We’ve seen a substantial amount of cryptocurrencies coming onto the scene over the last four years, and they all have drawbacks in one way or another.
The Bitcoin blockchain for example, allows no privacy as all transactions between different parties are transparent on a public ledger for scrutiny. This problem has caused users to begin seeking out different cryptocurrencies that work better to protect their anonymity.
Although some digital currencies, like Monero, have attempted to address this problem with privacy concerns, none have gone to the level of privacy ZCash offers.
Their technology allows a user to enjoy complete anonymity, allowing for more privacy and flexibility in how they trade. Here’s how this digital currency works.
According to ZCash, their technology utilizes an application called zk-SNARK, also known as zero-knowledge cryptography.
Transactions can be shielded and run through a process that encrypts them on the blockchain, making them unidentifiable yet still verifiable.
The full definition for zk-SNARK is “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge”. It’s based on a proof construction where you can prove you have certain information without having to reveal what that information is to the person asking for verification.
Because of this system’s unique design, it requires no interaction between the prover and the identifier, showing only that a transaction happened. This level of anonymity provides a higher level of security and anonymity.
ZCash, under the leadership of Zooko Wilcox as CEO and a number of other developers, is an initiative aiming to develop cryptographic protocols that offer unparalleled levels of privacy.
The developers wanted to address the security limitations with Bitcoin under the Zerocoin project. The project allowed Bitcoin to be converted to Zerocoin, which provided greater anonymity regarding the source of a payment.
A further improvement on Zerocoin is the Zerocash initiative, which stemmed from a collaboration between the Zerocoin developers together with MIT, Tel Aviv University and The Technion.
Zerocash has since taken on a new name and is now known as the cryptocurrency Z-Cash.
Because of the unique set-up of the cryptographic protocol, its ability to guarantee validity of transactions without having to reveal additional information has no competition. It effectively allows payments on a public blockchain to remain anonymous.
Users are attracted to this hyper-private way of exchanging digital currency, making this virtual money a popular option. Here’s a closer look at how it works.
ZCash is the first cryptocurrency using zk-SNARK application, which is the differentiator that separates it from the competition. The main reason the company can guarantee such freedom from interference is because all dealings or transactions are fully encrypted.
The encryption process happens without compromising the validity of the verification process or revealing other sensitive information.Using ZCash is similar to using Bitcoin. The only difference is with Bitcoins, you can choose whether you’d like to encrypt the information or not.
This privacy option is accomplished by choosing between transparent and shielded addresses, which allows you to send information publicly or privately.
When sending payments, the balance received remains invisible if sent to a shielded address, and visible if sent to a transparent address.
By looking at the wallet address, you’ll be able to determine whether the address is private or hidden. You can tell in a simple way. If the address starts with a “z”, it is shielded and private, but if it starts with a “t”, it is visible for everyone to see.
This digital currency also puts a fail-safe security system in place called The Ceremony to prevent the production of counterfeit coins.
The Ceremony is basically when multiple parties generate a parameter through a multi-party computation protocol. The protocol used has a feature that prevents the transaction from becoming compromised.
In order for the transaction to fail, all participants would have to be dishonest or end up compromising themselves. More about this whole parameter generation can be read at the Paramgen page.
Next, let’s take a closer look at how to store ZCash.
There are a number of different wallets someone can use to store this cryptocurrency. Here’s a brief look at each.
Internet Wallets – These desktop wallets are the fastest way to start out using ZEC. Simply download an app and store your altcoins there.
Hardware Wallets – Store you balance on a physical memory device like a USB drive or portable hard drive. These types of wallets are a safer way to store virtual currency than in an online wallet.
Transparent Addresses – This type of storage will cost you a bit of money because they come as a physical product designed with safeguards against loss of your ZCash.
Local Wallets – These wallets run a client on your computer connecting to a network node.
Exchange Wallets – All you have to do is create an account with an online exchange provider and manage your virtual currency there.
You may be wondering if you can mine this particular cryptocurrency. Here’s more information.
The short answer to whether or not you can mine this digital currency is yes. Instead of signing up to an exchange and buying it, you can directly mine it at home with your computer.
Mining ZCash also supports the network. But to mine effectively, you need the right type of hardware and software.
The first thing you have to know is whether you’d like to do CPU mining or GPU mining.
The only difference is mining on your home computer is called CPU mining, and mining with a specially built computer having one or more graphic cards is called GPU mining.
Obviously mining with a GPU yields better results. It’s more effective because of the ongoing advancement in software but it may cost you significantly more. Here’s a mining guide if you want more information.
Maybe mining isn’t your thing. Here’s a closer look at how you can buy this cryptocurrency instead along with other digital currencies (see here for more information about other altcoins).
Getting ZCash is similar to purchasing other types of cryptocurrencies. First, you need to find an online exchange that sells it.
Once you’ve found an exchange you want to use, the process is similar to trading shares of stocks. First, you fund your account with money from your bank account and wait for the payment to clear.
Then you find a seller who is willing to sell some of the cryptocurrency to you. Afterward, you can use your balance to do a number of things including:
Now that we’ve covered all the features and necessary details you need to know, let’s look at important information that might be helpful to you before you dive in and invest.
With privacy and security a hot topic in the world of cryptocurrency, ZCash is a company to watch closely in 2018.
Edward Snowden, a well-known former CIA employee also known as an NSA whistleblower, said, “Personally, I think zk-SNARKs are a hugely important, absolutely game-changing technology. They are the single most under-hyped thing in cryptography right now.”
In other words, it’s the future of private trade. According to Coindesk, ZCash development is planning a few major upgrades in 2018.
Zooko Wilcox, the CEO, and Nathan Wilcox, the CTO, have detailed two major milestone upgrades called Overwinter and Sapling on their blog.
The first update, Overwinter, will go live in June 2018 and focuses on making future upgrades safer for users.
The second upgrade, Sapling, is scheduled to be released in September of 2018. It will boost the capability of cryptocurrency shielded transactions. Both these upgrades are eagerly anticipated by the digital currency community.
ZCash is currently in collaboration with Ethereum, another major player in the world of digital currency, to integrate their algorithms into the Ethereum platform. This ultimately involves creating a larger bridge between these two blockchains.
For instant trading to take place between cryptocurrencies on blockchains, we need atomic swaps. The developers at ZEC are currently working on cross-chain atomic swaps in their line of future expansions.
The biggest question remains, should you invest in ZCash? Here’s what we think.
ZCash has the status of being a trendsetter right now, as it uses the zk-SNARK cryptography protocol that offers uniquely encrypted information and deeper security.
Cryptocurrencies that are heavily vested in user privacy may gain more support in the long run from mainstream media and other interested parties.
With all of the attention it is getting now, the projection for this cryptocurrency’s success looks bright. Not to mention, it has an active development team behind it working to make it even more secure and further differentiating from the competition.
It’s still in the early stages so there’s no telling if it will follow a similar trajectory as Bitcoin has experienced. But if there’s anything to learn from what happened with Bitcoin, investing early can be a smart move.
If you think privacy, security and anonymity plays an important role in the world of crypto currency, then keeping a watch on ZCash is a good idea.
The content of this post is for educational purposes only. Please do your own research and consult a financial professional before making any investment decisions.