Deciding which digital currency to put time and energy into can be exhausting, especially if you’re just starting out. What makes each coin different? What should you look for in a currency? There are so many options. Consider this a crash course in Zcash (ZEC) and an explanation for why we at HIVE participate in mining this notable digital currency.
How is Zcash the same as other digital currencies?
All digital currency is similar to regular currency in that it can be exchanged for goods and services. All digital currency to date utilizes blockchain technology as its backbone and involves cryptography as one if its principle elements. Like many digital currencies, Zcash allows for mining, a process by which transactions on the network are verified and new coins enter the ecosystem. Zcash can be placed into wallets, including exchange wallets and hard wallets.
Zcash is similar to Bitcoin in that it utilizes private and transparent transactions, and users can hold both private and transparent wallets. But in terms of privacy and anonymity, the closest coin on the market to Zcash is Monero. Zcash, however, has been described as being more technically advanced than Monero.
Here are some other ways in which Zcash is different from most other digital currencies on the market today.
What makes Zcash different from other digital currencies?
Most digital currencies, including Bitcoin, have the potential to expose a user’s payment history to the public. While digital currencies were once touted for their anonymity, special precautions must now be taken when using most digital currencies in order to maintain transaction privacy. One thing that sets Zcash apart from other digital currencies is its capacity for true privacy, thanks to its method of cryptography.
Zcash is the first “open, permissionless digital currency that can fully protect the privacy of transactions using zero-knowledge cryptography.” It upholds confidentiality by utilizing shielded transactions, which hide sender, recipient, and value data on the blockchain. Zcash has brought fungibility to digital currency by unlinking these shielded coins from their history on the blockchain, allowing them to all be equally interchangeable.
Zcash is using highly-experimental, zero-knowledge cryptography called zk-SNARK technology, which has been rightfully called a scientific breakthrough. The acronym stands for Succinct Non-Interactive Argument of Knowledge, and it ensures that all relevant and identifiable information is safeguarded from prying eyes.
This is very different from other popular digital currencies, such as Bitcoin, where anyone can view wallets and transactions from those wallets. Such transparency poses a security issue for people who are sending or receiving large sums of money because it makes them attractive targets for malicious actors. Security concerns drive Zcash’s belief that “privacy is necessary for core human values such as dignity, intimacy, and morality.”
The zk-SNARK proof construction was developed by the Zcash team, and it is the first widespread application of the protocol. It allows the prover and verifier to prove to each other that a statement is true without revealing anything more than the validity of the statement itself.
Vitalik Buterin, co-founder of Ethereum, had this to say about zk-SNARKs:
“Personally, I think zk-SNARKs are a hugely important, absolutely game-changing technology. They are the single most under-hyped thing in cryptography right now.”
Another difference surrounding Zcash that has spurred debate among digital currency enthusiasts is its business structure. Zcash is set up as a company, whereas most digital currencies are simply an open source project. Through this structure, Zcash’s stakeholders receive 10% of coins as a “Founder’s Reward.” Another 1% is set aside for nonprofits. The team that founded and supported Zcash consists of heavyweights in the field, including Roger Ver, Barry Seibert, Zooko Wilcox, and Pantera Capital.
Despite its existence as a company, Zcash remains an open source project, and their source code can be found on GitHub. They also host a developer’s community and an IRC channel, both of which can be found on their website.