Zcash: The Privacy Protecting Decentralized Blockchain
Zcash (ZEC) is a cryptocurrency that is built as a decentralized blockchain which provides anonymity for its users and their transactions. Zcash is similar to other cryptocurrencies such as Bitcoin in a lot of ways regarding the open-source feature but it has major differences which lie in the level of privacy and fungibility.
Zcash was founded by Zooko Wilcox-O’Hearn back in October 2016 to address the open financial system with the privacy feature that the users wanted. The cryptocurrency wants to maintain the same structure as Bitcoin but with higher privacy and fungibility included.
Breaking Down The Architecture Of Zcash
Once bitcoin made huge success back in 2009 and paved the way for thousands of alternative cryptocurrencies, some of them took the opportunity to thrive while others fell short along the digital track. As the demand for privacy and anonymity increased and big data became easily accessible, the crypto users wanted to find some other digital currencies that could help them protect their identity that Bitcoin couldn’t do. Zcash (ZEC) seems to provide this level of privacy protection and fungibility by allowing the users to remain completely anonymous.
The Fungibility is the ease which the commodity can be changed for another one which is very important in the crypto world since it makes sure that a users’ coin is as good as another.
While yes, Bitcoin is an open ledger system, Zcash (ZEC) is an encrypted open ledger. This means that even though the transactions are recorded forever on the blockchain, the transactions are encrypted and can only be viewed by the users that already have granted access to them.
The Security Question
While most of the cryptocurrencies provide anonymity, they rely on the private keys that are built with the alphanumeric characters. The users in the crypto community have the unique public address which represents their identity similar to an IP address. The public address is required to receive funds from other users which mean that the sender has to be given the address so that the transfer can be facilitated. The users’ private keys give them access to funds and the key is always attached to certain transactions.
When enough transactions are made over time, the public addresses can be linked to these transactions and the inquirers can identify the public address holder. This is also where the fungibility comes into play. If one seller of a certain product can track the buyers’ previous transaction, the seller could feel morally inclined to reject the payment from the buyer if he discovers the purchase history and doesn’t align with his beliefs or moral stances.
How Does Zcash Work?
Zcash (ZEC) employs a special cryptographic tool named Zero-Knowledge Proof which allows the users to engage in transactions without either party having to reveal their address to the other. This tool makes the transactions untraceable on the blockchain by obfuscating the address of the parties as well as the amount that the parties sent to each other. This way the addresses are recorded on the blockchain but are also shielded so it is impossible to trace the path of any given funds to the sender or receiver. Zcash (ZEC) works noting like Bitcoin and other blockchains which show the amount that gets transferred from one’s actual address to another.
The Zero-knowledge proof provides a high level of fungibility given that a party involved in a transaction is not wary of the other party’s identity so this way the payment history cannot reject the coin payment from the other side.
The cryptocurrencies with the nature such as Zcash often get criticizes for their potential into getting used in illegal activities because of their ability to hide the transactions but the use of this cryptocurrency is not just for cybercriminals who engage in illegal transactions on the Dark Web.
There are plenty of legitimate reasons why a user would choose a anonymity cryptocurrency as for example the companies that want to protect the trade secrets or supply chain Information from their competitors.
Partnerships And Potential
As of 2018, Zcash did relatively well and traded for $202 with a market capitalization of more than $870. Zcash executed the first hard fork in 2018 which was planned for a long time for the block 347500 which was successfully mined and has since scheduled a larger hard fork for the same year in October. The digital asset made a strategic partnership with the major financial institution JP Morgan which was also looking to install the Zero-knowledge proof protocol into their own blockchain project. Having such a partner gives the coin huge credibility.
The governments around the world have just started discussing how they can regulate cryptocurrencies because they don’t like the idea of anonymous payment systems buy Zcash has a possible solution which is named the ‘’View Key.’’ Every Zcash holder has access to the view key which will later allow them to reveal the transaction data and this key can also be shared with other users such as law enforcement and regulators which will allow them to audit transaction history. However, the user will have to provide the data by voluntarily agreeing. Another issue that could prevent the value of this digital asset to grow is the potential to scale. The blockchain can process more transactions per second than Bitcion but it is still only able to achieve between 6-26 transactions per second.
Overall, Zcash has preformed really good compared to other digital assets despite being created in 2016 and it has even established itself as a top 50 cryptocurrency. As a matter of fact, in 2017 Zcash reached an all-time high price and a market capitalization of over $2 billion.
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