Zcash (ZEC)

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Zcash Company
200px
Founded 2016
Headquarters Lakewood, CO (Headquarters)
Key People Zooko Wilcox, CEO
Employees Approx. 50
Products Cryptocurrency ZEC
Twitter @electriccoinco
StockTwits ZEC.X
LinkedIn Profile
Facebook Page
Website Zcash Homepage
Blog Zcash Official Blog

Zcash (ZEC) is a cryptocurrency based on its own native blockchain. The goal of the Electric Coin Company (ECC) and the other Zcash developers was to create a global, open economic platform allowing its users to make totally private payments.[1]

Overview

Zcash implements the "Zerocash" protocol, which is based on bitcoin's code.[2][3] The Zcash protocol was developed and is maintained by numerous software companies, but primarily ECC.[4]

Zcash is one of many cryptocurrencies accepted as donations by Wikileaks. The site started accepting ZEC in 2017.[5]

Background

According to the FAQ page on the official Zcash website, under the subheading "What is the difference between Zcash and Bitcoin, "Zcash began as a fork of bitcoin. It is being developed by the Zcash Company.[6] The Zcash Company was founded by Zooko Wilcox in 2016.[7][8]

History

In May 2018, Gemini announced that it would begin supporting user deposits of ZEC into their accounts and that trading would launch on May 22. The first trading pairs with ZEC were ZEC/USD, ZEC/BTC, and ZEC/ETH.[9]

In August 2019, the U.K. branch of Coinbase announced that it would no longer support ZCash (ZEC) trading. The company sent out letters to its U.K. customers urging them to convert, liquidate, or transfer their ZEC holdings to other wallets by August 26th.[10] According to sources close to the matter, the decision had "completely to do with" Coinbase's relationship with ClearBank which replaced Barclays.[11]

In November 2020, Zcash's blockchain surpassed 1,046,400 blocks and successfully underwent its fifth system-wide upgrade, "Canopy," which included several major changes to how mining rewards are distributed, as well as halving mining rewards from 6.25 ZEC to 3.125 ZEC.[12]

Privacy

The Zcash protocol has been designed to offer a greater degree of privacy than bitcoin by using "zero-knowledge cryptography" to encrypt user data; zero-knowledge cryptography allows encryption without requiring personal information to be sent to or handled by a service provider. For Zcash some transactions can be verified and added to the blockchain without Zcash operators handling any information that could be connected to the individuals making the transaction.[13]

Zcash was long rumored to be a favorite among criminals because of its privacy features.[14] In May 2020, a Rand Corporation study commissioned by ECC, the operator of Zcash, concluded that criminals on the darknet who use cryptocurrency prefer bitcoin and Monero over Zcash. Zcash had been considered likely to be the favorite of criminals for its ease of transacting privately; according to the recent study, however, the significantly larger number of bitcoin (BTC) transactions on the bitcoin blockchain enable criminals effectively to “obfuscate money laundering in bitcoin.”[15][16]

Along with cryptocurrencies DASH (DSH) and Monero (XMR), Colorado-based cryptocurrency trading platform Shapeshift delisted Zcash due to concerns about the coins' privacy features. “We’ve taken down the privacy coins because of their regulatory concerns,” Veronica McGregor, ShapeShift’s chief legal officer, said.[17]

Public outreach

ECC announced in a July 29, 2020 blog post that it had launched "Crypto in Context" along with other industry leaders, including Binance, Gemini, Flexa, Messari, and Digital Currency Group.[18]

The program, which grew from a pilot conducted in the South Bronx, New York, New York, is focused on educating underbanked communities about cryptocurrencies. According to ECC, the program intends to work with local leaders who host the actual workshops. In addition to helping with curriculum development and workshop logistics, ECC will help with funding individual programs. The company established a dedicated website for the program.[19]

Mining

Zcash operates via a decentralized blockchain-based network run by miners. Each miner uses a personal computer or specialized mining hardware to contribute processing power to the overall network. The machines are referred to as nodes.[20]

In January 2020, Zcash's online community voted to change the way the Zcash protocol rewards miners. Once the change was enacted, 20 percent of the rewards Zcash usually pays to miners for their contributions to the network began to go to a development fund instead. The terms of the vote said that these funds would be distributed to numerous companies, including the Electric Coin Company (7 percent), the Zcash Foundation (5 percent), and to various third-party developers working to maintain and develop software to support the protocol (8 percent). This new structure was to be implemented when block 1,046,400 is created in about November 2020, as long as the Electric Coin Company agreed to implement the change.[21]

This changed before block number 1,046,400. The allocation of the 20 percent of all mining rewards was redistributed among the Zcash Foundation and developers: 9.85 percent to ECC founders, 2.2 percent to the Zcash Foundation, 5.75 percent to ECC itself, and 2.2 percent to ECC employee compensation. The new system was named the "Founders Reward" system, and was unpopular among the Zcash community. In November 2020, Zcash's blockchain surpassed block number 1,046,400 and successfully underwent its fifth system-wide upgrade, "Canopy," which included several major changes to how mining rewards are distributed, as well as halving mining rewards from 6.25 ZEC to 3.125 ZEC.

Besides halving Zcash's mining reward, Canopy changed the contraversial "Founders Reward" system, opting for a "developers fund" system similar to that of Ethereum. The new system divided the 20 percent of mining rewards that aren't given to miners three ways: 8 percent goes to the new Major Grants Fund, 7 percent to the ECC, and 5 percent to the Zcash Foundation.[22]

zk-SNARKs

Zcash's signature technology is Zero-Knowledge Succinct Non-Interactive Argument of Knowledge (or "zk-SNARKs"), a form of zero-knowledge cryptography that allows one party to verify the validity of a transaction to another, using only the hash of a number tied to that transaction. zk-SNARKs does this in a very short amount of time. Zcash claims this can be done in milliseconds - hence the "Succinct" part of zk-SNARKs' name.[23]

In February 2019, ECC published a report on its blog revealing that the company had discovered a bug in Zcash's code which, if exploited, could have resulted in massive damage to the cryptocurrency by allowing users digitally to copy unlimited amounts of ZEC. The bug was discovered by Zcash cryptographer Ariel Gabizon in the zk-SNARKS code. The company took care to prevent the bug from becoming publicly-known while developing a fix for it, quietly adding it to Zcash's "Sapling" upgrade in October 2018.[24][25]

View keys and spend keys

While most cryptocurrencies provide users with public and private keys, or addresses, Zcash provides a "view key" and a "spend key." The spend key is an encrypted virtual address that allows users to spend ZEC from their wallets, while the view key is used to allow users to view information about each other's transactions. A user cannot view information about another user's ZEC transactions without that user's view key, similar to how two users of a messaging platform cannot send each other messages without knowing the recipient's email address or username. Zcash also allows users to deliver encrypted messages to other users, provided they have that user's view key. These messages are not viewable to anyone without the view key.[26]

Support from Vitalik Buterin

Ethereum creator Vitalik Buterin has praised Zcash's privacy-protection capabilities on more than one occasion. In May 2018, Buterin was asked during a livestream if he prefers Zcash or Monero, a competitor to Zcash. Buterin said that he would use Zcash if he was "doing anything seriously privacy-demanding."[27] In September that year, Buterin wrote on an Ethereum research forum that Ethereum developers should consider using zk-SNARKs to help Ethereum scale more effectively.[28]

References

  1. Frequently Asked Questions. Zcash.
  2. What is Zero-Knowledge Encryption?. Trezorit.
  3. What is Zcash?. Zcash.
  4. Zcash community votes to allocate 20% of network mining rewards to support development. The Block.
  5. Wikileaks is Now Accepting Zcash Donations. Coindesk.
  6. Frequently Asked Questions. Zcash.
  7. About Us. Zcash.
  8. Zcash Company. Linkedin.
  9. Winklevoss Crypto Exchange Wins Approval to Trade Zcash. Coindesk.
  10. Coinbase UK Dropping Support for Cryptocurrency Zcash. Coindesk.
  11. Barclays cancels banking deal with Coinbase – Report. The Block.
  12. Zcash Undergoes First Halving as Major Upgrade Drops ‘Founders Reward’. Coindesk.
  13. What are zk-SNARKs?. Zcash.
  14. Cypherpunk Zooko Wilcox Aims To Bring Anonymous Zcash To Law-Abiding Masses. Zcash.
  15. Cypherpunk Zooko Wilcox Aims To Bring Anonymous Zcash To Law-Abiding Masses. Zcash.
  16. Rand Corporation report finds bitcoin is still the dark web's preferred cryptocurrency. The Block.
  17. ShapeShift Delists Privacy Coin Zcash Over Regulatory Concerns. CoinDesk.
  18. Connecting industry leaders with underserved and burgeoning communities. Electric Coin Co..
  19. ECC partners with industry leaders and community leaders to launch Crypto in Context program. Electric Coin Co..
  20. Mining Zcash. Zcash.
  21. Zcash community votes to allocate 20% of network mining rewards to support development. The Block.
  22. Zcash Undergoes First Halving as Major Upgrade Drops ‘Founders Reward’. Coindesk.
  23. What are zk-SNARKs?. Zcash.
  24. Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug. Coindesk.
  25. Zcash Counterfeiting Vulnerability Successfully Remediated. Zcash.
  26. Zcash News. Cointelegraph.
  27. Ethereum’s Founder Vitalik Buterin Responds to Critics: ‘Insane’, ‘Plutocratic’ Governance. Coin Pedia.
  28. Vitalik Says Ethereum Can Scale to 500 tx/s Using Zcash Technology. Yahoo! Finance.