You are likely to have heard that Bitcoin and most other cryptocurrencies are only pseudonymous. And you probably also have been told that if you want full anonymity, then use Zcash or such other cryptocurrency.
In this beginner's guide, we explain what Zcash is, what makes it unique, and how it works. You will also learn how to easily exchange other coins or tokens for Zcash on Swapzone.
Zcash is a blockchain-based peer-to-peer cryptocurrency that was developed off a protocol forked from Bitcoin. It is better described as a privacy-centric network that seeks to allow for full anonymity of transactions via a unique cryptographic technique called zk-SNARKs.
ZEC is the native cryptocurrency on the Zcash network and went live in October 2016.
Like Bitcoin, there's a fixed supply of 21 million coins. Zcash's block time is 75 seconds and the block size is 2MB. This makes Zcash process more transactions and far faster than Bitcoin.
Zcash is a mineable coin that uses a mining algorithm called Equihash to mint new coins. Miners currently earn 3.125 ZEC in block reward, which reduces every four years when block halving occurs.
Miners receive 80% of the block reward, with 20% going to three groups within the ecosystem: 8% for the Major Grants Fund, 7% for the Electric Coin Company (ECC), and 5% for the Zcash Foundation.
In 2014, other scientists from MIT joined the John Hopkins team and created the Zerocash protocol. The new network introduced more advanced privacy features. Overall, the underlying Zcash protocol was contributed to by John Hopkins, MIT, UC Berkeley, and Tel Aviv University.
In 2015, the Zerocoin Electric Coin Company (later Electric Coin Company) was formed. The same year developer Zooko Wilcox worked on the protocol, before announcing the launch of ZEC on October 28, 2016.
The Zcash Foundation was then formed in 2017 to advance the development of cryptocurrency. As Zcash is an open-source platform, the ECC only helps oversee software updates, with decentralization enhanced via the participation of nodes.
Among advisors to the ECC team are renowned Bitcoin developer Gavin Andresen, Ethereum co-founder Vitalik Buterin, and Tezos' Arthur Breitman.
The Zcash blockchain had a unique launch, which was conducted via a process dubbed as "the Zcash ceremony." It is also referred to as the "Parameter generation ceremony" or "trusted setup."
Before launching Zcash, its developers used the master public key to create fragments for the private key needed for zk-SNARKS to function.
The first parameters generation phase occurred on October 21-23, 2016, and was called Zcash Sprout. There were six participants:
In addition, the ceremony was witnessed by Zcash engineer Sean Bowe, IEEE Spectrum journalist Morgen Peck, videographer Nat Kramer and production assistant Daniel Cooper.
Once the passkey was safely generated, the fragments that formed the 'toxic waste' that can be used to manipulate ZEC were destroyed.
The Zcash protocol allows users to transact (send, receive) or transfer ZEC as it happens on other cryptocurrency networks. All transactions are added to the blockchain via new blocks.
However, when using the Zcash network, you can choose between two types of transactions:
Unshielded transactions allow for details about the sender, amount, or receiver to be visible on the blockchain.
Only private transactions will be hidden from anyone looking at the network and will remain unless the individual(s) has the keys to view this information.
To achieve transaction anonymity, Zcash uses a cryptographic technique known as zk-SNARKs. This is a zero-knowledge proofs protocol, which basically means that nodes can safely verify shielded transactions without having any other information other than that the transaction is true.
Once a shielded transaction has been recorded on the blockchain, the only details publicly available will be the transaction date and time. A shielded transaction will have "z" and its only z-z transactions are fully anonymous.
While private transactions offer complete anonymity, users can still allow a third party to view them on the blockchain.
This is achieved via a dual key feature and is important when a user is seeking to grant access for audit purposes or regulatory compliance. Sharing or granting access to private addresses is done through the View Key.
Users have another key called the Spend Key, which as the name suggests, is what you need to spend funds on the network.
The primary use case for Zcash is in peer-to-peer transactions, with a growing number of merchants and retail points accepting ZEC as a payment method. Apart from using Zcash as a medium of exchange to pay for virtually anything online, users can also hold ZEC as a store of value.
Zcash currently trades around $173 against the US dollar and has a market cap of $1.8 billion, which ranks it 44th in the market. The all-time high for ZEC price was on October 29, 2016, when the coin traded as high as $5,941, nearly six times higher than Bitcoin at the time. Its price has leveled off from that initial hype-driven demand, and nearly 1000% up since its all-time low of $18 on March 13, 2020.
The easiest way to acquire ZEC is to buy it from an exchange or broker platform. You'll first need to identify the exchange to buy the coin from, create an account and proceed to buy. Remember that you need to keep your coins off the exchange or broker platform, which means you might have to get a wallet for that.
There are different wallets you can choose from, but among the best are hardware wallets like Trezor, Ledger Nano, and KeepKey.
An alternative way to easily get ZEC is to directly exchange it for another coin that you have. Here is how you can easily get Zcash on Swapzone.io:
Zcash is one of the most popular privacy coins, with alternatives being coins like Monero (XMR), PivX (PIVX), and Verge (XVG). A distinguishing feature for Zcash is its transparent and private transactions. People use ZEC as a medium of exchange or can hold it as a store of value.