What Is Zcash (ZEC)? | A Guide to the Bitcoin-Based Privacy Coin
What Is Zcash?
Zcash is a publicly encrypted blockchain and scientific breakthrough in cryptography with its use of zero-knowledge cryptography known as zk-SNARKS. This framework allows the user to leverage two addresses: one fully private and one transparent (similar to Bitcoin). The two customizable modes, shielded and transparent, allow your transaction to be completely anonymous or publicly viewable.
In this guide, we give you the lowdown on Zcash, covering:
- How Does Zcash Work?
- Bitcoin’s Transparency
- Zcash Team
- Where to Buy ZEC
- Where to Store ZEC
- Final Thoughts
- Additional Zcash Resources
How Does Zcash Work?
Zcash is significant because it provides a secure transportation layer for your data (and ultimately identity). It’s the HTTP of money. Imagine an armored car containing your data in a box. The security from the vehicle protects someone else from viewing the contents of the box as well as provides safe passage for the data.
With Bitcoin, a clear, glass car transports your data, allowing anyone to see the contents. Would be observers, thieves, or other bad actors have the ability to see what you have in the vehicle, whether it’s the amount of your funds or where they’re going/coming to/from.
zk-SNARKs are a scientific breakthrough in cryptography that allow you to prove an action without having to reveal all the details of the particular action. Before zk-SNARKs, someone would have to re-create and re-test the inputs you used.
Zero-knowledge Succinct Non-interactive Arguments of Knowledge (zk-SNARKs) are mathematical proof constructs that ensure all information (sender, receiver, and amount) is encrypted while also preventing double-spending (a critical element to successful cryptocurrency architecture).
How Does Zcash Make Privacy Optional?
You can make Zcash private transactions viewable through the selective disclosure function.
Transactions have a memo field which you can use to send additional transaction data viewable only to recipients. You could set up this memo in a customized way as required by industry, regulatory compliance, or other legal authorities.
For example, you could share that you have at least a million dollars in your account without revealing your total account balance. You could also prove that you possess a wallet’s private keys, and in effect, the ability to spend (like a controller).
An odd negative outcome of Bitcoin’s transparency is that savvy criminals can gain some anonymity (through coin mixers and IP cloaking) while your average user gets no privacy. Because anonymity is not built-in, most users don’t change the default settings. This transparency creates vulnerabilities as would-be attackers can cherry pick the highest value victims by seeing who has the most money in their wallet.
On the enterprise side, a business must protect confidential information from competitors, customers, and even suppliers. Employers might want payroll kept secret from other employees and rivals. These trade secrets are not insignificant, and you shouldn’t underestimate the utility of protecting them.
The Zcash team is a mish-mash of scientists, engineers, designers, and business pros from across the globe. Their resumes include MIT, Johns Hopkins and, Tel Aviv University. As Zcash Founder and CEO Zilko Wilcox puts it:
“This is the first protocol of its kind. It is the product of years of scientific research, advanced engineering, and diligent security work…We encourage the Zcash community to experiment with us, and to mine, run a node, and join the growing and friendly community. Zcash is a consensual currency, a community network, and developer-supported cryptocurrency; your active participation makes the network stronger.”
There was no crowd sale or ICO for Zcash but rather private investments from renowned individuals like Naval Ravikant (Angel list founder), Roger Ver (early Bitcoin investor), Erik Voorhees (Shapeshift founder), Barry Silbert (Digital Currency Council founder) and Fred Ehrsam (founder of Coinbase).
The Zcash team is currently working on the second and third versions of the Sapling release. Sapling is focused on improvements for shielded transactions such as better performance, the decoupling of zero-knowledge proof hardware from transaction signature hardware, and enhanced shielded keys.
The cryptocurrency market is filled with privacy coins. However, Zcash’s biggest competitor is Monero. Monero utilizes RingCT and Ring Signature (among many other things) to provide you with anonymity. No zk-SNARKs in sight.
For the most part, the ZEC price has followed overall market trends. It had a nice run in 2017 from about $30 (~0.0257 BTC) to an all-time high of over $866 (~0.0516) at the beginning of January 2018. It’s worth noting, however, that for the majority of 2017, ZEC was actually declining in BTC value. It reached an all-time BTC high of about 0.1683 BTC in June but fell drastically afterward.
Zcash seems to be unaffected by most coin-specific news. One of the only exceptions occurred in May 2018 when the price jumped over 40 percent in less than a day on news that Gemini would soon list the coin.
Other than a market turnaround, there’s really only one thing that will move the needle for the Zcash price – adoption. The project has the support of many of the top names in blockchain and technology, so be aware of any payment software integrations that may be on the horizon.
Where to Buy ZEC
You can purchase ZEC on most major exchanges. Binance lists the coin as a trading pair with BTC and ETH. Bithumb has ZEC available for KRW. And, Coinbase, Kraken, Gemini, and Bittrex all accept USD for ZEC.
Where to Store ZEC
Your safest, albeit most difficult to use, wallet option is the Linux command line client, zcashd. You should only use this wallet, however, if you’re comfortable around computers and have experience with command line interfaces.
Companies like Google and Facebook have crafted very profitable businesses from our data. Max Schrems, a privacy activist, requested the information Facebook had on him for a thesis paper and received a 1,200-page character profile across 57 categories.
There’s a whole data world out there and most people are unaware of how it works or how it’s being used against them. Zero-knowledge proofs and projects like Zcash protect you from the purview of age-old institutions while paradoxically offering compliance with the rules and regulations imposed by those same authorities today.
The promise of privacy-focused cryptocurrencies and new security layers like Zcash and zk-SNARKS are a refreshing reminder of important, and often overlooked, needs in an increasingly centralized and data-driven world.
Editor’s Note: This article was updated by Steven Buchko on 1.21.19 to reflect the recent changes of the project.
Additional Zcash Resources
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ABOUT THE AUTHOR
ABOUT THE AUTHOR
Aaron has spent 10+ years in different start-up, business environments wearing hats in marketing, sales, management and operations.
After doing business development and content marketing for a Silicon Valley IT and Cloud services firm, Aaron realized how technology is transforming everything we do in our personal and professional lives.
This prompted a deeper professional interest in the Bitcoin and Blockchain space which he had been dabbling in since 2014 as a miner and trader.
Aaron now writes about Blockchain Technologies and does content marketing and business development for CoinStructive, a Bitcoin and Blockchain consulting firm.