Over a decade since Bitcoin first launched its genesis block, many altcoins followed in its footsteps for better monetary transaction options. This includes ZCash cryptocurrency among the thousands available in the crypto sphere.
What can this altcoin offer better than other digital assets in the market? Find out if ZCash is worth looking into and investing in as you browse through Cryptoshimbun!
What is ZCash cryptocurrency?
Similar to other cryptocurrencies in the market, ZCash is a digital asset that operates on a decentralised blockchain and offers a platform for peer-to-peer transactions. It’s based on Bitcoin’s blockchain codebase and was launched in 2016.
Early years and development
Spearheaded by Matthew Green, a professor of computer science at Johns Hopkins University, along with his graduate students including Christina Garman, Ian Miers and Aviel Rubin in the Information Security Institute, they developed the technology for the digital asset. It took 3 years for the ZCash whitepaper to fully materialise.
Initially, the idea for ZCash came from Green’s cryptography team to address the privacy and scalability issues of Bitcoin. The concept started in 2013 with a US$3 million investment from the Electric Coin Company.
Zooko Wilcox-O’Hearn, the chief executive officer (CEO) of the crypto firm took over the development of ZCash cryptocurrency in 2016. In the same year, the first block from the network was mined which initiated the company’s success.
What ZCash aims to solve
Blockchains maintain the decentralised feature through transparency in transactions, especially in Bitcoin’s network. The key promise was to remove financial regulations from monetary transactions with optimised privacy and security.
However, this lulled crypto investors into a false sense of security in the early days of crypto. The information stored in the blocks can still be traced to the person that made the transaction.
This is the problem that ZCash cryptocurrency aims to solve. Through its unique network founded and improving upon Bitcoin’s blueprint, it gives the power back to its users by guaranteeing that transactions remain anonymous despite its blockchain transparency.
ZEC as the native coin
In many ways, ZCash’s native coin, ZEC is similar to Bitcoin’s BTC. This includes the number of coins circulating in the market. There are only 21 million ZEC coins issued for the project following BTC’s footsteps to limit the resource and drive the price up.
Moreover, ZEC coins are also transacted through the same open financial system. However, ZCash takes it a step further by adding privacy features and coin fungibility to make transactions safer and seamless for crypto investors.
Currently, ZEC trades at around US$171 per coin with an overall market capitalisation of US$2 million.
Primary features of ZCash cryptocurrency
To address the privacy issues plaguing Bitcoin transactions, the developers found a way to protect the users’ identity and payment history when recording transactions. ZCash then introduced a specific zero-knowledge proof called zk-SNARKs that allows anonymity in every private transaction.
ZCash has two types of addresses recorded in its blockchain namely:
- t-address – public addresses that are visible on the blockchain allowing users to view information such as the sender, receiver and transaction value.
- z-addresses – private addresses and can only be accessed through an authorised key.
Since two addresses can be utilised on the blockchain, different security measures can be done with specific transactions such as:
- Shielded transactions (z-to-z) – The data from both the sender and receiver are shielded from the block.
- Shielding and deshielding transactions (z-to-t and t-to-z) – Only the data from the z-address is shielded from the block while the t-address can be viewed by the public on the ledger.
All the transactions can still be viewed on the ledger since the ZCash blockchain follows the transparency protocols of Bitcoin.
What the zk-SNARKs protocol protects is the user information from the z-address. This allows selective disclosure wherein the transaction can be audited without compromising the identity of the user.
Proof-of-Work (POW) consensus
Similar to Bitcoin, ZCash cryptocurrency also mines blocks through POW consensus wherein nodes verify transactions and prevent double-spending. They are also rewarded with newly issued ZEC coins for maintaining and recording the transactions on the blockchain.
ZEC fungibility feature
This is where Bitcoin and ZCash cryptocurrency differ since ZEC coins are completely fungible. It’s the added feature that developers added to the coins to ensure that the transactions can’t be traced back to investors utilising the z-address.
Since each BTC is accounted for in every mined block, the wallet address of the transaction can still be traced back to its users. Although wallets are pseudonymous, this doesn’t ensure anonymity with the transactions since Bitcoin operates transparently to prevent fraud.
ZCash, on the other hand, ensures anonymity through its fungible coins. Each coin can be interchanged with any others of the same currency similar to fiat money.
The main difference is, there are no serial numbers attached to ZEC that can be traced back to the user. This allows you to remain anonymous when using the fungible coins since the purchase history isn’t traceable to its original block.
Another issue with Bitcoin that ZCash aims to solve is its scalability issues. Currently, transactions through the Bitcoin blockchain takes an enormous amount of energy to complete. This also prevents the blockchain from fully and quickly optimising its protocols between two users since large traffic can either delay or nullify the transaction.
The ZCash network altered Bitcoin’s protocol to fully maximise the ledger’s capacity through sharding. This means that the blockchain will be partitioned into separate sections to quicken mining and validation processes thus making the process more efficient.
The plan is still a work-in-progress since the proposal for ZCash sharding architecture is yet to be implemented on the blockchain.
ZCash: Taking crypto transactions to greater heights
Finding the right cryptocurrency that can take care of your privacy and security needs can be challenging in the developing crypto sphere. With heightened regulations required from exchanges and up and coming digital assets, options can quickly deplete.
However, ZCash cryptocurrency is a helpful choice when you want to maintain your anonymity in transactions. Its unique blockchain technology that improves Bitcoin’s network gives it leverage in the market that won’t be equally met by other digital assets.