BITCOIN may have become the currency of choice for the anonymity-loving Internet underground. But it's never been anonymous enough for Zooko Wilcox. As he’ll remind anyone who’ll listen, the blockchain, bitcoin’s very public ledger of all transactions in its crypto-economy, means that unless bitcoin's users funnel it through intermediaries or special software, their transactions can easily be traced.
Today Wilcox and his startup Zcash are launching the first public alpha release of the cryptography world’s best shot yet at perfectly untraceable digital money. Using a mathematical sleight-of-hand known as a “zero-knowledge proof,” Zcash (until recently known as Zerocoin or Zerocash) offers the same anti-forgery assurances as bitcoin: No one can counterfeit Zcash, or spend the same Zcash "coin" twice. But thanks to its zero-knowledge feature, any spender or receiver can also choose to keep their Zcash payment entirely secret.
Like bitcoin, Zcash's currency will be created by "mining" computers that compete to solve mathematical problems. But unlike bitcoin and other attempts to create an alternative cryptocurrency or "altcoin," Zcash is launching as a for-profit company. For its first four years online, a portion of every mined Zcash coin will go directly to Wilcox's Zcash company and a smaller portion to a non-profit he's creating to oversee the Zcash code and community longterm. Wilcox says that he plans for 1 percent of Zcash's currency to ultimately go towards that non-profit, and 10 percent to be paid to the for-profit startup.
Zcash transactions can contain regular inputs, outputs and scripts to perform transparent transfer of value like in Bitcoin. This regular transaction would remain pseudonymous like in Bitcoin – the amount, sender and recipient of the transaction is visible. However, Zcash transactions can also be made to be protected, meaning that the amount, sender and recipient are hidden. Protected transactions contain what are called in the Zcash documentation JoinSplit descriptions, which describe JoinSplit transfers (similar to “Mint” and “Pour” transactions in Zerocash) which take as input a value and up to two notes, and from this produce a second value and up to two output notes.
|Currency/Unit of Account||Bitcoin (divisible to 8 decimal places)||Same as Bitcoin|
|What’s in a transactions?||Transparent inputs and outputs which include recipient address and spender||JoinSplit descriptions and statements (containing zk-SNARKs) and heavily encrypted data|
|How prove ownership of currency?||Reveal public key and sign transaction with private key||Zk-SNARKs prove ownership without providing details, nullifiers prevent double spends|
|What could someone learn about you from analyzing the blockchain?||(If they had public address): how much BTC you held, which addresses it came from, and which addresses received any transactions||Observers can see protected transactions, but don’t know the value contained, where the inputs came from, or where they are going|
Zcash's developers are now standing by to launch a similar cryptocurrency, albeit with some key differences.
Small changes to the blockchain and issuance structures mean ZEC will have a 2.5-minute average block time and an initial block reward of 12.5 ZEC.
There will also be a "slow-start" period during the first 20,000 blocks (about 34 days) where the block reward linearly increases to 12.5 ZEC. This is designed to reduce the impact of a potential negative event like "a major bug" or "security vulnerability".
As a result, the first blocks will reward extremely small amounts of ZEC, meaning the overall supply in the ecosystem will be limited as the block reward ramps up.
Despite this, exchanges including Kraken and Poloniex have already announced they will be opening markets as soon as possible following the distribution of the first fractions of coins to miners and the network.
As you can imagine, early exchange order books will likely display many buy orders for large quantities. The only initial sell orders will be small, as those first reduced block rewards are issued.
SWOT analysis of Zcash
- Based on Bitcoin, thus able to use bitcoin infrastructure.
- It has all the benefits of a cryptocurrency
- It has a better governance system than most other coins, while some see this as a disadvantage. Do you prefer to be on a ship with a captain or without?
- There is one central key to the whole Zcash Kingdom and if this is mishandled the transactions are no longer anonymous.
- While tests have been going on Zcash for months, technology does break.
- Based in the US. This could go either way.
- Recent ICOs has seen the price of altcoins skyrocket. I would not be surprised that with the hype surrounding this one, the same happened here.
- Bitcoin has challenges at the time of writing; the bitcoin miners and core development team have not agreed how to solve the block size issue yet. If they continue to delay, another coin could become the next “go to” cryptocurrency. Zcash potentially could push Bitcoin from its Crypto throne.
- Mining will start slowly, meaning that there will not be a “gold rush” or “Zcash rush” and the early birds will take it all.
- Governments do not like secret messages, secret money or secret anything. They could ban it.
- There are other altcoins based on secret such as Monero, Stealth Coin and Dash which could become the preferred secret coin of those who like secret coins.
- Someone could decide to fork Zcash, meaning they would create a clone. Similarly to what happened with Etherum