Cryptograhic developers have continuously worked on protecting the privacy of the users in the digital currency space since Bitcoin was released close to ten years ago. The blockchains that were used by currencies that were developed soon after Bitcoin displayed information publicly which posed a big challenge especially to merchants. This is because they had to verify individual coins to establish their history as those coins that were used in illegal dealings stood a big chance of being rejected by other users. The lack of privacy also put the businesses at risk as all users could learn about your company’s current liquidity as well as transactional history. Zcash (ZEC) was the product of these developments.
Zooko Wilcox is the man behind Zcash which trades under the tag, ZEC. Before the release of Zcash, Wilcox worked on the Zerocoin protocol in 2013 which was aimed at bringing enhanced privacy to Bitcoin transactions. It achieved this by giving the users the ability to convert their Bitcoins to Zerocoins. These coins provided anonymity by concealing the origins of the payment. The Zerocoins could then be converted to Bitcoins again for transacting.
To offer even greater privacy, these developers joined hands with other developers from elite universities such as MIT to create the Zerocash protocol. This protocol could offer greater privacy and it formed the basis for the development of Zcash (ZEC).
The Zcash platform allows two users to exchange information without revealing their identities. It does this through the use of zk-SNARKs which are zero-knowledge proof constructions. These record the transaction on the Zcash blockchain without revealing the amount transacted or the people involved. This makes the coins fungible, which means that any one coin can be substituted for another without a loss in value as the transactional history of the coin is not recorded.
This has led to the Zcash being dubbed the anonymous currency.
Hawk is a digital currency start-up that seeks to introduce enhanced privacy into the Ethereum smart contracts platform by using Zcash protocol to hide the receiving and sending addresses in such transactions. It was developed by Andrew Miller. It is a system of smart contracts which are layered on top of a blockchain and conceal the details of the parties involved as well as the amount. Hawk can be integrated into any blockchain and will work seamlessly.
The defining aspects
While zk-SNARKs are a unique concept that was introduced by Zcash, most of the structures in use are similar to other currencies. It has a maximum coin supply of 21 million just like Bitcoin. It uses a proof-of-work consensus algorithm which is reliant on miners for verification. However, it has allocated 10% of all the mined units to its developers in what is known as Founder’s Reward.
It also adopted a slow-start mechanism in which the mining incentive for the first 20,000 blocks was halved. This was to give the developers time to monitor the system for bugs and vulnerabilities and ensure that if they existed, their impact would not be as great.
Investing in Zcash
Zcash currently has a market capitalization of $928 million with a per-unit price currently standing at $342 according to coinmarketcap.com. With privacy and security taking center stage in recent times in the digital currency market, Zcash has the chance to claim an even bigger market share with its anonymity. The integration of zk-SNARKs into other blockchain to offer extra privacy will propel Zcash to great heights.