Zcash: Privacy over all
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Introducing Zcash
Zcash is a cryptocurrency network that was launched in October of 2016 by a software developer known as Zooko Wilcox-O'Hearn. Like other cryptocurrency networks (e.g., Bitcoin or Ethereum), Zcash allows anyone with a computer and an Internet connection to send and receive scarce tokens that can be used like cash on the Internet. The software that powers Zcash is directly derived from Bitcoin's core software, but it has been modified to enhance user privacy.
The Zcash blockchain has its own cryptocurrency, known as $ZEC. There is a maximum of 21 million $ZEC coins. This blockchain can process transactions quicker than Bitcoin's blockchain and is a lot more scalable, which means that it can process a lot of transactions at once.
The members of the network who relay, validate, and bundle user transactions into blocks are, like in Bitcoin, commonly called miners. These miners are rewarded for honest participation with transaction fees and newly minted Zcash. They must solve a complex math problem (similar but distinct from Bitcoin's mining algorithm) to earn the privilege of participation.
As with Bitcoin, anyone can be a miner on the Zcash network. All they need is an Internet connection, a reasonably powerful computer, and free and open-source Zcash software. Zcash is an open blockchain network.
Growth narrative
Bitcoin has been around for almost a decade, and by now, many people have realized that it is not nearly as private or anonymous as many initially thought. That can be a good thing for catching criminals, but it can also be a bad thing for innocent users. In fact, Bitcoin's current specifications make it almost impossible for an unsophisticated innocent user to have any privacy.
ZCash (initially known as ZeroCash), on the other hand, started out as a modified Bitcoin fork that additionally implemented zero-knowledge cryptography in how transactions are carried out across the network.
Being in many ways more of a research-invested and involved experiment, with potential for a very wide variety of application implementations beyond just cryptocurrency (having academic cryptographers and institutions involved in the R&D, such as Israel's famous Institute of Technology, Technion - which, when thought about, also makes a lot of sense, given Israel) - as already witnessed by the widespread implementation of its ZkSNARKs (Succinct Non-Interactive Arguments of Knowledge) protocol in other cryptocurrency applications (e.g., Ethereum and others).
This is unlike Monero, which is more of a community-run project, and also the reason why such a large portion of the mining rewards from ZCash go to the founders to finance further core scientific research (another example would be the BLAKE3 hashing function developed by ZCash founder Zooko Wilcox and others in January 2020, which is significantly faster than MD5 and SHA-1/2/3, additionally implementing some other very useful properties as it is itself a Merkle tree on the inside).
Development work on Zcash began in 2013 by Johns Hopkins professor Matthew Green and some of his graduate students at Johns Hopkins University. It was completed by the for-profit ZCash Company, led by Zooko Wilcox (a well-known figure in the crypto space), raising over $3 million from Silicon Valley venture capitalists for the purpose. It was first mined in October 2016 and currently implements an Equihash type Proof-of-Work consensus algorithm.
Innovation
Although ZCash is based on the original Bitcoin (BTC) code, they are very different for two reasons: privacy and performance. When you transfer money using the ZCash network, everyone can always see that a transaction has been processed on the public blockchain. However, no one knows who the sender or receiver is or how much money was sent.
Here is what a Bitcoin transaction might look like:
ABC123 wallet sent 5 BTC to YXZ456 wallet on 01/01/2022 at 11:03 am
And this is what a ZCash transaction might look like:
XXXXXX Wallet sent XX ZEC to wallet XXXXXX on 01/01/2022 at 11:03 am
As we can see, it is impossible to know everything about the transaction except the date and time. To do this, it uses a technology called "zero-knowledge proof".
In simple terms, the technology allows two people to confirm a transaction without revealing any private information.
Source: Multicoin Capital
Zero-knowledge proofs are a scientific breakthrough in the field of cryptography: they allow you to prove that a statement is true without revealing the statement itself. In simple terms, if you want to prove you are old enough to drive a car, you generally must show your ID card, which reveals a lot of information about you beyond just your age. Your ID card can reveal your address, your face, your height - all of that has nothing to do with your age.
A zero-knowledge proof could let you prove that you are old enough to enjoy a car and only that. Zcash uses a particular type of zero-knowledge proof called zk-SNARKs (or "zero-knowledge succinct non-interactive arguments of knowledge").
These zk-SNARKs are used in any transactions that involve shielded addresses.
This technology allows one of the parties involved to prove to the other the existence of certain information without revealing additional information. For example, the proof person can present the cryptographic hash of a random number and convince the verifier that the number exists without explicitly sharing it.
In addition, zk-SNARKs are a system that allows the person responsible for proving that the number exists and knows it, all without sharing lengthy information or multiple trivial back-and-forth communications between the parties.
They explain that at a high level, zk-SNARKs first transform the information that will be proved into an equivalent form about the knowledge of a solution to some algebraic equations. The first step in this process is to create an arithmetic circuit that represents the equation to be proved, which is composed of a series of simple arithmetic operations (addition, subtraction, multiplication, and division).
Figure 1 shows an example of the arithmetic circuit that represents the equation (𝑎 + 𝑏) ∗ (𝑏 ∗ 𝑐)
, on which a verification layer is created, called the "Rank 1 Constraint System" or R1CS.
However, implementing an R1CS that verifies every step of the circuit would mean that verification would take a long time. So Zcash implemented a quadratic arithmetic program to combine multiple constraints into one. Zcash changes the verification of numbers into polynomials, which makes identity verification more secure. Then the system only has to verify that two of these polynomials match a randomly chosen point, preventing malicious users from preparing for the verification process.
Unlike Bitcoin, where transaction verification requires linking the addresses of the sender and receiver, as well as the input and output values of the transaction on the public blockchain, the sender of a protected transaction only needs to send a proof with a high probability that the input values add up to the output values, and he knows the private keys for spending the input notes.
These private keys are cryptographically linked to a signature on the entire transaction. With this information, the consensus algorithm can automatically verify the validity of a transaction even if the owners of the addresses wish to keep the transaction details private, thus covering the main privacy concern that has developed within the community.
Zcash addresses are either private (z-addresses) or transparent (t-addresses). Private z-addresses start with a "z," and transparent t-addresses start with a "t." Between these two types of addresses, there are four transaction types.
A Z-to-Z transaction appears on the public blockchain, so it is known to have occurred and that the fees were paid. But the addresses, transaction amount, and the memo field are all encrypted and not publicly visible. This type of encryption is only possible through the use of zero-knowledge proofs.
The owner of an address may choose to disclose z-address and transaction details with trusted third parties — think auditory and compliance needs — through the use of view keys and payment disclosure.
A T-to-T transaction works just like Bitcoin: The sender, receiver, and transaction value are publicly visible. While many wallets and exchanges exclusively use t-addresses today, many are moving to shielded addresses to protect user privacy better.
The two Zcash address types are interoperable. Funds can be transferred between z-addresses and t-addresses. However, users must understand the privacy implications of shielding or de-shielding information through these transactions.
In addition, Zcash offers multiple features that distinguish its system from other similar networks, including the ability to include encrypted memos in transactions as a way for the sender to share important information with the receiver, separate disclosure of addresses and payment volumes, the ability to create transactions that require multiple signatures for validation (multi-signature transactions), and all this while maintaining a transaction fee of 0.0001 Zcash.
Edge On The Market
Storing your assets in transparent addresses and attempting to "anonymize" them through technologies such as blenders and then reverting to transparent addresses does not solve this problem.
Nothing provides true privacy when used as a pass-through, as the attacker can simply infer the link by comparing inputs to outputs.
Zooko Wilcox - Electric Coin Company (ECC) CEO
In other words, storing your assets privately, not just trading them privately, might be the only way to ensure absolute financial privacy in the crypto-currency world. That's why Zcash was invented.
In addition to cutting-edge, privacy-preserving cryptography, Zcash has unique characteristics that differentiate it from other projects. Zcash supports fast block times (75 seconds), low fees (default 0.0001 $ZEC), and large block sizes (2 MB). Zcash has regular upgrade schedules, which means this protocol is adaptable to meet the varied use cases of today, as well as the unforeseen use cases of tomorrow. This promotes innovation and prevents ossification.
Zcash is also self-funded with strong community governance that aligns with the incentives of key stakeholders. Zcash's governance structure is inclusive and capture-resistant.
A new community development fund is secured with the Canopy upgrade from 2020 to 2024. With the Major Grants fund, at least $20 M is ear-marked for future zcash development, decentralizing the ecosystem
Thanks to its innovative and robust anonymity features, it has become one of the most popular crypto-currencies you can buy today. That's why JPMorgan has partnered with ZCash to provide blockchain security and an additional layer of privacy and anonymity for enterprise blockchain users.
In addition to this strategic partnership, the project was funded by Fenbushi Capital, Pantera Capital, and Digital Currency Group.
In addition, ZCash has also been able to forge long-term relationships with hundreds of vendors, NGOs, merchants, services, and retailers to allow users to spend their $ZEC tokens to purchase just about anything. If the project continues on this path, ZCash will have a chance to rank among the top 5 crypto-currencies, joining the ranks of Bitcoin, Ethereum, and XRP.
Competition
Privacy is a controversial area in blockchain technology development. It balances between protecting user data and hiding illegal activities. But while regulators are concerned about violations, innovators are looking for solutions to ensure anonymity.
Dash: Dash is an anonymous cryptocurrency that started as a fork of Bitcoin in 2014. The pioneering privacy coin was then called XCoin, later changed to DarkCoin, then finally Dash. Dash contains elective anonymity characteristics such as PrivateSend, which uses the CoinJoin strategy to mask real transaction inputs. The Dash Core Group (DCG), which maintains the cryptocurrency's development, explains that Dash focuses on usability and user protection.
Being a Bitcoin fork means that Dash isn't natively anonymous. Additionally, DashPay's CEO, Ryan Taylor, thinks that Dash isn't an anonymity-enhanced cryptocurrency (AEC). As a Bitcoin fork, transaction details such as wallet balances and addresses are publicly available on its blockchain unless a user utilizes the PrivateSend option.
Dash uses the X11 hashing algorithm while Zcash employs the zk-SNARKs mechanism and the Equihash algorithm. They share some similarities, including Bitcoin forks, a block size limit of 2MB, and a block confirmation time of 2.5 minutes. When it comes to privacy, Zcash beats Dash since Dash's transactions can be traced when one has access to masternodes.
Monero: Monero (MXR) is considered by many to be the best anonymous cryptocurrency in the market as it uses a powerful suite of privacy features such as RingCT, stealth addresses, and Ring signatures to promote comprehensive anonymity. In fact, Monero's privacy is so exceptional that the United States Internal Revenue Service (IRS) had to put a bounty of roughly $625K for anyone who could crack its anonymity technology.
However, a Chainalysis employee has claimed that "Monero is smart[ly] invented," but not flawless. To check or prove payment that has gone through, users need to provide more than just the Monero transaction ID (hash). Instead, you would need the Monero transaction ID, private transaction key (a one-time key that is automatically generated), and the recipient's public address. With these three pieces of information, interested parties can then check using the Monero GUI wallet.
Firstly, Zcash uses the zk-SNARKs feature, while Monero combines stealth addresses (a one-time wallet address used to create more anonymity in cryptocurrency transactions, a stealth address acts as a proxy for your wallet address), ring confidential transactions (In cryptography, a "ring signature" is a type of electronic signature in which it is impossible to determine who signed the document. The potential list of participants is known, but it is not disclosed who exactly performed the action) and ring transactions. Zcash promotes optional privacy, while any transaction conducted on Monero is anonymous by default. On Zcash, users can choose which transactions they want to cloak and which ones they want to make public – making it a flexible, anonymous cryptocurrency. Monero developers, on the other hand, believe that causing privacy optional would weaken the private network's anonymity set.
Concerns
While Zcash is one of the first applications of zk-SNARK technology, this type of confidential transaction validation could also be added to other distributed ledgers as an additional layer of security, which could be helpful for institutional clients or other high-level users with stricter confidentiality requirements.
It's still too early in terms of computing power to think about the future of zk-SNARKs, but Zcash guarantees that its team of scientists is among the most knowledgeable in the field and will continue to work on new ways to implement this system.
The question of the reliability of its anonymity: this is the crucial point of all cryptocurrencies claiming to be "anonymous". With the current low use of private transactions (from z-address to z-address), its anonymity is currently quite low. Greater adoption of Zcash (especially by businesses) should mechanically increase privacy.
Hostile state reactions: this is a valid point for all anonymous cryptocurrencies. With states wanting to abolish cash to be able to trace every single transaction, it's not certain that these same states won't do everything they can to crack down on this "digital cash."
Tax on mining and run by a company: Although the Zcash Company will play a less prominent role in the future than the Zcash Foundation, de facto, it is a company that is currently directing the destiny of Zcash. And the disadvantage for miners of giving up 10% of their earnings is obvious.
Fierce competition: the sector of anonymous cryptos is very competitive. Many projects want to be the best in private transactions.
The original Ceremony: although the Ceremony was conducted by people whose integrity we do not want to question, if ever the original private key had leaked and was to be known by someone, the latter could duplicate as many $ZECs as he wished, even if this would not question the confidentiality of transactions.
Team
ZCash is a project of Electric Coin. A company focused on creating privacy-focused technical and scientific solutions for its customers. The board of directors is led by ZCash founder Zooko Wilcox, Andrew McLaughlin, and Alan Fairless. The advisory board includes Ethereum founder Vitalik Buterin.
The team that worked on the original idea consisted of 7 scientists, including the following:
Alessandro Chiesa - UK Berkeley
Christina Garman - Purdue University
Eli Ben-Sasson - Technion
Eran Tromer - Tel Aviv University
Ian Miers - John Hopkins University
Madars Virza - MIT
Matthew Green - John Hopkins University
The core team currently working on the project is the ZCash Foundation, registered as a public charity. Its primary goal is to create a financial privacy framework that serves users of the ZCash blockchain, protocol, and crypto-currency. The Foundation also provides policy and technical support for applications using zero-knowledge proof.
Partners & Backers
Price
Token Release Date: October 28, 2016
Market Capitalization: April, 25 2022: $2,117,100,591
ATL: March 13, 2020: $18.94
ATH: October 29, 2016: $5,941.80
TA Analysis
First, let’s break down the weekly timeframe:
$ZEC was in the accumulation range up to the beginning of 2021, which started with a solid volume injection and caused an impulse that took the asset on a strong uptrend and price discovery, which was obviously a sell-off phase for the smart money.
The distribution range is shaped into a descending horizontal triangle (that signifies weakness) with a very obvious base (top of the monthly demand zone) as additional proof that the market maker is not interested in selling their position below that level. However, we can see a significant volume decrease as a sign of the distribution phase coming to its end.
Let’s now consider a few possible scenarios:
A new accumulation range is now at the bottom of the triangle, the monthly demand zone holds, and the triangle is broken to the upside, starting a new impulse - bullish.
With volume & volatility decreasing, $ZEC forms a very narrow range, with some spikes up and down to collect liquidity. Eventually, that starts a new accumulation range before the next cycle - neutral.
Market makers completely let go of their positions, the monthly demand zone is broken, and $ZEC forms the next accumulation zone below it (possibly at the -18-27 zone) - bearish.
So, it forms an interesting phenomenon: the monthly demand zone acts as strong support only while market makers distribute their holdings. However, because it’s nearly impossible to identify if the smart money formed the new accumulation range once the remaining positions are sold, that zone can be easily broken (+keep in mind, since the level of support is so exact, there is a lot of liquidity right under it).
So, what strategy can we use to get the best R/R ratio and profit from it the most? For that, we need to identify the most crucial levels, and in my opinion, they are the following:
Knowing them, we can apply the most balanced approach, given the probabilities of each scenario playing out, having neutral as the most favorable one (usually the case) while being prepared for bullish and bearish options too
Divide our orders into three parts:
25% POC - $152
50% strong support (graphically proven + psychological level) - $100.2
25% nPOC of the old accumulation range - $63.8
In this case, we will be able to maximize our profits and minimize our risks, having an average entry at $104.5 if all our orders get triggered.
Technical analysis of $ZEC provided by Oleg Khodovskyi.
Founders' Reward
At first, 50 $ZEC will be created every ten minutes. 80% of the newly created $ZEC will go to the miners and 20% of $ZEC to the founders. Every four years, the rate of $ZEC being made will halve (again, like in Bitcoin). After the first four years, the $ZEC created per ten minutes will drop to 25ⓩ, but 100% of it goes to the miners after the first four years.
The end result (as shown in the diagram) is that there will ultimately be 21 million ⓩ, and 10% of it, or 2.1 million ⓩ, will have been initially distributed to the founders. With this approach, the founders are incentivized to support Zcash for the long haul (at least for four years), and they have limited ability to pump and dump.
Commerce
Zcash is supported by top cryptocurrency payment providers, including Flexa and Gemini Pay. Last month, on the Flexa network, Zcash accounted for 11 percent of all transactions at Baskin Robbins, 31 percent of all transactions at Ulta, 16 percent of all transactions at GameStop, and 13 percent of all transactions at AMC theaters, and 19 percent of all transactions at Petco. Today, Zcash can be used at more than 39,000 major retail locations, coffee shops, movie theaters, etc.
Zcash payments don't require a credit card or bank account, which creates access to more inclusive financial services that reach unbanked and underbanked populations. Zcash transactions are secure, borderless, and available to everyone, regardless of age, ethnicity, or financial status.
Charities and nonprofit donations
Privacy is an often-overlooked component of charitable giving for both the donor and recipient. There are several reasons why someone might choose to donate anonymously. In many cases, they want to support a cause without public notoriety.
Likewise, charities that are firmly focused on an organization's mission may not want the source of a donation to be a distraction from their work. A growing number of charitable causes accept Zcash. Their missions range from privacy advocacy to freedom of the press and more.
AirDrop Venezuela is an organization dedicated to providing humanitarian aid directly to thousands of Venezuelans. Funds can help families purchase food, medicine, or scarce imported goods. To date, the initiative has raised more than 300 Zcash and reached over 60,000 ID-verified recipients.
BitcoinTuesday is a campaign launched to support those affected by the Covid-19 pandemic. More than 160 Zcash has been raised as part of this initiative, with the proceeds going to a wide range of participating charities: 41 percent of the Zcash donations were sent to Save The Children, 31 percent to SOS Children's Villages, 16 percent to Human Rights Foundation, 8 percent to No Kid Hungry, and 4 percent to TOR Project.
The Giving Block ran a campaign for International Women's Day to support two nonprofit organizations: Africa Development Promise and The Mona Foundation. Africa Development Promise is a charity focused on empowering rural women and supporting their efforts to achieve economic independence. The Mona Foundation's mission is to provide educational opportunities to children around the world and empower women and girls so they can elevate their communities. The campaign raised $15,000, and Zcash was the top donated cryptocurrency.
Many other charitable organizations accept Zcash, such as:
Electronic Frontier Foundation is the leading nonprofit organization defending civil liberties in the digital world. EFF champions user privacy, free expression, and innovation through impact litigation, policy analysis, grassroots activism, and technology development.
Freedom of the Press protects, defends, and empowers public-interest journalism in the 21st century.
GiveCrypto.org distributes cryptocurrency to people living in poverty.
Open Privacy Research Society conducts scientific research advancing the area of privacy and anonymity as they relate to computer science and computer security.
The Tor Project creates Tor Browser, enabling you to use the Internet privately and resist surveillance.
The Internet Archive builds a digital library of Internet sites and other cultural artifacts in digital form. They provide free access to provide "Universal Access to All Knowledge."
Education in underserved communities
In the Bronx, 29.7 percent of the population lives in poverty — just miles away from the wealthiest neighborhoods in New York City. The lack of access to traditional banking forces many households to turn to alternative financial services that charge exorbitant fees, leaving the unbanked and underbanked trapped in a cycle of poverty. Improved financial literacy and access to affordable banking products are necessary to increase economic participation in these communities.
In 2019, ECC provided scholarships to 35 students to attend two-day Crypto Community Project workshops in the South Bronx. During the program, students worked with leaders in the cryptocurrency ecosystem to learn about the fundamentals of blockchain, personal finance, and self-sovereignty. They learned how to install their first digital wallets, how exchanges work, and how to send a Zcash transaction. The students were also asked to go out into the neighborhood and spend some of the Zcash they received.
Instead of a traditional curriculum, industry leaders taught the classes from companies like Flexa, Gemini, Casa, Messari, and ECC. Three of the students received paid internships directly from the host companies, and several others formed mentorships with the speakers that continued long past the event.
Not financial advice. The Crypto Intelligence Report is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Do your own research and make an informed decision.
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