Cash for Concerned Citizens
In a world where national governments spy on their citizens, no one has secrets anymore. The advent of predictive analytics and targeted advertising has opened up a difficult conversation surrounding just how much privacy people should be afforded.
Zcash proposes that our financial transactions are within the boundaries of our right to privacy and lets people send confidential, untraceable transactions to anyone in the world.
A Promising Start
Matthew Green, a professor at John Hopkins, started developing Zcash in 2013 along with some of his graduate students. The Zcash Company (now The Electric Coin Company) raised over $3 million from VCs to complete its development.
The ZEC token soared to over $3000 within a week of trading, with 10% of the total supply allotted to the non-profit Zcash Foundation and its employees. The coin soon crashed back down to double-digits and has mostly remained under $100 since late-2018.
Zcash allows users to ‘opt-in’ to privacy enabled transactions, but in 2017 only 0.8% of Zcash was found to be held in private ‘shielded’ pools. Despite touting FATF compliance in 2019, Zcash has continued to see dwindling usage as a privacy token but improving adoption as a regular cryptocurrency.
ZEC has seen a 140% rise in value over 2020, and with wrapped Zcash now available on Ethereum, this project could have a lot in store for the future.
From Proposal to Project
Zcash was initially proposed as ‘Zerocoin,’ a privacy extension for the Bitcoin protocol. Though Bitcoin developers rejected the initial proposal due to its impractical implementation, the project would eventually launch as the standalone Zcash a few years later.
Besides its codebase, Zcash shares many other traits with Bitcoin, such as its 21 million total token supply. However, its main differences lie in how they approach user privacy.
Bitcoin transactions can always be traced back to an address, and as such, all transfers are recorded on a public ledger. Zcash encrypts this information so only those with authority can access the record.
This is done using zk-SNARKs, a kind of ‘zero-knowledge proof’ that enables private transactions while keeping them verifiable.
A Joint Effort
While Mathew Green started the project at John Hopkins, it was completed by Zooko Wilcox at The Zcash Company, of which he is currently the CEO. Wilcox was a well-known cypherpunk and computer security specialist and had designed secure network protocols with self-contained economies before.
The Zcash company announced its rebranding as The Electric Coin Company in February 2019. The company works with its non-profit sister, The Zcash Foundation, to develop and maintain the blockchain.
A Community of Strangers
The Zcash community is surprisingly active, with frequent posts on the official Zcash Foundation Forums, as well as its subreddit and Twitter account. As mentioned above, only a small fraction of Zcash transactions are obscured from view, meaning most people just use it as a regular payment network.
In January 2020, the Zcash community voted to donate 20% of miner rewards to infrastructure and marketing development. This was a bump from the earlier allocated 5% and was implemented after Wilcox wrote a letter to the community asking them to consider a new development fund.
In July, The Electric Coin Company announced its global ‘Crypto in Context’ effort to educate regions like Europe, the Middle-East, and Nigeria about cryptocurrencies. Initial partners included some big names like Gemini, Messari, LocalBitcoins, and Binance.
Though ZEC’s leap to $3000 was short-lived, the token did manage to rise back to nearly $800 in early-2018.
Over the last two years, ZEC has remained mostly under the $100 mark, but its incredible appreciation in 2020 leaves hope for the future.
Playing the Privacy Game
As privacy-focused as it is, Zcash hasn’t managed to stay out of the limelight. During an interview in 2018, the infamous NSA whistleblower and former CIA agent, Edward Snowden, spoke in favor of Zcash and its privacy-enabling functions.
Being an icon of protecting citizens’ privacy, this was a significant endorsement for the platform, but far from the last. Ethereum co-founder and advisor to Zcash, Vitalik Buterin, has also spoken about the project’s cutting-edge research and deployment of privacy tech and how it was “exploring unchartered terrain in blockchain governance.”
Zcash has been the flag-bearer of privacy transactions in the cryptocurrency space, owing to its determined focus on user confidentiality and transaction security. However, Zcash isn’t the only player in the privacy game, and far from the most private blockchain.
Monero is a significant competitor to Zcash, and with the implementation of ringed signatures this year, XMR has become incredibly difficult to trace.
A May 2020 study conducted at Carnegie Mellon University states that the “overall Zcash ecosystem is not conducive towards achieving anonymity for its users.” Further, they claimed that the vast majority of actors within the ecosystem were subject to a degree of traceability.
With other privacy-centric projects like Dash and Verge on the rise, Zcash may have to implement something unprecedented to outshine the competition.
Zcash of Zfuture
In October 2020, a wrapped version of the ZEC token (WZEC) made its way onto the Ethereum blockchain. After a year of exchanges delisting the coin due to its privacy features, WZEC has found solace in decentralized exchanges.
American centralized exchange, Gemini enabled shielded withdrawals just a month prior, further cementing that privacy coins are here to stay.
The Electric Coin Company recently unveiled the source code for ‘Halo 2’, an updated recursive proof composition that improves privacy and may advance scalability — not just for Zcash, but for the blockchain ecosystem as a whole.
As long as Zcash continues to bring value to its users, the project’s perseverance could lead us to a financial system that not only enables privacy but respects it too.