Coins that are geared towards providing privacy online will become more valuable in a future where it is a growing concern. Zcash, a cryptocurrency with zero-knowledge encryption that is open and permissionless, represents one of the so-called “privacy coins”. The coin is based on the decentralized Blockchain like Bitcoin but it keeps transaction amounts secret and anonymous parties. ZCash is less transparent than Bitcoin, which allows users to track someone’s transaction if they know the wallet address. Zcash is still published in a public Blockchain, but sender, receiver, and the amount of coins transferred are private.
What is a privacy token?
All over the Internet, people are increasingly looking for enhanced privacy and anonymity. Unsurprisingly, some of the demand for enhanced privacy and anonymity comes from those who are involved in illegal activities. This fact became a focal point of any anti-Bitcoin or anti-cryptocurrencies narrative. These criminals, however, are a dime a dozen. To conserve your privacy means you want to be in complete control of who has access to what information about you.
Privacy coins are usually classified by three key characteristics:
- Confidentiality: The amount of coins that you send, receive, or own are not visible, traceable, nor linked by viewing the history of transactions on the Blockchain.
- Interchangeability: Every coin has the same value, and can therefore be interchanged. A coin’s transaction history will not cause it to be blacklisted or devalued.
- Decentralization:All the nodes are equal in power and influence. There is no such thing as a node that has more control than another. masternodes. It is impossible for a single person or business to create, maintain, and control the currency. a central authority.
Zcash does not offer much at the moment in any of these three categories. The privacy aspect is present, as it allows for private transactions. However, the encryption service only accounts for a small fraction of total transaction volumes. It can cause fungibility problems, since coins used in encrypted transactions may end up more valuable than the ones that have been “contaminated” by unencrypted transactions. Decentralization is also an issue, since the Zcash Foundation could end up with up to 10% ownership of all tokens. (Explained in more detail later on). Zcash has much to do before it can be considered a privacy coin.
Zcash vs other popular privacy coins (source: https://masterthecrypto.com/wp-content/uploads/2017/09/CRYPTOCURRENCY-4-min.jpg)
Zcash was created based on Zerocash, a protocol that aims to solve Bitcoin’s issues with privacy. Zcash created a “hard fork”, a copy of the Bitcoin blockchain. The design was kept relatively unchanged with a few minor differences. The Zcash team changed the target block interval from 10 to 2.5 minutes. They also increased the limit of the block to 2MB and introduced a scheme for confidential value transfers.
Zcash relies on advanced cryptographic methods, such as zero-knowledge-proofs (zk SNARKs), to ensure the integrity of transactions. This is done without divulging any additional information. The team that is testing and verifying this technology is composed of high-profile scientists, including Professors Eli Ben-Sasson. zk-SNARK is an acronym for “Zero Knowledge Succinct Argument of Knowledge” and describes a proof structure whereby one can demonstrate possession of information without revealing it and without interfacing with the verifier. The network can maintain a ledger without having to reveal the parties involved or their amounts. The only way known to date to create zero-knowledge proofs that are both non-interactive and brief enough to post to the blockchain, is by having an initial setup phase which generates a reference string that provers and verifiers share. This common reference string is what we call the public parameters for the system. These parameters are generated randomly, but the randomness must be kept hidden to malicious parties. This would allow the malicious party to create fake proofs or counterfeit coins. Zcash creates public parameters by means of elaborate multi-party ceremonies to prevent such a thing from happening.
Zcash offers its users the option of conducting transparent (public), or shielded transactions (private). Users can also choose to reveal information selectively about shielded transactions. The option of transparency is useful in situations when an entity must be audited, or provide information to the IRS. This selective transparency can be enabled by using a ” View Key“. The key is shared to enable certain people to view transaction details selectively. The view key alone is not sufficient to use the funds that you see. It is important to note that the “view key”, which you use for spending funds, is different from ” Spend key“. The spend key must be known to enable ZECs stored at a payment account address to be spent. The separation of the keys allows a third-party to see the details about the transaction without being able to use the money on the account.
Zcash provides -encrypted memo fields. The memo fields are used to transmit encrypted messages. This message can only be read by the holder of a view key. It can be used to include a code for payment or send a message.
Zcash technology has limitations. The most commonly cited weakness that Zcash is working to fix in the near future include:
- Setup and computation One disadvantage of zk-SNARKs, is the need for a multiparty calculation ceremony to be performed by network members. The purpose of this ceremony is to create the public parameters for the zero-knowledge technology. You need to be confident that each member of your group is doing their best without compromise in order to maintain a totally accurate Zcash base. This parameter has no effect on Zcash’s privacy. There is research underway with Zk-SNARKs, a technology that allows privacy without requiring a trust setup.
- Generating encryption transactions in Zcash takes a large amount of memory, which is not suitable for commercial purposes. Due to this, not all transactions in Zcash are protected (approximately 5.05% are stored in z addresses). It means some coins are more valuable because they were not part of an allegedly tainted deal. The team is focused on Performance Improvements for a future release, and promises to introduce Sapling, which will reduce the time and memory requirements, which are key for opening mobile support for Zcash-shielded addresses.
This will increase the overall level of privacy by shielding a larger percentage of Zcash transactions. Even the development team hinted at a plan to abandon fully transparent addresses in future.
Zcash, coin and Governance
Zcash launched on October 28th, 2016. The initial phase was code-named Sprout, signifying that it is an emerging blockchain that has great potential for growth. Zooko Wilcox is an experienced investor with over 20 years’ experience in cryptography, open systems and digital startups. Zerocoin Electric Coin Company, a for-profit US company, is responsible for its development. They claim to be committed to open-source blockchain technology (which they back by making their source code available), but they plan to take 20% of Zcash coin mined in the first 4 years to give to “founders” and “investors”.
In the first four-year period, 50 coins are produced every 10 minutes. The founders will own 2,102.400 coins. The coin production will then be reduced from 50 coins every 10 minutes to 25 per minute after the first four years. Only at that point will miners get 100% of their mining. After the 21,000,000 coin cap is reached, “founders and investors” could end up with 10% of all coins that are in circulation. Many forums have discussed this. Since the coin is open-source, some people suggest they’ll create their own currency using the exact same protocol but without 10% tax.
Zcash’s founders rewards system and pre-mine policy have received criticism from many community members. While the pre-mine policy may seem greedy, it is not unreasonable, given that Zcash has been supported by some big investors, including Pantera Capital and Roger Ver. Digital Currency Group is one of Zcash’s major investors. It owns many media outlets in the crypto currency industry. DCG was accused of “shilling”, and ZCash as a result of corporate greed. The founders’ award recipients have pledged to give 10 percent of their total rewards to the non-profit Zcash Foundation, which will be focused on fair and impartial governance. Some sections of the community still have doubts about how far this project can go in terms of decentralization.
Zcash’s total coin supply will be similar to Bitcoin, at 21 million. Even the project follows the same coin distribution rate, with 21,000,000 ZEC issued over 131-years. There is still a slight difference. Instead of Bitcoins’ 10 minute blocks Zcash has a block time average of 2.5 minutes with block rewards 4x larger that are halved every four years.
Zcash currently occupies the 23 position amongst all available cryptocurrency market cap-wise. It is also the 7th most expensive coin in the market. The stats indicate that Zcash is a fairly expensive coin, which could be an attractive target for people who would rather mine coins than buy them.
What is Zcash?
ZCash’s hashing will be Equihash, an asymmetrical memory-hard PoW based algorithm that uses the generalized birthday algorithm. Much like Ethereum, it relies on high RAM needs to bottleneck proof generation and prevent ASIC development. In order to prevent Instamine from occurring, ZCash has a slower mining start where the block rewards are issued at a lower rate than usual. Visit the Zcash official blog to learn how you can start your Zcash node.
How to Buy Zcash?
1. How to set up your Zcash wallet
Download a desktop wallet or mobile wallet. In addition to zcashd, the core client that is officially supported, there are a number of options from third parties for storing ZEC and sending it. There are limitations to the support of Zcash by many third-party wallets, notably the memory requirement for address-shielding. Here you can find a list of the third-party wallets that supported Zcash at its launch.
Download the Zcash desktop wallet from Mac, or Windows. You can start using the wallet immediately after installation, but transactions won’t show up until you sync it. After installing the wallet, go to Own addresses, click on the address that the client created for you and click Get Private Key.
You will see a screen that shows your private key, and lets you know that it has been copied into your clipboard. This should be backed up carefully and securely. You can either take a screenshot, write down the information on paper or type it on an encrypted note. You will not be able to rebuild your wallet in the event that your computer breaks down if you lose your key. If anyone manages to find this key, they will be able to take over all of your money.
Double-click the address to copy and paste it. You’ll need this address to transfer your Zcash from the exchanges into your wallet. The address will usually begin with “t”, “z” or “1”, just as bitcoin addresses start with “1” and “3”. These addresses are different in that those that begin with a “z” have the added privacy provided by Zero-Knowledge Proofs.
Zcash can be stored on your hardware wallet, mobile or exchange wallet. It is not safe to store your money online, so make sure you send it to cold storage. Check out the list that has been approved by Zcash’s community for more options.
2. Buy BTC/ETH
You can buy Bitcoin and Ethereum, just like any other coin. Buying BTC/ETH can be easily done through an exchange that allows you to convert fiat currency into cryptocurrency, such as Coinbase or Kraken.
3. Buy ZEC with BTC/ETH
Binance is your best bet, but there are many other exchanges that offer ZEC in trade for BTC/ETH. Binance may be your best option, but you can also choose from a variety of exchanges. Some of these allow ZEC to be purchased with USDT and others offer fiat purchases of ZEC. You can purchase ZEC once your funds have been transferred.
4. Cold storage of your money
Send your money to the address above on your Windows wallet.
Zcash, which has been in existence for less than a year now, is still an emerging project. In this period, the official Zcash team and many other interested parties worked to lay down the foundations for a global Zcash eco-system. The development team focused on security and stability, while third-party developers added support for Zcash into existing exchanges and wallets. The State of the Network post is regularly published by the team throughout the year. These posts have marked important milestones such as the distribution of the 1st million ZEC, the 100-million USD market cap (which has now surpassed 1 billion USD), and Zcash’s 1st birthday. The Zcash Team released a recent roadmap that outlined ambitious but achievable goals for the future. These include Sapling’s usability and safety improvements, as well as the adoption and support of Zcash from third parties.
Zcash had an excellent year, with its value reaching over $400 by June 2017. Since then it has maintained his place as the most valuable coin on the market. The Zcash community has taken pride in promoting the platform, as many understand how important anonymous transactions are to the future of cryptocurrency payment. There have been serious talks about combining Ethereum’s blockchain based on smart contracts with Zcash anonymity payments. This suggests that both platforms can be scaled up. Monero is a privacy coin that has been gaining popularity. Dash, Verge, and Bitcoin are also proving to be very competitive. Zcash, all things considered, has shown great potential. The market will have to see that Zcash can deliver the potential it has shown and maybe even go beyond that in order to believe that this is the future private Bitcoin.
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