Zcash — What is it?
Zcash is a decentralised, peer-to-peer cryptocurrency and blockchain which prides itself on its high levels of privacy and security. It also claims to base its construction firmly on science.
It has a restricted supply of 21 million coins. The company behind it is the Zcash Company, whose stakeholders receive 10% of all mined Zcash until 2020, i.e. during its first four years of operation. (Some have criticised this as a move towards centralisation.)
How to play
Zcash allows businesses, consumers and new apps to control who can view their transaction details, even while using an international, permission-less blockchain.
One problem with a public, transparent blockchain is that it challenges most people’s expectations of privacy. For example, certain transactions could reveal someone’s personal data. Equally, private transactions on public blockchains could cause problems.
It uses the same algorithm as Bitcoin but enhances it through semi-transparent processing. Put simply, it swaps Bitcoin’s transparent blockchain for a more nuanced implementation which reveals user transaction data selectively.
The roots lie in Zerocoin, which was developed in the 1980s. But Zerocoin had problems, including the size of transactions, how long they took to complete, cost and functionality. Additionally, the system had no native cryptocurrency and didn’t hide metadata from public ledgers.
Zcash aims to iron out the problems with Zerocoin via zk-SNARK, its zero-knowledge proof that’s short and easily verified. Such proof means a transaction can go ahead without its contents being divulged.
In a nutshell, there are three Bitcoin requirements, and Zcash meets these without compromising anonymity. These include:
- The coin must not have been previously spent
- Input must equal output
- Authorisation for senders
This is another key feature of Zcash. It means each party participating in a transacting system treats Zcash as equal, regardless of the transaction history. Generally speaking in a public blockchain, this can’t happen because it is sometimes possible to blacklist particular tokens due to their transaction history. In other words, with Zcash coins are effectively ‘cleaned’ of their part history and so can’t be traced.
In the summer of 2019, Zcash forked into a new blockchain network called Ycash, which has a total supply of 21 million coins. It’s independent of the firm behind Zcash, the Electric Coin Company, and the Zcash Foundation.
Ycash is built on Zcash’s codebase and shares its blockchain history.
Every user who has Zcash private keys at block height 570,000 can use them to access a similar amount of Ycash.
Does Zcash have any downsides?
Given that it has similar governance to Bitcoin, there may be potential for issues with network scaling if Zcash gets the same volume of traffic as Bitcoin did when it ran into difficulties previously.
What are the benefits of Zcash?
- Its privacy options protect users and mean Zcash acts in some ways more like a form of real cash than a cryptocurrency
- Because it forked from Bitcoin, it has identical, tried-and-tested, security
- There’s a peer-reviewed, scientific approach to tech development
- Since it doesn’t load transactions with high levels of data, it has a privacy technology that’s arguably more effective than that of many similar cryptocurrencies
As a cryptocurrency and blockchain, Zcash aims to overcome the privacy flaws sometimes associated with Bitcoin. Its use of zero-knowledge proofs in verifying and validating transactions means its blockchain has practical applications for businesses and other organisations keen to benefit from blockchain technology and privacy.
It has many of the most sought-after aspects of a well-rounded cryptocurrency, including limited supply, strong privacy options and fungibility. In addition, it has a respected team of experts and institutional support, which, again, make it worthy of consideration.
Learn more about financial trading at Roger.com.