Zcash Cryptocurrency Explained: Basics and the Review

a year ago

Today we are analyzing the favorite cryptocurrency of Edward Snowden and WikiLeaks. We’re talking about Zcash, a coin developed by professional cryptographers that utilizes the unique Zero-Knowledge Proof protocol as it claims the title of the most anonymous cryptocurrency ever.

We will dive into the Zcash history, technology, certain specifications, as well review its potential for the market.

History

At the heart of the Zcash cryptocurrency lies a cryptographic protocol for anonymizing transactions called Zerocoin. It was created by a group of scientists from Johns Hopkins University, Massachusetts and Israel Institutes of technology, and Tel Aviv University. Initially, the team planned to create the protocol for the Bitcoin network to increase its privacy.

But then they revised the concept and decided to launch a separate cryptocurrency named Zcash. The development was funded by the private investors, allowing the team to steer away from ICO or pre-mining.

The Zcash network was officially launched on October 28, 2016. The ceremony was held by the famous American cryptographer and developer Zooko Wilcox, who is also the team leader of the project.

Due to the fact that private investors funded the Zcash development, it was agreed that within the first four years after the launch of Zcash, 20% of the mined cryptocurrency goes to the account that belongs to developers and investors. The 10% of all Zcash coins will become owned by the founders. What, you expected them to work for free?

This split of the profit angered the part of the community, so they forked Zcash into ZСlassic. The new coin featured no additional rewards for the founders. For a time being, the fork was actively worked on until the developers switched to another cryptocurrency. Today, ZСlassic is left drifting the market without a development team.

On the other side, Zcash is doing relatively well. The cryptocurrency has long been in the top twenty rating by the market cap.

It took a lot of effort for developers to release the Sapling update for the network on October 2018. The update increases network security, expands the use of Zcash, and improves the scalability of the blockchain.

Technology

To understand how the Zero-Knowledge Proof algorithm works, let us examine how the transactions are recorded in the Bitcoin and Zcash blockchains.

Each Bitcoin transaction lists the details about the sender, recipient, and the amount of currency. In the Zcash blockchain, transactions can only tell us that one anonymous user sent an unknown amount of coins to another anonymous person. Basically, the Zcash blockchain does not record info on a sender or a recipient. It only records the fact of a transaction.

Zcash mining utilizes the Equihash algorithm. Mining a single block takes around 2 and a half minutes. The quantity cap of the cryptocurrency is limited to 21 million coins as with the case of Bitcoin. Equihash had been considered protected from the ASIC mining for a long time until the Bitmain company and others had figured out how to mine it with ASICs anyway.

Despite community requests, the Zcash developers have not carried out any measures to counter the ASIC invasion.

Unlike Zcash, another anonymous cryptocurrency called Monero went with a fork to override the ASIC mining, eventually turning the Bitmain miners into a pile of trash. We’ve covered Monero in our other video which you may check out at your convenience.

Specs

Zcash specifications include three main points:

  1. A unique privacy technology. The blockchain doesn't store information about users and amount of the transactions, rendering transactions untraceable
  2. Cryptocurrency exchangeability. Every Zcash coin on the network has a clean history, as such sellers will have no reason to refuse your payments as in the case with Bitcoin when certain address history services can tell whether your Bitcoin was previously used for illegal transactions.
  3. Freedom to choose the level of privacy. Each Zcash user can choose for themselves whether they need to anonymize their transaction or not. For this feature, there are two types of addresses: public which act like Bitcoin addresses and private ones that utilize the Zero-Knowledge Proof algorithm.

It’s also worth noting that there may be some trace left after a Zcash transaction if the funds moved through public and private addresses and vice versa.

Prospects

Now’s the time to assess the prospects of Zcash. This project certainly took off well and will continue its development thanks to one of the best development teams in the industry and the great support of the community. Zcash has a clear plan for further development as well as resources to execute it.

The Zcash network has a high level of decentralization and even in the case of a strict ban on anonymous cryptocurrencies, it will not seize to exist. Of course, declaring Zcash illegal would significantly reduce its investment attractiveness, but such a scenario is unlikely. Most likely, however, is that governments will have to accept the existence of anonymous cryptocurrencies and set specific regulatory conditions for them to protect against illegal transactions.

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