- ZCash is a Proof-of-Work (PoW) cryptocurrency designed to deal with a number of the inherent flaws of Bitcoin e.g., lack of fungibility. Zcash has relied on a group of zero-knowledge proofs called zk-SNARKs to enhance anonymity and thus fungibility.
- In the Zcash network, addresses are either private (“z-addresses”) or transparent/public (“t-addresses”). These two address types are interoperable.
- According to the team, a number of its key features include low-fee transactions, encrypted memos (allows the sender to incorporate relevant information to the receiver), payment disclosure (allows disclose transaction-specific details to 3rd parties), multi-sig transactions, and transaction expiration (transaction expire after a selected number of blocks if not mined).
- Initially built on the Zerocash protocol, it’s relied on Sapling since late 2018, a part of its continuous improvement strategy. Sapling has led to efficiency improvements for shielded transactions (lower memory requirements), decoupled spend authority (i.e., hardware for zero-knowledge proof is independent from hardware to sign transactions), and an improved key system (allowing shielded addresses the power to look at incoming and outgoing transaction details without revealing private keys).
Zcash is a decentralized, peer-to-peer (P2P) digital currency and payment network equipped with privacy- and security-enhanced features. It is the first network to integrate zk-SNARKS,1 an application of zero-knowledge cryptography featured in MIT Technology Review’s 10 Breakthrough Technologies of 20182, which validates transactions without revealing information such as the address of the sender, receiver, or payment amount. Zcash is the implementation of the Zerocash whitepaper, published in May 2014 through the combined efforts of researchers from universities around the world.3 It was formally launched on October 28, 2016 by a privately held company known today as the Electric Coin Company (ECC), led by founder and CEO, Zooko Wilcox. Separately, in June 2017 a non-profit called the Zcash Foundation formed with the mission of building internet payment and privacy infrastructure for the public good, primarily serving the users of the Zcash protocol and blockchain.4 Together, the ECC and Zcash Foundation have largely been responsible for the continued development and improvement of the Zcash network.
The Zcash Project sought to expand upon Bitcoin, which is considered
by many to be the benchmark store-of-value and digital currency. By introducing several technical modifications to the original Bitcoin source code, users are granted the ability to decide on the degree of confidentiality associated with their financial activities. These features concentrate on safeguarding financial privacy, including a shift to the Equihash consensus algorithm, and other network upgrades. In addition, the ECC and the Zcash Foundation are backed by prominent digital currency investors5 and development is supported by a team of world-class engineers and researchers specializing in cryptography.
Zcash seeks to become the model digital currency of choice for privacy and digital information security and has established itself to be one of the top 35 largest networks by market cap in the ecosystem.
History of Zcash
In an era where information is increasingly digitized and data leaks revealing personal information are frequent, privacy and security are preeminent concerns for individuals and institutions around the world. Bitcoin attempted to address these concerns with its decentralized network, but by nature, the Bitcoin blockchain records all transactions and makes them publicly viewable, prioritizing financial transparency at the expense of privacy.
The Zerocoin proof-of-concept was introduced in May 2013 as an extension of Bitcoin. Using cryptography, Zerocoin proposed an additional layer of privacy to the Bitcoin network that would potentially allow for anonymous transactions. It was published by researchers from Johns Hopkins University – Ian Miers, Christina Garman, Matthew Green, and Aviel D. Rubin. However, limitations in its technical design prohibited proper implementation.7
Zerocoin laid the groundwork for Zerocash, for which the May 2014 whitepaper served as an outline for Zcash.8 Zerocash addressed two problems identified in the Zerocoin proposal: (i) it enhanced privacy across all dimensions of a transaction, unlike Zerocoin, in which only the identity of the sender could be concealed and not the receiver or transaction amount and (ii) it decreased both the projected transaction size and block confirmation time by approximately 98%.9 It was developed in collaboration with the original Zerocoin authors, excluding Rubin, and four academics – Eli Ben-Sasson, Alessandro Chiesa, Eran Tromer, and Madars Virza. Funded by private, federal, and university grants, Zerocash is the product of research conducted by scholars from the top universities in the world.
All of these contributions led to the creation of the Zcash Project in January 2016. Around the same time, the Zcash Company (now known as the Electric Coin Company, or ECC), led by Bryce “Zooko” Wilcox, was founded, and under its supervision, the Zcash network was launched in October 2016.
Since the original Zcash protocol, Sprout, was released, Zcash has undergone two network upgrades: Overwinter and Sapling. Each upgrade is supplemented with comprehensive testing of features in testnets. Over time, Zcash has evolved according to community consensus. Contributors to the Zcash Project work towards reaching its final stage, to become the premiere global digital currency with privacy-enhanced features.
Defining Characteristics of Zcash
By design, Zcash is similar to Bitcoin. It is a software project clone of Bitcoin, often referred to as an altcoin, in which the original source code was copied, then modified, to be a secure and privacy-enhanced digital currency alternative to Bitcoin. To accomplish this, the Zcash protocol has two types of addresses and therefore four types of transactions, as well as features unique to the network:
Address & Transaction Types
Public, or transparent addresses, which always begin with “t”.
Private, or shielded addresses, which always begin with “z”.
Public: ZEC transferred from a t-address to a t-address. Public transactions appear on the public Zcash blockchain just like Bitcoin. The sender and receiver addresses and transaction amount are all publicly visible.
Private: ZEC transferred from a z-address to a z-address. Private transactions appear on the public Zcash blockchain, but the sender and receiver addresses and transaction amount are all encrypted and not publicly visible.
Shielding: ZEC transferred from a t-address to a z-address. Shielding transactions appear on the public Zcash blockchain, but the receiver address is encrypted and not publicly visible.
Deshielding: ZEC transferred from a z-address to a t-address. Deshielding transactions appear on the public Zcash blockchain, but the sender address is encrypted and not publicly visible.
Privacy Technology (zk-SNARKS)
Created by the SCIPR12 Lab, zk-SNARKs is an acronym for Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge. Zk-SNARKs are a form
of zero-knowledge proofs originating from a 1989 paper published by MIT researchers, where one can prove possession of certain information (e.g., a secret key), without revealing that information, and without any interaction between the prover and verifier.13 They add additional layers of confidentiality to transactions by concealing the amount, and sender and receiver of ZEC transactions, and are easily verifiable in milliseconds.
Equihash was conceived in 2016 by Dmitry Khovratovic and Alex Biryukov, research students at the University of Luxembourg. Specifically, Equihash
is a proof-of-work (PoW) consensus algorithm, which is fundamental to how miners, or nodes, in the network validate transactions. This authentication process hinders attacks and abuses of the network by requiring computational power on behalf of the miner, which is resource intensive and expensive.
Equihash is designed to verify transactions quickly. To an extent, it is considered to be ASIC-resistant, as GPUs (Graphical Processing Units) are currently the preferred choice of equipment as they are relatively cheaper. Consequently, the Zcash mining process is more egalitarian by reducing the cost barrier to entry. It also reduces the probability of mining centralization, and subsequent risk of attacks on the network. However, the tradeoff for adopting Equihash is that computations are more memory intensive and are restricted to the memory capacity of the hardware.14
For more on the technicalities on Equihash, please refer to Biryukov and Khoratovich’s paper, Equihash: Asymmetric Proof-of-Work Based on the Generalized Birthday Problem.
Miners who successfully confirm a transaction and upload it on the blockchain receive block rewards for their effort, providing an incentive and attributing
to the exponential increase in network usage. For the first 850,000 blocks,
or approximately four years, the block reward is 12.5 ZEC. As illustrated
Miners receive 80%, equivalent to 10 ZEC per block, plus any transaction fees accrued. The beneficiaries of the Founders’ Reward (e.g., founders, employees, advisors, investors, the ECC, and the Zcash Foundation) receive 20%, equivalent to 2.5 ZEC. The Founders’ Reward was designed to incentivize those partaking in the development of the network.
After four years, block rewards will halve every 840,000 blocks and 100% of the block rewards will go to the miners. As a result, miners will receive 90% in the final distribution of the ZEC supply.