- The private spending keys of the input notes are cryptographically linked to a signature over the whole transaction, in such a way that the transaction cannot be modified by a party who did not know these private keys.
A shielded transaction is also able to verify that a user actually possesses enough ZEC in order to process the transaction by using “commitments” and a corresponding nullifier.
Unique Identifiers: Is Zcash Truly Private And Independent?
These commitments are all given a unique identifier called an “rho” which is used to verify the payments. When a shielded transaction is spent the sender publishes a nullifier, which is the hash of the rho from an unused commitment.
This provides a zero-knowledge way to demonstrate that they are authorized to make the transaction.
The team behind ZEC insist that their blockchain is truly independent and decentralized, despite accusations that it is a corporate coin.
They argue that because the protocol behind Zcash is open source that they don’t have any control over the mining and distribution of ZEC or have access to any special shielded features.
Bitcoin vs Zcash: Similarities And Differences
How does Zcash compare to the leading cryptocurrency Bitcoin? What are the key differences? See below for our head-to-head comparison:
|Zcash (ZEC)||Bitcoin (BTC)|
|Purpose||Created to protect users privacy by placing their ZEC in a shielded pool||Decentralized digital currency|
|Founder||Zooko Wilcox-O'Hearn||Satoshi Nakamoto (alias)|
|Market Cap||Over $1 Billion||Over $250 billion|
|All time High||$5,272 (October 2016)||$19,908 (December 2017)|
|All Time Low||$26 (September 2017)||$0.06 (July 2010)|
|How long did it take to hit $100?||Zcash was worth over $5,000 within the first days of its launch||51 months|
|Notable Supporters||Edward Snowden||Jeff Currie (Goldman Sachs)
Peter Theil (Venture capitalist)
Christine Lagarde (IMF)
Marc Andreessen (Early internet Pioneer)
|Consensus Method||Proof of work||Proof of work|
|Network Hash Rate*||127 ZEC an hour||Over 40 BTC per hour|
|Difficulty increase||Difficulty adjusts based on a target of a block produced every 2.5 minutes||Every 2,016 Blocks|
How Is Zcash Made?
Zcash is mined in a similar way to most other cryptocurrencies. Governments or banks are centralized institutions that physically print money.
Instead Zcash and other cryptocurrencies take a decentralized approach and new ZEC is created by its community.
The basic technology behind Zcash is the same as the technology behind Bitcoin and it is mined in a similar way. The blockchain is secured through a consensus mechanism called Proof of Work (POW).
What Does The Zcash Mining Process Look Like?
A miner uses their computer in order to solve complicated equations. Once the equation is solved a new block is added to the chain and the miner is rewarded with some ZEC.
This reward system serves two purposes. The first is to encourage miners to devote computing power in order to complete transactions on the Zcash blockchain.
The second is to regulate the creation of new ZEC, which is then distributed by the miners.
What Is The Zcash Founders’ Reward?
Zcash differs significantly from other cryptocurrencies because until 2020 the founders will receive a “founders reward” of 20% of all ZEC created.
They have agreed to set aside 10% of this in order to create the Zcash foundation. This means that until 2020 miners receive 80% of all coins produced, the founders receive 10% and the Zcash foundation also receives 10%.
After 2020 the reward will halve and miners will receive 100% of all ZEC produced.
What Do Experts Say About Zcash?
As with most cryptocurrencies, the short-term price outlook for Zcash can be described in one way. Volatile. The Cryptocurrency market is still young and therefore still unstable.
You should expect fairly big peaks and troughs in the short term.
In the medium, to long-term, you should expect Zcash to experience a slow and steady increase in value as it has in the past. You will see ups and downs and while some do buy low and sell high, this is a more risky approach than holding for the long term.
Edward Snowden On Zcash And Privacy Coins
Zcash has proven to be fairly divisive amongst experts. Some, such as Edward Snowden, have argued that Zcash is important because it is one of the few privacy coins developed by actual cryptographers.
Snowden has argued that this makes Zcash safer to use than Monero which he has described as “amateur crypto” pointing to traceability issues and design errors with Monero.
“Zcash’s privacy tech makes it the most interesting Bitcoin alternative. Bitcoin is great, but if it’s not private, it’s not safe.”
Manfred Karrer On Zcash Regulation And Competition
Others have also come out in support of Zcash and privacy coins in general.
Manfred Karrer, Developer and Founder of Bitsquare said:
“I expect three things. One, regulations on cryptocurrency exchanges will come. Two, the war on cash, gold and cryptocurrencies will accelerate. And three, privacy-protecting technologies like Monero and Zcash will elevate in importance.”
Despite these positives, there are a number of experts who believe that Zcash is too centralized to be considered a true privacy coin.
Greg Slepak And Charlie Lee’s Doubts About Zcash
One of the earliest detractors of Zcash was Greg Slepak, the founder of the email security firm Tao Effect, and the non-profit okTurtles.
Mr. Slepak talked about many of his misgivings with the “Zcash catch” long before ZEC saw the light of day.
If Slepak’s concerns prove to be correct then it would severely undermine the utility of ZEC and could lead to traders abandoning the currency en masse.
Charlie Lee, the creator of Litecoin, has also been a vocal detractor of Zcash saying:
If you’d like to learn more about the history of Zcash and how the coin is produced, see our ZEC trading guide.
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