Zcash (ZEC) is one of the most prominent privacy coins in the current crypto scene. The upcoming ZEC halving in November piques the interest of many investors. In this ZEC guide, we will cover the basics and fundamentals of Zcash, as well as ZEC news and give practical advice on how to buy Zcash before this event.
What is Zcash?
Before we take a deep dive into the features and specifics of what Zcash is, let’s start our Zcash guide with the origins of the currency.
Like with many other privacy coins, the issue that started Zcash was the lack of privacy in Bitcoin. As we know, the transactions in Bitcoin’s blockchain are recorded in a pseudonymous but also transparent way. Given enough information, it is possible to trace the addresses and transaction history back to a certain person in the real world. Additionally, in Bitcoin, flows of cash and balances would also be transparent, meaning that it is not suited to store confidential financial information.
Zcash was initially developed in 2013 as a privacy extension to the original Bitcoin protocol by a group of cryptographers from John Hopkins University in Baltimore, MD (USA). The Bitcoin core group of developers turned down the proposal due to protocol’s novelty and computational intensity. With some further additions, the Zerocoin protocol was made into a fully-fledged blueprint for a cryptocurrency of its own.
To launch and support the endeavour, Zooko Wilcox was recruited to the project as the CEO of a newly established Zcash Company. They managed to raise initial funding and launch Zcash as we know it. In 2019 ZEC news reported that Zcash Company was rebranded as Electric Coin Company.
So what exactly did these companies and researchers work on? This is what the next sections of our ZEC guide are about.
What is ZEC?
Zcash is centered around its native currency with the same name and ticker ZEC. Despite the protocol being designed in 2013, the currency itself was launched in 2016. The time was taken to complete the protocol from Bitcoin extension up to a complete and independent structure, and also to seek funding and create the opportunity for a successful start.
Zcash is a rather rare case of an older coin when the all-time high was not recorded in December 2017 or January 2018. Instead, its highest price actually was observed on launch ($5,941.80 on October 29, 2016). In fact, the first Zcash news reported it surpassed the price of Bitcoin on that day.
The second highest price of ZEC was around $900, at the same time as the peak of 2017 Bitcoin rally occurred. By the end of 2018, ZEC was down to double digit numbers.
In June 2019 and February 2020, in bull markets ZEC was also able to exceed $100 and $70 respectively. From the looks of it, it may seem that the price tends to get lower over the years. This August, though, it was able to near $100 again.
At the moment of writing the ZEC guide, its market capitalization is $541,924,337 (rank 32), and with 10,105,700 ZEC in circulation the price of ZEC is $53,63.
This November, there will be the first miner reward halving in ZEC. The reward will be reduced from 6.25 ZEC to 3.125 ZEC. This is a mechanism that might in short-term make Zcash mining less profitable but in the long run deflate the currency, so all its units should be more valuable. Halvings are generally considered bullish events in BTC because of that, but we will have to follow the ZEC news this November and further to see how it will play out for Zcash.
Moreover, the Founders Reward, which accrued 20% of the block rewards, will expire at the same time. It is planned to be replaced with a new funding mechanism, developers’ fund.
If you are already thinking about purchasing ZEC, do not hurry so much. Read on this ZEC guide for more fundamentals and practical tips on how to buy Zcash until the end.
ZEC Use Cases
Basically, Zcash is supposed to be used in the same vein as Bitcoin: as peer-to-peer digital cash, but with privacy functions.
There are hundreds of shops and merchants that accept ZEC either through cryptocurrency gateway or with their own means. According to Cryptwerk, in the past month the number of businesses that accept Zcash grew to 675. It’s in the top-10 most used cryptocurrencies. The most popular categories that accept ZEC are Internet and crypto services, and shops and markets.
Now that we know more about the currency, we’ll be passing over to the specifics of the protocol that it is powered by in the following section of our ZEC guide.
How does Zcash work?
Despite Bitcoin Core code being a foundation for its code, Zcash is not a fork of it per se. It is an original open-source protocol developed by cyber security experts, aimed at providing privacy to all its users.
Its trademark feature is zero-knowledge proofs. With it, ZEC users can fully or partially obscure addresses of one or both parties participating in the transaction, as well as the amount of funds transferred.
Zero-knowledge proofs, in essence, are cryptographic functions which do not communicate the mathematical solution to the validator. Instead, they provide proof that the solution was indeed found. A thought experiment called “Ali-Baba’s Door” is often used to illustrate it. Peggy (Prover) enters the cave and chooses a random path to a “magic door”. They know the code (key and prerequisites for a transaction) to open it. Victor (Verifier) follows into the cave and stands at the branching point. They don’t know which path Peggy chose or on which side of the door they are standing. Victor can ask them to come back to the branching point either through path A or B at random, and Peggy can do it because they can pass through the door. The whole process can be repeated until Victor is convinced Peggy knows the magic word. Thus, without explicitly knowing the process or the prerequisites to confirm the transaction, a verifier can approve or decline a prover’s action.
Zcash implements an advanced form of zero-knowledge proofs, zk-SNARKs which stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge. In short, it does not require prover and verifier to interact and is faster and efficient. How does it enable shielded transactions?
Instead of public UTXOs (unspent transaction outputs) like in Bitcoin and analogous cryptocurrencies, Zcash uses encrypted “commitments”. Nodes keep track of commitments and corresponding nullifiers (function that helps provers verify transactions).
Zcash is not the first and only coin with privacy features, though. In the next section of the Zcash guide we cover the differences from other well-known protocols and currencies.
How is ZEC different from other privacy coins?
- Private by default, in Zcash privacy is optional. Because of this, Monero has issues with regulatory compliance;
- Monero is funded by donations, Zcash keeps a founders reward fund which accrues 20% of all miners’ rewards for Zcash development.
- Sometimes Dash is also treated as a privacy coin due to the PrivateSend function. However, it is fully optional and is achieved through output mixing, which is not a cryptographic method of obfuscation.
- Verge also has privacy features. They are more focused on obscuring the user’s IP. Verge Currency also has stealth address functions, which works not with cryptography itself but rather with generating several addresses that only the owner can claim.
In comparison with other privacy coins, Zcash has on-chain cryptography to enable privacy functions, but only if a user opts in. zk-SNARKs cover all the ground, not only IP obfuscation or transaction history.
So far it sounds very positive, doesn’t it? But we think it is fair to also look at the criticisms and people’s opinions to make our ZEC guide comprehensive.
Is Zcash Controversial?
At the time of ZEC’s launch, there were two major ways to launch a cryptocurrency. Some developers went for a “fair” launch with no premine, and others chose to kickstart their project with an ICO. Zcash chose to launch with a hybrid model. However, it became a point of contention anyway, because the core group of developers still hard-coded a rewards program for themselves to put into development of the chain. Many crypto community members argued that this is not exactly in the spirit of decentralization, to put it lightly.
Zcash has also had a history of very buggy releases. Having a steady developer team has helped them in fixing those bugs in time, but nevertheless, the community remembered. For instance, one of the bugs, if exploited, could have led to infinite inflation, and another exploit could have been used to render privacy features useless by disclosing an IP address of a full node.
These blunders are a thing of the past now, even though they are not erased from history. What about the future of Zcash? We’ll be moving on to that section of our ZEC guide.
What is the Future of Zcash?
The Electric Coin foundation has a plan for ZEC development for a few years ahead.
Due to the computational intensity of ZEC’s cryptography, full nodes are given a higher priority from the developers than light wallets. However, this has been changing over 2020, and the team plans to keep delivering on that front and cater to the users of Windows and ChromeOS. With Cosmos peg-zone on the table, Zcash development team is also considering cross-chain integrations for ZEC.
Zcash Foundation is currently working on fine-tuning the governance structure. They frequently hold calls and inquire the community on the future of the Major Grant Review Committee (MGRC), which will distribute the funds from the Dev Fund towards research and development (most proposals are public here).
Next in the Zcash guide, to learn what the investors say about ZEC, we will cover some Zcash news from Twitter.
ZEC Posts from Twitter
A lot of people wonder why I like #Zcash despite the Founder’s Reward. Here’s a reason: that tax funds a quality team that catches and kills serious bugs in-house, before they get exploited. Some other projects learn about bugs like this only AFTER people have lost money. https://t.co/i9MD1CpeNx
— Edward Snowden (@Snowden) February 5, 2019
It does not really come as a surprise that Edward Snowden is pro-privacy coins. He even seems to like a controversial idea of the developer’s fund. This is not the only time that Snowden has voiced his support for Zcash, and it speaks volumes.
Just added 40% to my $ZEC position.
— Ryan Selkis (@twobitidiot) September 23, 2020
Ryan Selkis of Messari is also a longtime supporter of Zcash. Not only he often endorses the technology and modus operandi of the coin, but also he has faith in them as an investor. Won’t be unfair to assume that Selkis is closely familiar with the fundamentals we covered in our Zcash guide so far.
— Electric Coin Company (@ElectricCoinCo) September 16, 2020
In the ZEC news, Electric Coin Company recently presented a thesis to Grayscale LLC. It’s the leading company for digital currency investment funds, and being endorsed by them can attract investors to ZEC.
Zcash (ZEC) Is Compatible with the FATF Regulations and MGRC Results are In – Link to Post: https://t.co/j91hn2YaIk – Tags: #cryptonews #Zcash #FATF #MRGC #ECC #ZEC #blockchainDLT .@ElectricCoinCo .@sydneyifergan pic.twitter.com/2WeKvbULtT
— The Currency Analytics (TCAT) (@TheCurrencyA) September 22, 2020
In other Zcash news, the report that proves that Zcash is compliant with the FATF (Financial Action Task Force, international organization that combats money laundering and financing of terrorism) AML regulations is in. There are many concerns surrounding privacy coins about their possible use in money laundering, but the opt-in nature of Zcash privacy features allows it to stick to the regulatory requirements which might be the question whether the coin survives in the world where cryptocurrencies are regulated or not.
“In our experience with over 20 networks and their cryptoeconomic + governance experiments, few teams take the governance of their network more seriously than Zcash. That’s because Zcash understands the gravity of providing sovereign financial privacy to all of Earth’s citizens.”
— zooko (@zooko) September 15, 2020
Zooko Wilcox is also very active on Twitter, always sharing the latest ZEC news and updates. This quote from another investment thesis highlights the mission of Zcash: to give the people their basic right to privacy back.
And now that we have had enough talk about the fundamentals of the project, we will be going forward to a more practical part of our ZEC guide. Here are our tips on how to buy Zcash, store and exchange ZEC.
How to buy Zcash?
Privacy coins can be sometimes tricky to find on some centralized exchanges. You don’t have to worry, though, because we have handled the search of trusted liquidity providers already! You can get it on ChangeHero at the most competitive rates by exchanging it with any other cryptocurrency from our long list. We made sure that the experience will be easy and secure, and if anything goes wrong you can get help from our support specialists at any time of the day.
What is the Best ZEC Wallet?
To use Zcash to the fullest extent, one has to be an advanced user. The most reliable way to store ZEC and use its privacy features is to run a full node, but not everyone has the memory and data bandwidth to keep it active. Alternatively, Zcash specific wallets with shielded address support like ZecWallet Lite on desktop or Nighthawk Wallet on mobile are available.
For hardware storage of Zcash, users can choose Trezor devices. Many multi-currency wallets like Coinomi, Trust and Exodus also have support of ZEC transparent addresses. In Exodus and Trezor, you can use the exchange option provided by ChangeHero right in the app to swap crypto with Zcash.
How to exchange ZEC?
To make our ZEC guide complete, we include the step-by-step instruction on how to buy Zcash on ChangeHero with crypto. It’s really easy:
- Choose the currencies on the home page, amounts and the type of exchange. Provide your ZEC wallet address in the next step and check the amounts;
- Send in a single transaction the sum of cryptocurrency you will be exchanging. For Fixed Rate transactions you have 15 minutes before it expires;
- From here on, you won’t need to do anything. At this step we are doing all the work: checking the incoming transaction and doing the exchange as soon as it arrives;
- As soon as the exchange has been processed, your ZEC is on the way to your wallet. And so, the transaction is finished!
Remember that you can reach our support in the chat on our website or through the email: [email protected].
Many crypto-savvy investors and developers, as well as human rights advocates, think that the future is behind privacy coins. Right now, they might be a challenge for users and regulators, but sooner than later this might as well change to the better. Zcash has all the opportunities to be at the forefront of this revolution. To check out other articles similar to our ZEC guide, make sure to subscribe to our blog and ChangeHero on Twitter, Facebook, Reddit and Telegram.