Why is Everyone Talking About Zcash?
When Bitcoin first arrived in 2009, few could have predicted the profound impact that cryptocurrency would have. Hundreds of new cryptocurrencies have followed in Bitcoin’s footsteps, each with their own specific purposes and niches.
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 have 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.
Data from U.S. Equity Research estimates the cryptocurrency market is expected to grow at a 32% rate by 2023.
“According to RnRMarketResearch: “Growth is propelled by the benefits of compliance-free peer-to-peer transaction, cross-border remittance transfer, increase in use cases, volatility in the stock market, fluctuating monetary regulations in different countries, transparency, and immutability of the distributed ledger technology and benefits such as faster transaction and reduction in total ownership cost.”
Dan Morehead – Cryptocurrency Investor and Founder of Pantera Capital
Cryptocurrency trader and Pantera Capital founder Dan Morehead has always been bullish about Zcash.
Others have taken a harsher tone against Zcash usually echoing Peter Black’s assertion that Zcash can never be 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 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. 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.
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?
Zcash is in the same category as other so-called “privacy coins” such as Monero, PivX and Verge. 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.
The Zcash team features a number of cryptographers 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.
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. In order to do this 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. 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 procol 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.
Zcash vs BitcoinHow 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). 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.
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 is the Price of Zcash?
What Drives the Price of Zcash?
For a long time, Zcash was, by cryptocurrency standards, relatively stable and on a slow upward trajectory. Like many other cryptocurrencies, it saw a marked increase in value following the frenzied speculation that took place in December 2017. The factors drive the price of ZEC are broadly similar to the factors that impact other cryptocurrencies, particularly privacy-focused coins.
Arguably the primary price driver for all cryptocurrencies is media attention. As mainstream newspapers pick up a currency it encourages more traders to pile in. This often results in large increases of value and day-traders will often seek to “profit take” and sell off their assets. If you buy before the increase and sell before the major drop it is possible to make a profit by keeping an eye out for rumors. However, it should be noted that this is risky and if you miss the sweet spot you could well lose money rather than make it.
Zcash rose sharply in anticipation of the Bithump announcement, only to plummet as traders engaged in profit-taking Sept – Oct 2017
One major price driver for cryptocurrencies is availability on exchanges. Generally, when a major exchange announces that it is going to list a currency, there will be a rapid surge in value. This happened when Zcash was listed on Bithumb. The news led to a short-term spike in the value of ZEC. This jump was particularly pronounced because it allowed Zcash to gain access to the lucrative South Korean market.
Like other privacy coins Zcash will also have a better ability to weather any potential government regulations. This makes ZEC an excellent hedge in case the USA or EU decide to follow China’s example and make moves to more heavily regulate cryptocurrency. This would have a disastrous effect on currencies like Bitcoin but Zcash’s Shielded transactions may encourage users to use ZEC to protect their assets. This makes Zcash and other privacy coins a good choice as a hedging asset.
What is the Price Outlook for Zcash, And What Do Experts Say on Prices?
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 it might be possible to make money by buying low and selling high, although this is a more risky approach than holding for the long term.
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.”
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. One of the earliest detractors of Zcash was Greg Slepak, the founder of 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 enmasse.
Charlie Lee, the creator of Litecoin, has also been a vocal detractor of Zcash saying:
I own Monero but not Zcash
— Charlie Lee [LTC⚡] (@SatoshiLite) September 29, 2017
All private transactions
More tested privacy tech
No tax on miners to pay investors
No high inflation… better investment.@fluffypony
— Charlie Lee [LTC⚡] (@SatoshiLite) September 29, 2017
Zcash Market Sentiment
We’ve gathered data from leading exchanges to determine the general feeling in the Zcash market. Its calculation is simple; using data from the exchanges listed below, we gather buy and sell volumes for a given time period and weight this against the total transaction volumes.
Source – CryptoCompare Public API.
3 Reasons to Invest in Zcash
- State of the art privacy protection
- Development team with a background in cryptography
- Privacy coins are poised to do well
State of the art privacy protection
Like Monero and Dash, Zcash is designed to protect its users’ privacy. However, the approach taken by Zcash is different. Monero uses the ring signature (you can find out more about ring signatures in our Monero guide) to scramble transactions. This technique is imperfect and a number of early transactions were in fact linkable. Rather than simply scrambling transactions, Zcash uses zk-SNARKs to ensure that shielded transactions are completely hidden from the network.
Development team with a background in cryptography
Many altcoins have incredibly talented teams behind them but few have a team filled with academic cryptographers. This gives Zcash an edge over its rivals as it means that they have access to people who specialize in implementing and testing cutting-edge cryptography. This team is part of the reason that Zcash was able to develop and implement zk-SNARKs.
Privacy coins are poised to do well
Privacy coins are becoming an increasingly important aspect of the broader cryptocurrency market. The competition between Monero, Zcash, Verge, and others has become increasingly fierce over the last year and many experts believe that all of these coins will increase in value.
I am inundated by people asking me for recommendations on cryptocurrencies. If you would use your heads you would figure out that the privacy coins (anonymous transactions) will have the greatest future. Coins like Monero (XMR), Verge (XVG), or Zcash (ZEC) cannot lose.
— John McAfee (@officialmcafee) December 13, 2017
2 Reasons Not to Invest in Zcash
- The controversy surrounding its creation
- Founders fee might discourage miners
The controversy surrounding its creation
The controversy surrounding the Zcash catch has not fully gone away. While it unlikely that anybody has gained access to the master-key, and therefore the ability to create ZEC, it will always be a possibility. Unless the team can prove that the Parameter generation ceremony was successful, then users will be unable to tell whether their ZEC are counterfeit or not.
Founders fee might discourage miners
The founders’ tax has proven to be controversial. Miners are essential for a blockchain to function and losing 20% of their profits will discourage some miners from choosing Zcash. The fee has also allowed other cryptocurrency teams, notably Monero, to accuse Zcash of forcing miners to pay a tax in order to pay traders.
How to Buy Zcash
So you’ve decided that you want to buy ZEC. The next step is figuring out how to get Zcash.
The best way to acquire ZEC is through a cryptocurrency exchange. You use these exchanges to trade fiat currency for Zcash. Unfortunately, using exchanges can be risky. You need to take care to protect your investment. If you have any problems you are pretty much on your own.
There are two main ways to buy Zcash. Which one you decide to use will largely depend upon your priorities.
If you want to acquire Bitcoin to trade for Zcash then one possible choice is an exchange called Coinbase. There are several other options but Coinbase is one of the best choices for newcomers. It comes with a large number of currency pairs and you even have the option to buy BTC using your credit or debit card. Coinbase has a competitive fee rate. Purchasing BTC will typically result in a 3.99% fee if using a credit or debit card and a 1.49% fee for most kinds of bank transfers.
Coinbase requires your ID and address when registering. This kind of verification is standard procedure and considered best practice for many exchanges. It’s designed to prevent the exchange from being used for money laundering and other criminal activities. Privacy-conscious traders should consider using a different exchange.
Rather than buying ZEC directly you can first buy Bitcoin through a peer to peer Bitcoin Exchange that does not require an ID. One of the best options is LocalBitcoins which allows users to buy Bitcoin with almost any currency.
If you choose to use LocalBitcoins make sure that you vet other users thoroughly. There is a review function and you should make sure you use it. Some unscrupulous users have been known to scam new traders. If you get a bad feeling or see poor reviews it is generally best not to make the trade. Some LocalBitcoins users will even meet in person to conduct trades, to help ensure that both parties are being honest.
However, you choose to acquire your BTC the next step is to convert that into ZEC and one of the best exchanges for that is Binance.
Binance is an exchange that is focused on Chinese and English language users. It has almost all of the major coins as well as some of the smaller cryptocurrencies. Binance is a good choice thanks to its relatively low trade fee of 0.1% and minimal withdrawal fees.
The process can be a little daunting for new users but it is not as complex as it looks at first glance. One you have made your account the first step will be to go to the ‘deposit’ section and acquire your deposit address (it will be a string of numbers and letters). Keep this, you’ll need it in a moment.
Ensure you only transfer to your exact deposit address, otherwise you risk losing your currency
Go back to your coinbase account and find your Bitcoin wallet. Click send and paste in the exact address provided to you by Binance. Click send and wait 40-60 minutes depending on the amount of activity on Bitcoin. Once your funds are verified then your Binance wallet will be automatically updated.
Now you can finally trade your Bitcoin for ZEC. Go to the exchange tab and click basic. Next search for ZEC in the box on right, click “market” in order to buy Zcash at the current market price and place your order. Once this goes through you’ll have finally acquired your first ZEC tokens.
You can also choose to buy at Limit which will allow you to specify the price you want to buy at, rather than just buying at the cheapest currently available.
Keep in mind that exchanges are not safe and you will need to be serious about your security. Always enable two-factor authorization and avoid keeping all of your coins in a single wallet. Also, remember that you should never leave your coins in an exchange wallet unless you are planning to exchange them. The best way to secure your Zcash is in a hardware wallet or by putting them in cold storage.
Cold storage involves keeping your cryptocurrency in an offline wallet that only you have access to.Remember that you are entirely responsible for your own security. If you don’t own the keys to your wallet, you don’t own your tokens. You will also need to take extra care to ensure that your computer is secure and password and protected. Any breach could result in your coins finding their way into the wallet of a hacker.
Managing your own Zcash isn’t an easy task. Not only do you have to navigate the exchanges but you will also need to take extra care to keep your computer secure. You will need to take extra precautions to protect yourself against phishing scams, viruses, and other risks. You will also need to keep very careful track of your wallet’s access codes. If you misplace those then your ZEC investment will be trapped in a wallet you can no longer access.
On top of this, there are risks that you have no control over. Whenever you use an exchange you are relying on them to protect you and your ZEC. The problem is that they sometimes fail to do this properly.
The most notorious example is MtGox. Back in 2013 MtGox was by far the largest Bitcoin exchange with control over 70% of the market. In May of 2013 the cracks started to show when FinCEN seized their accounts. This led to users losing their ability to draw USD from the exchange. MtGox’s woes continued when hackers attacked the exchange and stole around $500 million, forcing MtGox to file for bankruptcy.
Sadly it seems that exchanges have not learned their lesson. In August 2017 Bitfinex was hit by a similar hack. The attackers emptied random wallets and stole around $72 million worth of cryptocurrency. In order to prevent individual users from losing everything, Bitfinex decided to spread the losses, reducing everyone’s account balance by 37%.
Many traders find this level of uncontrollable risk to be unacceptable and you’re probably asking yourself whether there is a better way to trade Zcash. Unfortunately, the answer is no, not at the moment. However, there is a safer way to trade many other cryptocurrencies by using a regulated broker such as Plus500. The Plus500 platform gives you the ability to trade contracts for difference (CFDs) for a wide variety of cryptocurrencies and they are regularly adding new ones.
How To Trade in Cryptocurrency CFDs
Our preferred method is to not buy Cryptocurrencies at all and instead, trade Contracts for Difference (CFDs) through a regulated broker.
To see which currencies are currently available to trade as CFDs on Plus500, visit their site here. They regularly add new cryptocurrencies so check back occasionally for updates.
A CFD is a contract between you and the broker. Instead of directly buying Cryptocurrencies, you would buy a CFD and take a short or buy position. If the market moves in your favor then you will receive money based on your CFD. If it moves against you then you will have to pay. This allows you to take advantage of Cryptocurrencies without ever having to take on the risk of owning a single token.
There are lots of brokers out there and picking the right one can be a challenge. The first rule when deciding how to get Cryptocurrency CFDs is to always use a regulated broker. These brokers have to follow a strict code of conduct which makes them much safer than ordinary unregulated brokers. You also need to compare the different fee structures and you should take advantage of the free demo accounts many brokers offer before you commit to a platform.
Trying to find the best-regulated broker can be a daunting task. Thankfully we are here to help and have already done the heaving lifting for you. After investigating the available options we’ve found that for the vast majority of traders, Plus500 is probably the best way for you to trade cryptocurrency CFDs.
Plus500 – Our Top recommendation for trading in Cryptocurrency CFDs
Plus500 is a safe and secure way to trade Cryptocurrency CFDs.
Plus500 subsidiaries are individually regulated by the following agencies; Financial Conduct Authority (FCA), Cyprus Securities Exchange (CySEC), Australian Securities and Investments Commission (ASIC).
See the table below for exactly which regulator covers you in your country and what protection is offered.
|Regulator||Countries Covered||Protection Offered||Additional Protection Offered|
|Financial Conduct Authority (FCA)||UK, Ireland and Germany||All client funds are held in a segregated client bank account||Financial Services Compensation Scheme (FSCS) may cover up to £50,000 if Plus500 fails.|
|Cyprus Securities Exchange (CySEC)||Andorra, Argentina, Austria, Bahrain, Belgium, Bulgaria, Chile, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Gibraltar, Greece, Hungary, Iceland, Isle of Man, Israel, Italy, Kuwait, Latvia, Liechenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Monaco, The Netherlands, Norway, Oman, Poland, Portugal, Qatar, Romania, Saudi Arabia, Slovakia, Slovenia, Spain, South Africa, Sweden, Switzerland, United Arab Emirates and Uruguay.||All client funds are held in a segregated client bank account||The Investor Compensation Fund may provide up to €30,000 if Plus500 fails.|
|Australian Securities & Investments Commission (ASIC)||Australia, New Zealand and South Africa||All client funds are held in a segregated client bank account|
How Much Does It Cost To Trade Cryptocurrency CFDs with Plus500?
Plus500 has a very competitive fee structure.
Unlike some other brokers, they charge zero commission. Instead, users are only charged on the spread of their CFD trades.
You should keep in mind that there are premiums for holding an overnight position and you might be charged an inactivity fee if you do not use your account in a 3 month period.
Plus500 also provides some of the best risk management tools out there. Not only do you have the ability to customize your leverage and set close at loss or close at profit limits but they also have a rare and useful tool known as a trailing stop. This allows you to set your stop position to grow with the market. Using a tool like this means you can increase your profit without having to manually adjust your stop positions and if the market turns against you, you’ll still be protected. This feature is not available with every broker and it helps to cut out a lot of micromanagement.
Plus500 have gone out of their way to make their platform accessible to traders around the world. The interface is simple to understand and should help newer traders ease into trading in cryptocurrency CFDs. They also offer their platform in over 31 languages and it has been localized in 50 countries. This allows traders from all over the world to feel comfortable using Plus500.
Many of us spend a lot of our time away from our computers so another useful addition is Plus500’s mobile app. This functions very much like their desktop app and can help you trade while you’re away from the desk. One feature that we found particularly useful was the inclusion of the demo mode on the app.
Other brokers might suit traders with very specific needs but Plus500 is probably the best choice for the vast majority of traders and we would find difficulty in recommending anyone else.
No Matter Which Broker You Use Remember That Your Capital Is At Risk
Plus 500 Summary
- Convenient, safe access to Cryptocurrency CFD trading.
- Easy sign-up, compared to the cumbersome process of enlisting in a Cryptocurrency trading exchange.
- Guaranteed execution at a fixed price, without having to wait for another trader to agree to a buy or a sell transaction.
- Allowance of credit or debit cards, a service generally not allowed on Cryptocurrency trading exchanges.
- Allowance to trade 10 or more cryptocurrency CFDs, including Bitcoin, Bitcoin Cash, Ethereum, Litecoin, and IOTA.
- Free real-time quotes and 24/7 trading availability.“1-to-10” leverage – meaning brokerage customers can use leverage to trade large positions but only deploying a small amount of capital.
- Intuitive charting tools.
Any trade is a risk and Cryptocurrencies are a volatile commodity. When you’re considering how to buy Cryptocurrency CFDs you need to keep in mind that even using a regulated broker like Plus500 you can still lose all your capital. If the market turns against you it is possible some, or all, of your initial capital.
Trading in Cryptocurrency CFDs is the same as any other instrument. Make sure that you follow the golden rule. Only spend what you can afford to lose. If you stick to this and use a regulated broker to protect yourself then your Cryptocurrency CFD trades will be off to a good start.