Zcash: A Privacy-Protecting, Digital Currency Backed by Blockchain Technology
~ Governance integrated, Digital currency, Privacy, Anonymity.
People’s privacy will always face the threat of being compromised as digital currencies continue to gain increased adoption and as the world becomes more decentralized. The reason for this is mainly because of the design of most digital currencies. The truth is that the distributed ledger technology which acts as an open ledger ensures the transparency of every transaction.
The desire of cryptocurrency users to use a blockchain that offers them more privacy increased when they discovered that it is possible for anyone to trace their transactions in most blockchains. Obviously, this feature will help to deal with the issue of corruption and negative activities. but on the other hand, it has ended up compromising our privacy.
Is it compulsory for people to disclose every detail of their financial transaction and life to the world? Are we entitled to request some level of privacy in our activities? One crypto project that has emerged to answer these questions and more is Zcash. Among the major crypto projects that deal with privacy issues include Monero and Dash which I’ve talked about in previous posts. Take a look at my article on Monero.
What Exactly is Zcash?
Just like Dash, Zcash entered the crypto world as a fork of Bitcoin in 2016 and it’s a decentralized peer-to-peer digital currency that has the same hard limit as bitcoin — 21 million coins. Initially, Zcash was known as the Zerocoin protocol, then changed to Zerocash before finally becoming Zcash. The ticker symbol of this currency is ZEC and it currently occupies a position among the top 40 cryptocurrencies based on market cap. The CEO and founder of Zcash is Zooko Wilcox and he is the driving force behind the cryptocurrency.
Zcash has managed to create entirely new features. Users enjoy complete privacy for all their transactions courtesy of the power of cryptography. The blockchain conceals the sender and receivers’ identity and the only piece of information about a transaction that is visible is the transaction time and date. Zcash retained the basic structure of Bitcoin while providing fungibility and privacy.
Fungibility has to do with the ease with which a specific commodity can be substituted for another. Well, instruments that are fungible are prone to theft and fraud and that’s why fungible assets like gold and US dollars are guarded. To solve the issue of fraud and theft, Satoshi Nakamoto made sure that all transactions on the Bitcoin blockchain are completely transparent and traceable.
Well, this ended up affecting the privacy of users who initially thought that since wallet addresses were pseudonymous, all bitcoin transactions were anonymous. But when law enforcement took action against those behind darknets such as Silk Road, it was obvious that all that’s needed to trace the real identity of any bitcoin wallet was a small amount of information.
What Zcash did was to make use of Bitcoin’s open ledger system while encrypting the data regarding the ledger’s users. So, even when all transactions on the Zcash blockchain are recorded, those who can only view the details of the transactions are users who have access to them because they have been encrypted. But Let’s take a look at privacy-focused cryptos like Monero.
Monero depends on private keys that have alphanumeric characters. Users of the coin are provided a unique public address that serves as their identity (this works much like the IP address of each computer user). To receive funds from another individual, a user must have the public address and what this means is that the sender will first get the address of the receiver to enable the transfer. What gives a user access to the funds is a private key that is also attached to the particular transaction they initiated.
Well, guess what happens when the transactions are made repeatedly? Of course, the public address will eventually be linked to all the transactions and this makes it easy for anyone interested to identify the owner of a public address.
This is one aspect that Zcash has also resolved by making use of a cryptographic tool known as Zero-Knowledge Proofs (zk-SNACKS). With this tool, users can engage in transactions and all parties involved would avoid disclosing their payment addresses to each other. With this tool, all Zcash transactions are untraceable on the blockchain because it conceals the payment addresses of all parties involved as well as the amount that was transferred. It’s nearly impossible to trace the path of any fund that was transferred to a receiver or sender because the payment addresses that was recorded on the distributed ledger are not the real users’ address. This is what makes Zcash stand out from all blockchains including Bitcoin.
The highly anonymized crypto has been seriously criticized for potentially creating a safe haven for illegal transactions like cyber criminals who are involved in transactions in the dark web. But it also has valid legitimate use cases. For instance, Zcash would be useful for those with chronic medical conditions that need to buy their pills online and anonymously or a couple who want to purchase taboo sexual toys and several others.
Even though some exchanges delisted ZEC and other similar cryptos due to the anonymity of transactions, you can still buy the coin on major exchanges like Binance, OKEx, BitBTC and Huobi Global.
Why use Zcash
It’s not easy to predict the future of Zcash just like every other digital asset out there. But one interesting thing about Zcash is that it has managed to get the attention of several groups within a short time. For instance, major financial institutions such as JP Morgan have already incorporated Zcash’s tech into different blockchain software.
The reason for doing this is that they would be compliant with business needs and regulations when making use of blockchains. It’s also crucial to point out that Zcash has some obstacles to deal with especially when it comes to wider adoption. There are concerns about the decentralization of the network because the computation involved is more than that of other cryptos.
The project also faces a lot of competition from other privacy-focused digital currencies such as GRIN, XMR and BEAM. Regulators have also criticized the project for fear that criminals might take advantage of the coin and this has actually led some exchanges to delist the coin as well as other privacy cryptos. Dive into the world of digital currencies by reading “The Digital World of Crypto Riches.” The book provides a summary of over a hundred top cryptocurrencies and is an ideal resource for any investor who desires to make informed investing decisions.
~ The official website of ZCASH is https://z.cash/