Zcash (ZEC) is a privacy-focused cryptocurrency. While other cryptocurrencies, like Bitcoin, enable anonymous transactions, they aren’t private.
Transaction data gets stored on the blockchain and accessible to everyone. Zcash uses zero-knowledge proofs to verify transactions, without revealing sender, receiver, or transaction amount. Here’s how it works.
What is Zcash?
It’s often assumed that all cryptocurrency transactions are privacy-friendly, but that’s not quite true. Most are anonymous, so they aren’t linked to your identity. But they aren’t private. Blockchain explorers, like these Bitcoin blockchain explorers, allow anyone to view transaction data. This makes it difficult, but not impossible, to find out where the transaction took place and who it was between.
Electric Coin Company, the team behind Zcash, believe that it is possible to create a cryptocurrency that is fast, secure, and private. The Zcash Whitepaper came out in 2014, with the privacy-protecting cryptocurrency making its debut in 2016. The network itself is a Bitcoin fork, although it doesn’t maintain links with BTC. Instead, it uses its own blockchain and currency token, ZEC.
There is a fixed number of ZEC coins, 21 million, which is the same as the total number of Bitcoin. As of August 2019, there are 7,204,931 ZEC in circulation. Transaction fees cost 0.0001 Zcash.
Zcash offers two address types; private and transparent. Transactions performed between private addresses (z-addresses) are all encrypted, so the transaction details are not viewable. They still appear on the blockchain, so the transaction gets recorded and fees get paid.
The sender, recipient, transaction amount, and memo field are all encrypted. These are shielded transactions. Like with other cryptocurrencies, transparent transactions are publicly visible on the blockchain.
How Does Zcash Work?
The encryption on the blockchain is possible through the use of zero-knowledge proofs. To offer this service, Zcash adopted zk-SNARKs. The Zero-Knowledge Succinct Non-Interactive Argument of Knowledge allows for a zero-knowledge (no-one reveals information) proof of knowledge (confirmation that they do know the information). All this happens in a few milliseconds, so it doesn’t slow down transaction speeds.
This is possible by a common reference string, shared between the prover and the verifier. A single party could issue these public parameters, but that risks interference or false transactions if they become compromised. To avoid this scenario, Zcash has implemented multi-party computation (MPC) protocols.
The MPC generation ceremonies need participants to collaborate to create the public parameters. To date, two ceremonies have taken place; Sprout and Sapling. Sprout was the first of the two and required six participants to remain connected throughout the ceremony. Sapling was constructed throughout 2017 and 2018 and consists of up to 90 participants. This larger group means that the attack surface area is much lower as all parties would need compromising for the public parameters to expose.
Transactions using transparent addresses (t-addresses) are like other cryptocurrency transactions, with the detail published on the public blockchain. The two address types are interoperable, but those transactions between t-addresses and z-addresses are not fully shielded. The total ZEC sent to or from a t-address is visible on the blockchain explorer, but the shielded z-address is not.
There many reasons to want privacy for your financial transactions, but there will still be people who will link that desire for privacy to illegality. Zcash has tried to tackle that perception head-on. Shielded addresses offer privacy, but you are still able to account for your holdings legally.
Viewing keys are available for shielded addresses, which give holders viewing, but not spending, rights for the address. This means that it’s possible to audit Zcash holdings. The memo field is for passing along messages or information to follow the Bank Secrecy Act’s Travel rule.
Where Can You Buy Zcash?
As of August 2019, one ZEC costs $50. The all-time high was $5,941.80 on October 29th 2016, the day after Zcash launched. It has a market capitalization of $360,258,789, ranking it the 28th cryptocurrency by market cap. You can store your ZEC in a handful of different digital wallets, but only one, Zecwallet, supports the memo field and shielded transactions.
Most major exchanges support Zcash (ZEC) including Binance and Coinbase. Although, as of August 2019, Coinbase has delisted Zcash from its platform in the UK. This is reportedly due to a change in Coinbase’s supporting bank. The international bank Barclays had previously been Coinbase’s partner in the UK, but this agreement ended in mid-2019. To continue operating in the country, Coinbase have partnered with the UK-based ClearBank, who requested the company delist Zcash.
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Zcash is accepted as a payment method for a range of products and services; from apparel to VPNs, and even medical and legal services. Zcash does not maintain a list themselves, but there is a community-compiled list of merchants who accept the cryptocurrency at Zcashcommunity.
What is Zcash’s Future Potential?
As more communities around the world transition to a cashless society, there will be demand for a private digital payment system. While Facebook’s Libra has pitched itself as an alternative digital global currency, it is neither anonymous nor private (If you’re interested in Facebook’s digital currency, check out these things you need to know about Facebook Libra).
People often equate privacy with illegality, as if the only reason to conduct your affairs privately is that you are doing something wrong, but that’s not the case.
Privacy is essential in the digital age, but it’s something that isn’t often baked into products and services by design. The default is public, with a minority willing to trade convenience for privacy. However, the past few years have seen some companies treat privacy as a feature, rather than an afterthought. These services don’t force you to trade ease of use for privacy.
Zcash is well-positioned to meet this demand as cryptocurrencies gain mainstream acceptance. The network is scheduled for an upgrade at the end of October 2019. The upgrade, known as Blossom, will increase block frequency in a bid to improve transaction speeds. This focus on usability and convenience will be critical to users accepting privacy-focused alternatives like Zcash.
Join The Zcash Community
If you’d like to find out more about Zcash or get involved, check out these ZEC communities:
- Zcash Official Website
- Zcash Official Github Repository
- Electric Coin Company Official Twitter
- Zcash Community
- Zcash Subreddit
If you’re interested in other privacy-friendly cryptocurrencies, check out our roundup of the most private cryptocurrencies you can use today.
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