In a world teeming with cryptocurrencies, Zcash (ZEC) stands tall with its distinctive privacy preserving features, setting a new precedent for digital money. While it builds on the foundation laid by Bitcoin, it goes further by providing an additional layer of security and anonymity, making it an attractive choice for privacy-conscious individuals and entities.
This comprehensive guide delves into the intricacies of Zcash, revealing its roots, understanding its unique attributes, comparing it to Bitcoin and exploring the dynamics of its native token, ZEC. By the end of this exploration, you will understand the unique strengths and capabilities that Zcash brings to the ever-evolving world of cryptocurrency.
Born in 2013, Zcash had his humble beginnings under the name “Zerocoin”. Originally proposed as an experimental add-on to Bitcoin, Zerocoin used state-of-the-art mathematical techniques known as “zero-knowledge proofs”. However, due to the sophisticated and resource-intensive nature of the Zerocoin protocol, it was not seen by the core developers as a practical choice for integration into Bitcoin.
In the wake of this, Zerocoin’s founding scientists from Johns Hopkins University joined forces with researchers from MIT and Tel Aviv University to further refine the protocol. The result was a significantly more efficient form of zero-knowledge proofs, which they called “Zerocash” or “Zcash.” Zooko Wilcox, the current CEO, was brought on board to lead the project. This, coupled with raising more than $3 million in venture capital in two rounds, marked the birth of Zcash’s development under the Zcash Company. Their mission: to develop Zcash into a full-fledged cryptocurrency.
The Zcash Company established a separate entity in 2017 known as the Zcash Foundation. Registered as a 501(c)3 non-profit organization, the foundation was established to build internet payments and privacy infrastructure for the public good, primarily targeting the Zcash protocol and blockchain users. In 2019, the Zcash Company underwent a rebranding process, resulting in its new identity: the Electric Coin Company.
The creation of Zcash was rooted in the realization that Bitcoin could not provide robust privacy safeguards. Since Bitcoin transactions were recorded in a public decentralized ledger, significant amounts of information could be derived from them. At the heart of Zcash’s technology framework are zero-knowledge proofs. This allows transaction details to be verified without disclosing details about the amount or the parties involved. Zcash offers its users the ability to selectively share transaction and address information, taking into account audit or regulatory requirements through payment disclosure and display keys. By using zero-knowledge proofs, Zcash aims to develop a truly expendable, privacy-focused cryptocurrency.
Zcash owes its strength to sound scientific principles and independent audits. An open-source protocol built on the Bitcoin Core codebase and developed by a team of engineers specializing in security.
What is Zcash?
Zcash is a distinctive cryptocurrency that places a premium on enhanced privacy features. Although it is built on a public blockchain – just like Bitcoin – it uniquely allows users to control the level of public visibility of their transaction details.
By using Zcash, users not only experience enhanced privacy, but also enjoy the security and transparency benefits that a public blockchain offers. This smart balance between privacy and transparency is achieved through the use of zero-knowledge proofs, advanced cryptographic protocols that enable private transactions on a public blockchain.
Main aspects of Zcash (ZEC)
- A cryptocurrency with a sharp focus on privacy.
- Developed from Bitcoin’s public blockchain, but modified to include selective privacy features.
- It allows users to choose to hide certain details of their transactions if they wish.
- Uses zero-knowledge proofs to keep personal and transactional data confidential.
Zcash consensus mechanism
Zcash uses a proof-of-work consensus mechanism for its operation. This consensus method is a definitive feature of Zcash and there are no plans to move to another consensus mechanism to protect the network. In this setup, Zcash miners play a vital role in securing the network by solving complex math puzzles to generate blocks.
For the network to function seamlessly, each miner or node must agree on the order in which the blocks are produced. Once consensus is reached, the status of all registered information is confirmed and the network moves on to the next block. The next section covers the technical details in more detail.
Zcash vs Bitcoin
The Bitcoin community is known for championing transparent transactions while maintaining anonymity. However, an interested party or stakeholder can trace the parties involved in a transaction within the Bitcoin ecosystem.
Zcash takes a different approach. It does not eliminate transaction information; instead, it is encrypted to prevent tracking. While the Zcash blockchain remains encrypted, using the zk-SNARK security protocol adds an extra layer of user security and anonymity.
Bitcoin uses a hash algorithm known as SHA-256. On the other hand, Zcash uses Equihash, a different algorithm that is not compatible with the hardware and software designed for Bitcoin mining. In addition, Zcash has larger blocks and extended hash times, which in turn improves the network hash rate. The hash rate of a cryptocurrency is the processing power of the miner’s network; it indicates how quickly transactions can be verified and validated to open a new block.
Hashing is a procedure used to convert data into a string of alphanumeric characters called a hash. This string is unique because it is generated from the data in the block. Once hashed, it cannot be duplicated. The hash algorithm is the mathematical method used to create this unique alphanumeric sequence.
ZEC, the native currency of Zcash, shares several properties with Bitcoin (BTC), including decentralization. However, it goes a step further by better embodying the essence of digital money.
Like Bitcoin, a maximum supply of ZEC is set at 21 million. The production of new ZEC coins is carried out through a proof-of-work (PoW) mining process, where mining rewards are halved at various intervals.
What sets ZEC apart and adds to its investment appeal is the additional privacy features it offers beyond Bitcoin’s.
ZEC tokens can be earned by miners who help maintain and operate the network. Interestingly, Zcash did not have an Initial Coin Offering (ICO). The founders chose to take a fee from the mining rewards instead. Over time, 10% of all ZEC coins produced, totaling 2.1 million, will go to the founders.
As we have traveled through the world of Zcash, it is clear that this cryptocurrency is more than just another digital coin in the market. With its robust focus on user privacy, innovative use of zero-knowledge proofs, and an inherent desire to improve upon Bitcoin’s principles, Zcash represents a fascinating evolution in the digital currency space. While it shares the decentralized ethos of its predecessor, Zcash moves forward and offers users a unique degree of control over the visibility of their transaction details.
The native token, ZEC, embodies these values while providing an intriguing investment opportunity in the cryptosphere. As the cryptocurrency landscape continues to evolve and mature, the role of privacy-focused digital currencies like Zcash will undoubtedly be integral to shaping the future of online transactions and financial freedom.