The last decade has seen the evolution of Finance as we know it along with the birth of a new era of digital currencies. While we have seen new cryptocurrencies being introduced to us every now and then, there are few that have shown promises for offering the users a higher level of privacy and fungibility. There are others that have developed mammoth market caps in the last few years and have figured out a niche.
Satoshi Nakamoto’s Bitcoin was the first to scale. It helped open a whole new world for investors and traders. Not only that, Bitcoin has successfully built a path for various other cryptocurrencies, like Ethereum, Ripple, ZCash, etc. to emerge. The finance sector saw a rise in demand for privacy, as cryptocurrency investors understood that their transactions were easily traceable within blockchain technology.
In the years following Bitcoin’s release, developers came out with privacy-oriented cryptocurrencies like Monero and Dash. Both of them assisted traders and investors in increasing the chance of their anonymity. That is where ZCash came in, with its ability to provide even better service of privacy.
What is ZCash?
ZCash is one of the most well-known privacy cryptocurrencies in the decentralized blockchain, that provides optional anonymity to users and their transactions, using advanced cryptography. If compared through the lens of a digital currency, one might find ZCash very similar to Bitcoin. The major difference between them lies in the level of privacy and fungibility that each one provides.
Along with offering public addresses, ZCash offered this feature of encryption by introducing shielded addresses for its users. While the initial plan was to go ahead with the shielded address only, ZCash let its users choose between the level of anonymity by offering both — the public address and the shielded address. Shielded transactions can be verified without disclosing the sender’s nor receiver’s balance or transaction history.
ZCash uses zero-knowledge proof constructions; zk-SNARKs; which allows two participants to exchange information while retaining their privacy. The bitcoin blockchain contains records of the participants making the transactions, as well as the amount involved, whereas, Zcash’s blockchain only displays that a transaction was made. It does not reveal the participants that were involved in the transaction or what the amount was.
How does ZCash work?
Zcash offers a shielded address to its user by employing a cryptographic breakthrough called the Zero-Knowledge Proofs or zk-SNARKs that allows anyone to prove they know something without sharing what they know. Zcash allows the ledger to be still auditable while maintaining the privacy of the shielded addresses. This is done using encryption on the blockchain.
It can therefore be proved that the transaction was correct and was legitimately transferred from the sender, without anyone else having any knowledge about the transaction.
Other than the privacy features, the cryptocurrency operates similarly to other cryptocurrencies. Each transaction is verified by the nodes and recorded on the blockchain. Each block is added to the open network of computers using an algorithm called Equihash which calculates the amount of RAM a miner is devoting to securing the blockchain.
| Coin | Price (16 July’21) | Market Cap | Inventor |
| Zcash | $95.78 | $1.2 trillion | Zooko Wilcox-O’Hearn |
Why is Zcash valued?
Privacy is an integral part of the financial markets. Having access to others’ information helps to predict the future which affects the functioning of these markets. Maintaining privacy is necessary for businesses to prevent their competition to see their trades. If you are in a business that takes care of information about a lot of people, for example, health care, child safety, etc. then maintaining the privacy of such people is extremely important.
Having copied the open-source codes of Bitcoin also means that Zcash can also serve as digital money.
5 things you need to know about ZCash
| Zcash is equipped with better privacy. |
| Zcash uses zero-knowledge proofs, zk-SNARK, to ensure user anonymity |
| It is identical to Bitcoin in many aspects as it is built on a framework similar to Bitcoin |
| Only a total of 21 million Zcash will ever be available |
| 20% of the Zcash mined by 2020 will be distributed to its founders. |
What does Zcash’s privacy mean?
Zcash uses a variant of zero-knowledge proofs called a zk-SNARK for its shielded transactions, which ensures:
- That the verifier can only differentiate the data from being either true or false
- The proof can be verified in milliseconds.
- There is anonymity between the prover and the verifier
- No false information is accepted by the verifier.
- Only verifiable information can make a prover prove information.
- These properties ensure the anonymity of transactions taking place between the Zcash shielded addresses.
Why use ZEC?
While the launch of Bitcoin led to the creation of other use cases of blockchain technology, the idea of creating a privacy coin like Zcash allowed users to make payments without disclosing their identity or transaction history to the rest of the world.
Major financial institutions, like JP Morgan, have also incorporated Zcash’s tech into various blockchain software, the idea being it could allow them to remain compliant with business requirements and regulations when using blockchains.
The idea of Zero-Knowledge Proofs could further help create new applications for businesses that want to keep their actions hidden from their competitors. Read more on Zcash Whitepaper.
Now that you know the basics of Zcash, are you ready to get started with the next step? You can start investing in Zcash on CoinDCX Go, the simplest Bitcoin investment app!
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