What is Zcash?
Zcash is building an open, permissionless cryptocurrency designed to tackle privacy in a slightly different way than most other cryptocurrencies.
Zcash can be thought of like a fork of bitcoin, focusing on privacy, anonymity, and fungibility. With a circulating supply of just under 4 million, Zcash was founded in 2016 and will have a total supply of 21 million coins. Founded by Zooko Wilcox of ZECC (Zerocoin Electric Coin Company), Zcash is an open source project run by a private organization. With an initial investment of $1 million, its early investors will receive 10 percent of the total supply over the first four years, known as the “founders” reward.
The Zcash price has seen some absolutely wild movements in its short existence. The Zcash price was $3000 per coin in the first week, then it crashed to $50. At one point hitting an all-time high of $3191.93 on October 29, 2016.
Why is Zcash (ZEC) important?
Zcash is important because bitcoin lacks some privacy controls. Parts of every bitcoin transaction are visible on the Bitcoin blockchain. Via the blockchain, people can view the sender’s address, the receiver’s address, and the transaction amount.
This level of transaction detail is potentially problematic because if users started using bitcoin to get paid by their employer or for everyday purchases, then those details would be recorded on the blockchain and with a little bit of connecting the dots, interested people can start to piece together transaction data in a way that could undermine privacy.
The issue with bitcoin is all of the transaction details are publicly available on the bitcoin ledger and permanently recorded in the blockchain in a way that can never be altered. Great for verification that these digital funds have not been spent twice, but not so great for privacy.
Zcash addresses this problem by making all aspects of the transaction: the sender, the receiver, and the amount, completely anonymous, private, and built upon strong encryption. This is possible using a system of zero-knowledge proofs called zkSNARKs.
Zcash has caught the attention of huge players such as JP Morgan, even establishing a partnership with the firm in their development of the enterprise-scale blockchain known as Quorum. JP Morgan may find such a system appealing in the case of wanting to secure their trades from the eyes of competitors, or in diligence required to protect private-public data.
How does Zcash (ZEC) work?
Without having to understand the advanced cryptography involved with the magic of zero-knowledge proofs, one key takeaway is that Zcash functions in a very similar manner to bitcoin, but adds a layer of privacy that is built on a layer of strong encryption. Payments are concealed because the sender, receiver, and amounts are obscured, ensuring that privacy and anonymity remain a top priority.
In short, this protocol means that someone is able to prove that certain information is in someone’s possession, without actually revealing that information. It’s able to prove that the encrypted data and transactions are legitimate, without revealing what this data is, who the actual owners are, or what amounts are being spent. Effectively it can verify that someone has funds, it has never been spent, and that it’s been moved to someone else — exactly what we need to establish a more private version of bitcoin.