What is Zcash?
Zcash Guide & Review
It’s hard to talk about privacy coins without mentioning Zcash. After starting 2017 at a modest price of $48, the cryptocurrency surged to a peak of $876 one year later. Several other altcoins grew by more than 100% in 2017, but few of them tackle one of the biggest challenges crypto investors face; that is, privacy.
Contrary to popular opinion, Bitcoin and many altcoins are not as secure as it was previously thought. The cryptocurrency addresses used by altcoins and Bitcoin do not shield the payment details or crucial information about traders.
With the right tools, transactions you’ve made before can be traced back to you; government officials can learn how you spend your crypto; corporates can spy on you, and discriminate against you if they disagree with your spending habits.
For such reasons, every investor deserves some privacy. Irrespective of whether you only use crypto to conduct legit businesses or not, there is nothing wrong with enjoying top-tier privacy. Fortunately, that’s what Zcash is all about.
What is Zcash?
Zcash is a decentralized cryptocurrency network forked from Bitcoin in 2016. Like Bitcoin, Zcash has a maximum supply of 21 million coins. However, Zcash is not an imitation of Bitcoin. It's rather an improvement of the pioneer cryptocurrency that uses advanced techniques to provide users with total privacy when spending their crypto.
The Zcash hard fork occurred on October 28, 2016, as Zerocoin. The name was soon changed to Zerocash before rebranding to Zcash in 2017. Zooko Wilcox, an experienced decentralized system and cryptography developer, founded Zcash together with a team of college professors and blockchain enthusiasts.
Zcash was inspired by one of the first ever decentralized payment protocols, Zerocoin. Developed in the 1980s by a graduate of Johns Hopkins University, Matthew Green, Zerocoin used zero-knowledge proofs to provide anonymous transactions. The protocol didn’t succeed back then, but more than thirty years later, the developer joined Zooko Wilcox to develop the now successful Zcash.
The Zero-knowledge proofs construction (zk-SNARK) used to secure users’ data by hiding not only the amount being paid but also the details of the traders. Zcash also utilizes the same encryption techniques to ensure that users do not attempt to forge its payment protocol.
Although its main purpose is to provide anonymous payments, Zcash also allows users to make semi-private payments, as Bitcoin does. With semi-private payments, users trade using cryptographic addresses, thus, shielding their names and addresses. The downside of Bitcoin payments is that it creates room to be spied on and for transactions to be traced back to traders.
What makes Zcash different from other private coins? Unlike most privacy coins, Zcash offers users the freedom to shield their payments or keep them pseudo-anonymous. It gives users the authority to comply with anti-money laundering efforts by disclosing some details about their payments or not to comply.
What is Fungibility?
Fungibility as the ability of goods to be valued as equal and interchangeable with other goods. Stocks belonging to a particular company, for example, are fungible because irrespective of where you purchase them, they are equal in value.
If you purchase 100 stocks from Apple.inc in the New York Stock Exchange and another 100 stocks of the same company at the London Stock Exchange, you will have 200 stocks in total; all valued at the same price.
In the crypto world, fungibility refers to the ease of exchanging one altcoin for another. Fungibility ensures that one crypto is as good as the other and that traders transact equal amounts of crypto efficiently without the possibility of rejecting a payment based on any bias.
In an ideal world, people exchange a $50 bill for two $20 bills and one $10 bill because money is fungible. But at the same time, a car owner will reject an offer to exchange her Toyota Camry for another Toyota Camry because cars are not fungible. The car owner will probably reject to exchange her car because she:
- Hates the color of the new Camry
- Thinks the car being exchanged for is old and unworthy
- Holds sentimental value to her current Toyota Camry
Privacy coins like Zcash provide great fungibility because they shield almost all important details of a transaction. The sender does not know any details about the recipient’s payment history or identity and can’t use such details to refute payment.
By providing total anonymity to traders, Zcash ensures that there is no chance of a payment getting rejected based on prejudice. A crypto exchange can’t trace your identity and reject your payment because of your past trading history. Crypto miners can’t refuse to verify your payment because they dislike you. The sheer fact that your details are shielded provides immense fungibility.
How Zcash works
Zcash is a peer to peer blockchain-based virtual currency, meaning there is no central authority governing the operations of the cryptocurrency. However, every payment must go through a blockchain for verification before it’s completed. Zcash payments are verified using the Equihash mining algorithm that is ASIC resistant.
Since the Zcash system that provides anonymous payments is optional, traders have the option to shield their transaction details or complete them in a pseudo-anonymous manner. If a trader chooses to shield their data, Zcash utilizes its Zero-knowledge proof construction to hide the details.
At the same time, Zcash’s zk-SNARK system helps validate transactions to miners. The Zcash miner is able to confirm that payment is legitimate, but they can’t trace the payment to any address.
Zcash has two types of addresses that support either the pseudo-anonymous payments or completely private payments. The transparent address is known as the t-addr. Traders who don’t want to shield their data use the t-addr. On the other hand, traders who want to transact anonymously use an address known as z-addr.
Like Bitcoin, Zcash coins are distributed through a mining process. Zcash uses an Equihash Proof of Work mining algorithm to reach a consensus. The consensus, however, makes it impossible to mine Zcash with the more advanced mining machines known as ASICs.
In an effort to equalize the mining process, Equihash limits miners to GPU and CPU mining. Zcash miners are rewarded with 10 Zcash coins for every block mined plus the transactions paid for the block. Zcash has a block time of 2.5 minutes, and the 10 coins’ block reward is halved after every 810,000 blocks.
It’s worth noting that Zcash founders take 10% of the block rewards as their payment for founding the network. They will continue taking the fee for the first four years’ of Zcash’s existence.
Zcash miners can mine individually or join a pool to mine blocks faster and share the rewards. Flypool and Nano Pool are the most popular Zcash mining pools. They offer nearly the same benefits, but it’s wise to research more about each to learn the exact differences.
What makes Zcash Special?
Zcash has the decentralization and Convenience of Bitcoin
Zcash is a decentralized and peer to peer payment protocol. Like Bitcoin, Zcash allows users to trade from any point of the world conveniently using a mobile device or a personal computer. There is no middle operator or long, tedious processes required to complete a payment. The transaction fees are low as a result, and the payments are super-fast.
Zcash provides transparency Through Blockchain
Based on a blockchain, every Zcash payment is recorded and verifiable on a blockchain. Zcash’s privacy details may shield users’ data, but transactions are verifiable. This ensures that no one attempts to cheat in a trade. And since the blockchain can be used to record all types of data, organizations can depend on Zcash to transact in a transparent manner.
Total Privacy to Traders
Using Zero-proofs construction, Zcash hides the amounts and details of its traders. Zcash has special addresses for this. Traders can spend their coins anonymously, avoid KYC verification if they want to and even avoid taxation. However, Zcash was developed to accord traders privacy and not necessarily to buy illegal products.
In contrast to Bitcoin, Zcash provides extremely low transaction fees. The average Zcash fee at the beginning of July 2018 is $0.00018, much less than the $0.764 average fee for BTC payments at the same time.
Zero-Knowledge Security Layer
Zero-Knowledge security proofs shield all the important details of a transaction. For a recipient to receive the payments, they must prove certain facts about the payment without revealing the hidden information.
In Zcash’s network, a special type of Zero-Knowledge proofs known as zk-SNARKs is used to provide anonymity to traders but to also ensure the transaction is verifiable by miners. Zk-SNARKs shield the amount of payment and the addresses of traders.
While zk-SNARKs provide privacy to Zcash traders, the security layer does not offer total privacy where multi-signature wallets are used. It also does not obfuscate an IP address. As such, if anyone traced your computer’s IP address to your transactions, they have a fair chance of knowing you made the payment.
For added security, Zcash traders can use the Tor browser to protect themselves against any security breach caused by using a public IP address. Zcash is, therefore, only provides data protection within its network alone. Its traders are protected, but their IP addresses are not.
Zcash Price Growth
A day after Zcash was forked; the coin’s price was an overwhelming $4,233. Soon, people started mining the cryptocurrency, and by December 2016, ZEC coin was priced at $37. Zcash started recording steady growth in March 2018, moving from $30 and rising to $330 by early December 2017.
By January 8th, 2018, Zcash growth rate was up by more than 2000%, and its market cap had moved from $19 million to $2 billion in the one-year time frame. An investor who spotted Zcash’s potential when it was still valued at $40 and invested $1000 had a return of more than $20,000 after one year of investing.
Like many cryptocurrencies, unfortunately, Zcash faced a dip in price at the start of 2018. Within the first four months of 2018, Zcash price moved from $876 to $181. After the correction, the coin has been stable and provided several investment opportunities.
Together with coins like Dash and ZenCash, Zcash is enjoying a prime era for privacy coins. Crypto traders are increasingly adopting privacy coins for a wide variety of reasons. The good thing is that the demand for privacy coin is still rising, meaning that Zcash still holds the potential to gain more value in the near future.
Z cash is one of the most popular privacy coins in the crypto world. Launched in 2016 by a team of developers from Jonhs Hopkins University, MIT, and Israel-based Universities, Zcash utilizes zero-proof knowledge security layers to shield users’ data.
Zcash grew at an incredibly fast rate after its launch, rising by more than 100% in six months. The coin gave more popular privacy coins like Dash tough time and is one of the best Bitcoin's fork.
As the demand for privacy coins increase in 2018, Crypto coins like Zcash will continue to gain value. And since Zcash provides efficient payments beside its security features, it has a higher prospect than its competitors.
Thank you for reading our Zcash explained coin guide. Feel welcomed to frequently visit our for more crypto guides, reviews, and general altcoin investment tips.