Zcash is a cryptocurrency with a strong emphasis on privacy and identity protection. Zcash maintains the features of a public blockchain while enabling completely anonymous transactions.
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What is Zcash?
|ZEC||28 October, 2016||zk-SNARKs||21 million ZEC|
While cryptocurrencies are often hailed as “anonymous,” in many cases user identity can be traced by following the transaction history on the blockchain. Zcash was born from a project called ZeroCoin, originally geared towards improving anonymity for bitcoin users. Using a specialized form of zero-knowledge cryptography, Zcash makes it possible for fully encrypted transactions to be validated by the network’s consensus protocol.
Zcash, itself, is a fork of the bitcoin protocol. While ZEC is a separate cryptocurrency and maintains its own blockchain, the infrastructure is built on top of bitcoin’s core code. Additions to the underlying code that are specific to Zcash include updating the proof-of-work consensus model and introducing zero-knowledge proofs to enhance user privacy.
Bitcoin, and many other cryptocurrencies, rely on private keys to identify users. While these keys are cryptographically generated, an address that is used for multiple transactions over time can become linked to a particular key, leaving a “paper trail” of sorts that is tied to that user. The bitcoin blockchain keeps a record of every transaction, including the addresses of both parties involved and the amount of the transaction, which is accessible to the public. The Zcash blockchain, on the other hand, only shows that a transaction occurred, without revealing the amount exchanged or information about the identity of either the sender or the recipient.
Selective disclosure in Zcash
Zcash grew primarily out of a desire to increase privacy protections for bitcoin users. That being said, within Zcash users can choose whether to use certain privacy features. When making a transaction in Zcash, you have the option to opt in or out of publishing information about your wallet address and the amount of the transaction to the public blockchain. The option for “selective disclosure” within Zcash is designed largely to give users the option to comply with anti-money laundering regulations, tax regulations, and audits.
Like bitcoin, ZEC can be used as payment anywhere that vendors are willing to accept it. Notably, the multi-currency Jaxx wallet, available for both iOS and Android, has integrated support for ZEC. Services designed to offer users enhanced levels of identity protection, such as certain VPNs, have been some of the first to offer options for Zcash payment.
How to purchase ZEC
You can purchase ZEC on a number of cryptocurrency exchanges, including Bittrex, Poloniex, and Shapeshift. In some cases, depending on the particular exchange, you can buy ZEC directly with fiat currency, otherwise, you will need to use bitcoin or another cryptocurrency for your purchase.
Historically, there has been some stigma attached to cryptocurrencies that place an emphasis on anonymity, fueled by the assumption that anyone who uses them must be engaging in some sort of illicit behavior. However, with the rise of identity theft, ad targeting, data mining, and other forms of surveillance, many people are beginning to take increased measures to protect their identities.
It is also possible to mine ZEC. By contributing to the Zcash network, miners can earn rewards by devoting computing power to validating transactions on the Zcash blockchain.
- Zcash can be used as a privacy enhancement tool, but it is not anonymous by default. Furthermore, because shielding transaction data from the public blockchain is an optional feature, it is possible that only a minority of users will take advantage of this ability, potentially making it easier to trace the history of private transactions on an otherwise largely transparent blockchain.
- Zcash uses a new form of cryptographic algorithm. Like any new technology, zk-SNARKs is still being tested, explored, and developed. The possibility for unknown vulnerabilities to be exploited is something that users should be aware of.
- Unlike some other cryptocurrencies, there is a company behind Zcash. Zooko Wilcox, generally considered to be the creator of Zcash, is the CEO of the Zcash company. 10% of all Zcash mined within the first four years, called the “Founders Reward,” goes to stakeholders in the Zcash company.
- Collaboration with Ethereum. The team behind Zcash is working with the developers at Ethereum to integrate the algorithms behind Zcash’s privacy features into the Ethereum platform. Ongoing collaboration between these two projects includes a vision to create a larger bridge between the Zcash and Ethereum blockchains.
- Cross-chain atomic swaps. Often abbreviated to XCAT, cross-chain atomic swaps are on the development roadmap for Zcash. These allow instant trades between cryptocurrencies and blockchains. In addition to integrating with the Ethereum blockchain, Zcash is also working on developing interoperability with bitcoin and other blockchains.
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