Zcash (ZEC) is a privacy-focused cryptocurrency that was launched in 2016. Zcash is one of the most well-known alternatives to Bitcoin in the crypto market. Longtime cypherpunk, Zooko Wilcox-O’Hearn, is the key man behind the Zcash project. He is also the CEO of a company that focuses on supporting the crypto network. Notably, NSA whistleblower Edward Snowden participated in a ceremony regarding the cryptographic keys used to initially launch the network. People compare Zcash to Monero due to both projects’ dedication to the cause of improving privacy in cryptocurrency.
Bitcoin’s Privacy Problem
People refer to Bitcoin as a form of anonymous digital cash. However, the reality is this is much more myth than fact. Anyone with a copy of the Bitcoin blockchain has the complete history of all payments made between different Bitcoin addresses.
There is not necessarily a real name to link to each pseudonymous Bitcoin address. However, users routinely turn over personal information about themselves to exchanges and leak data about themselves in other ways. Additionally, there are entire companies that focus around the task of surveilling the blockchain. Also, they collect as much data as possible about the identities of the people behind activity on the network. Taking additional precautions is a good idea for those who try to use Bitcoin privately. They should also use special software to even have a chance at hiding their activities.
There have been many proposals for improving privacy in Bitcoin over the years, but not many of these ideas have been implemented (at least not on Bitcoin). CoinJoin, which is an old and far from perfect method of making it more difficult to compile a clear transaction graph from data on the blockchain, is still the most popular privacy tool in Bitcoin.
Bitcoin vs Zcash
For most people, the best way to understand Zcash is to compare and contrast it with Bitcoin. Many of the privacy improvement proposals made for Bitcoin over the years never found their way into the Bitcoin protocol. But when that happens, it opens the door for someone to create a new crypto network that implements those proposals.
This was definitely the case with Zcash. Especially, as the Zerocoin and Zerocash proposals that preceded Zcash originally intend to be extensions for Bitcoin. Indeed, there was potentially going to be a Zcash-esque side-chain for Bitcoin before the team behind the project decided to take a different route and create their own coin instead. Recently, there has been a proposal for a Zcash drive chain for Bitcoin, which is a specific type of side-chain.
There are similarities between. ZEC and the Bitcoin codebase. In fact, Zcash has a fixed supply of 21 million coins, just like bitcoin. However, a key difference with Zcash is that there is shield and unshielded transactions. Unshielded transactions aren’t much different than the transactions seen on the Bitcoin network. However, shielded transactions add an extreme level of privacy to the equation by the way of zero-knowledge proofs.
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Of course, these proofs are rather resource intensive. This is part of the reason why they haven’t made their way into Bitcoin yet. There are other downsides of Zcash. Ones that make its features unsuitable for Bitcoin. These include the requirement of having a trusted setup and potentially causing issues with the ability to verify the current supply of coins on the network.
Anyone who has an interest in privacy in crypto should track the progression of ZEC, as much of the groundbreaking advancements in this area are happening on this crypto network. Over the long term, it’s still possible that the technology in Zcash or something similar to it will eventually find its way into Bitcoin.
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