A history of Zcash (ZEC)
Zcash (ZEC) is a privacy coin that differentiates itself from other cryptocurrencies by its use of sci-fi technology. Specifically it uses Zero-knowledge Succinct Non-Interactive Argument of Knowledge, or zk-SNARKs.
This allows you to prove that information sent – or an amount of funds – is valid, without having to prove the fact. Neither the sender or recipient or even the amount sent is disclosed or broken down. Units of cryptocurrency are “unlinked from their history so that one unit is as good as any other unit’, so Zcash claims on its website.
Zcash offers two different addresses, one public, one private. It is not private by default. In that sense Zcash attempts to position itself away from ‘dark web’ users.
From Zerocoin to Zcash
Zcash, introduced formally in late October 2016, has its origins in a 2013 start-up called Zerocoin led by several key personnel: Matthew Green, Christina Garman, Ian Miers and Aviel Rubin. All four were at John Hopkins University Department of Computer Science, Baltimore. The public face of zcash is CEO Zooko Wilcox.
“Our system uses standard cryptographic assumptions and does not introduce new trusted parties or otherwise change the security model of Bitcoin,” the team said at the time of its development.
A new protocol emerged in 2014 following a MIT cryptographic collaboration with other agencies. This boasted major privacy and practical improvements; in effect, a new digital currency labelled Zerocash was born. Zerocash evolves from Zerocoin, the tech behind Zcash coin, but it is not a fork of Zerocoin, with different protocols.
- Zcash has a fixed supply of 21 million ZEC units
- Zcash has received support from the US Defense Advanced Research Projects Agency (DARPA) and Israeli Ministry of Science and Technology
- Zcash has its own employees, founders and investors who make up the main company; running alongside zcash is non-profit Zcash Foundation which endeavours to improve the Zcash protocol
- Its zero-knowledge functionality stretches beyond the financial sector including how organisations handle third party data; you don’t have to look too far to see the commercial attraction: it’s legitimate for any business or citizen to want privacy when trading or buying
- zk-SNARKs tech is being tested with Ethereum though it is most commonly connected to Zcash currently
At the time of writing (early June 2018) Zcash is ranked 20th in terms of overall market capitalisation. As of early June 2018 it was trading at $234 with a market cap of $960m.
The private coin market is competitive and includes other well-established names such as Dash, PVIX and Monero.
Zcash core team
The CEO of Zcash is Zooko Wilcox, born in 1974, who is also the company’s founder. He has a strong interest in health and food science.
Eli Ben-Sasson is part of Zcash’s core technical team; he is a professor at the Computer Science Department at Technion Israel Institute of Technology.
Another core team member is Ian Miers, a computer security PhD student at John Hopkins University, specialising in applied cryptography.
Cryptographer Matthew Green from Johns Hopkins is also part of the Zcash set-up with a background in cryptographic engineering and information storage.
Bitcoin entrepreneur and privacy advocate Roger Ver, labelled ‘Bitcoin Jesus’, was an early Zcash investor.
While many cryptocurrencies are transparent (up to a point), blockchain’s accounting nuts and bolts also remain transparent for anyone with the right computer skills.
This relative opacity goes to the core of the technology’s strength and weakness – especially for corporations who want many transactions to be private, particularly banks and businesses with sensitive client information.
Technology Review described Zcash ‘zero-knowledge proofs’ tech as “so mind-bending it seems taken from the pages of a science fiction novel. Essentially, it is,” quoting Emin Gün Sirer, a computer scientist at Cornell University, the article went on, “a way to prove something to someone without revealing any of the information that goes into that proof”.
Early on the founders of the Zerocash Electric Coin company decided to reward early investors and developers of Zcash with a 20% reward of all Zcash mined in the first four years – effectively a ‘genius tax’. However, there is concern what incentives developers will have beyond the first four years (though the initial reward is highly generous compared to other coin financials).
It’s thought only 5% of Zcash transactions actually take advantage of its private functions.
Zcash’s technology has been criticised by some, including Bitcoin core developer Peter Todd. Much of the maths around ZK-proofs are fearsomely difficult to comprehend for a limited circle of people.
“I don’t understand how zero-knowledge proofs actually specifically work,” founder Zooko Wilcox has said in the past. “But I rely on a bunch of cryptographers who claim that they do.” The need to provide such robust privacy also demands a lot of computer memory which may impact regular users.
“As a result,” Linda Xie, co-founder of cryptoasset management company ScalarCapital, writing in Medium at the end of 2017, said “currently not all transactions are shielded in Zcash which affects fungibility. This means that some coins may be more valuable than others because they don’t have a tainted history associated with it.”
Xie does think that performance improvements should “significantly reduce the amount of time and memory required”.
It’s likely Zcash will see a hard fork – that is, a permanent change in its underlying blockchain protocol – come late June 2018. This is tagged Overwinter. If the hard fork is successful it may create more value for Zcash investors.
But the private coin space is competitive. The worry about anonymity is twinned to concerns about potential regulatory crackdowns and the smell of ‘bad’ money.
Major digital currency exchange Gemini, which became an Ether exchange in 2016, started to absorb Zcash deposits in May 2018. The move prompted Zcash’s share price to rise to more than $360 per token. Zcash drew praise for the integrity of this shift – there was little share price or trading volume change before the announcement.
While many cryptos came under pressure in the second half of 2018 Zcash has looked remarkably stable, down –1.8% in the last 12 months (early June 2017– early June 2018).
In early June Zcash was trading at $233 and an indication of significant ongoing crypto volatility – trading volumes are massively down across the sector after late December 2017’s extraordinary valuation highs – though Zcash itself hit more than $955 in early January 2018.