So, you’ve probably come across the term Zcash; nonetheless, you’re not sure how it can be used or how it works? Well, you have found the right guide to help you learn more!
While on the subject, did you know that ZCash was once known as Zerocoin?
Anyways, this beginner’s guide on ZCash will inform you of all you need to know. To begin with, I will share some history about ZCash, and then I will let you know how it can be used in the real world.
After that, we will discuss the technology behind ZCash in a simple way and its potential to either increase or decrease in value over time.
Are you ready to be educated? Let’s get started!
What is ZCash: The History of ZCash
In 0ctober of 2016, a developer called Zooko Wilcox launched ZCash. Zooko was impressed by what Bitcoin could do, but he wasn’t impressed that transactions were open for everyone to see. On the contrary, he desired to develop a blockchain that would permit people to receive and send money anonymously – which is what ZCash does!
Zooko conducted a fork of the original Bitcoin code to achieve his dream. He made some quite impressive alterations to the Bitcoin code to ensure that it was faster and more private compared to Bitcoin.
When a blockchain is forked, it implies that the original code is copied, but alterations are made to better it. Popular blockchain forks include Ethereum Classic (forked from Ethereum) and Bitcoin Cash (forked from Bitcoin).
Edward Snowden, the famous whistleblower, is one of the biggest fans of ZCash. Recently, he said ZCash is the most exciting alternative to Bitcoin! Barry Silbert, an ex-banker, and Roger Ver, a cryptocurrency legend, have made a private investment into the project.
The ZCash blockchain has its cryptocurrency known as ZCash or “ZEC.” The maximum number of ZEC coins available is 21 million, the same amount as Bitcoin, and it is projected to get to this amount in 2032.
As of 2021, the total amount of ZCash in circulation was $ 9 960 781.
Nonetheless, the ZCash blockchain can process transactions much faster than Bitcoin, and it is also more scalable. Scalability is essential since it implies that a blockchain has many transactions at a single go. I will share more about this later on.
The main feature that distinguishes ZCash is that it hides the identity of both the receiver and the sender. It is so private that the only information the public can see is the transaction time and date!
Same as Bitcoin, no single authority or individual controls ZCash – it is decentralized! On the contrary, miners maintain the blockchain in exchange for ZCash coins for their electric power and time.
Therefore, now that you have some degree of understanding of ZCash and why it was developed, the next section of this beginner’s guide on ZCash will discuss some of its features in detail.
A Review of ZCash: How can ZCash Be Used?
The primary role of ZCash is to permit people to receive and send money cheaply, faster, and most importantly – privately. The ZCash team aspires to adopt it as a global payment system used by people globally one day.
Imagine how you might send money to a friend living in a different country. You will be forced to use a third party like Western Union or a bank. Regardless of your option, the fees are generally relatively high.
For instance, sending $210 to Egypt costs an average of 14.6%, or $30.66! This is a huge fee to a person who might be living in poverty. An international transfer such as this is known as a “Remittance,.”It is a multi-billion-dollar industry that makes lots of money for third-party intermediaries.
Besides this, sending money to a person in a different country can also take days before receiving the money! For these reasons, ZCash offers excellent relief.
ZCash network can verify a new block every 2.5 minutes. A block can be likened to a container carrying lots of different packages. Nonetheless, instead of having boxes, a block contains transactions! This is much faster than Bitcoin, which averagely takes 10 minutes to verify a block.
When it comes to transaction fees, the ZCash network is much cheaper when compared to transferring money with a bank. While the prices vary depending on how busy the blockchain is, it shouldn’t cost any more than a few cents!
One other advantage that ZCash has over Bitcoin is how its miners operate. While they both use a consensus model known as “proof-of-work” (POW), the ZCash network is much fairer.
Picture mining is a complicated puzzle. To verify transactions on the blockchain, miners use their computing power that helps resolve the equation or puzzle. Once this is done, the transaction is then confirmed in the block. Miners are rewarded with coins once they solve the equation. In this case, they are rewarded with ZCash coins.
Mining Bitcoin has become hard since people utilize expensive hardware known as ASICs.
Think of it like being in a race with Ferrari while you’re driving a Honda! Who do you think would win? Your guess is as good as mine! This is how unjust it can be when mining Bitcoin – individuals with more cash can acquire more powerful equipment, implying that they will often get the reward.
Nonetheless, this is how ZCash stands out. ASIC hardware is not compatible with ZCash, implying that individuals can use either a GPU or CPU to mine ZCash. These are much affordable compared to ASICs so that anyone can mine ZCash!
There is a minor issue, though. For the first four years, developers of ZCash will get 20% of all the transaction fees generated. They state that this will aid in funding the project. Nonetheless, some individuals think this is unjust. If you spent your electricity to mine ZCash, how would you feel about parting with 20% of your reward to the developers? Most certainly not too happy, eh?
So, now that you have an idea of what it can be used for, the next section of this beginner’s guide on ZCash will discuss how transactions work.
A Review of ZCash: How Do Transactions Work?
As you might know, blockchain technology is genuinely complex, and sometimes this makes it difficult to comprehend how everything operates. But worry not, I’m going to break it down for you.
The primary technology supporting ZCash to be such an excellent blockchain is its “Zero Knowledge Proof” protocol, which permits transactions to be done anonymously. Here is a case on how both a ZCash and Bitcoin transaction looks:
Bitcoin Transaction: Wallet BEG228 sent 2.0 BTC to wallet HLZ123 on July 24th, 2021, at 1 pm
The moment the block is verified, information for the above transaction is sent to the public blockchain, which anyone can see. In addition to this, once you know the wallet address, you can then see every single transaction that it has received or sent in the past. You can also view the balance of the wallet.
Although nobody knows the real-world identity behind a Bitcoin address, it still discloses much information about you.
An increasing number of stores accept Bitcoin as a payment method, particularly in Japan, where more than 300,000 different vendors! If you physically walked in and used Bitcoin to pay, the store owner would then have access to all of your transaction history.
ZCash is different though, let’s check it out.
ZCash Transaction: Wallet YYYYYY sent P.Q ZEC to wallet YYYYYY on July 24th, 2021, at 1 pm
As you can observe, the only information displayed in the public blockchain is the time and date of the transaction. This is what makes ZCash a truly untraceable and private blockchain!
Zero-Knowledge proof was, in reality, first designed in the 1980s by three academics at the Massachusetts Institute of Technology University.
As the name hints, the idea of Zero-Knowledge Proof is that it permits a system to confirm a transaction without exchanging passwords. This also implies that the keys cannot be hacked or stolen, and nobody can access any private information shared on the blockchain.
Here is a real-world case to demonstrate how the blockchain can verify that a transaction is authentic without disclosing the passwords.
1. Edwin has two bottle tops, and one is yellow, and the other is pink.
2. Cate is blind and does not believe that the bottle tops are different.
3. Edwin tells Cate that the bottle tops are two different colours.
4. Cate takes the two bottle tops, mixes them up behind her back, and then shows Edwin one of the bottle tops, which is pink.
5. Cate then puts the pink bottle top back behind her back and mixes them again. Nonetheless, she knows which bottle top she originally showed Edwin.
6. Cate then asks Edwin to pick out the bottle she originally showed him.
7. Edwin picks up the pink bottle top, which, of course, is correct.
8. Cate says that it was a 50/50 chance Edwin would pick the right bottle top. She is correct, but if the same thing was repeated a million times? Since Edwin is not blind, he would always pick the right colour.
9. Edwin was able to prove he was telling the truth.
10. This is similar to how Zero-Knowledge Proof works. Although Cate is blind, she can still trust that what Edwin tells her is correct.
So, now that you have an idea of how transactions work, the next section of this beginner’s guide on ZCash will cover its potential!
What is ZCash Review: Potential of ZCash?
The cryptocurrency market is truly difficult to predict. Still, it’s normally a good idea to look at key parameters why a coin might appreciate and the reasons why it might not.
Firstly, ZCash has done well to partner with major financial institutions such as JP Morgan, who are planning to install the Zero-Knowledge Proof protocol into their blockchain project. Having a big institution like JP Morgan express interest in ZCash adds huge credibility to the company.
Nonetheless, a potential issue that might injure ZCash is its use for criminal activity in the long run. This is so since it allows people to receive and send funds anonymously, which is excellent for criminals.
The dark web is a huge business, with criminals trading illegal goods online in exchange for cryptocurrencies.
Governments globally are beginning to hold discussions on how to regulate cryptocurrencies, and they might not be impressed with the idea of an anonymous payment system. Nonetheless, ZCash has a probable solution, known as the “view key.”
Every ZCash holder has access to their view key, which permits users to disclose transactional data. Also, users can share this view key with agencies such as law enforcement or regulators, which would enable them to audit transaction history. Nonetheless, the user would need to voluntarily agree to this, which is a criminal most likely wouldn’t.
Another issue that might hinder the value of ZCash from appreciating is its potential to scale. Earlier on, I mentioned in this beginner’s guide for ZCash that the blockchain can process more transactions per second than Bitcoin. But it can still only attain between 6 – 26 transactions per second.
So, unless developers of ZCash can enhance this, other blockchains might stand a better chance of becoming a worldwide payment system.
There are also other anonymous coins such as Dash that can facilitate transactions much faster. Utilizing the InstantSend feature, Dash transactions take a few seconds, whereas ZCash takes 2.5 minutes.
Nonetheless, generally, ZCash has performed exceedingly well since its launch in 2016 and has built itself as a top 50 currency. As a matter of fact, in late 2017, it hit an all-time high price with a market capitalization of over $2 billion! This has since moved down but is worth well over $1 billion.
The current (2021) market cap for ZCash stands at $564 726 271.
I hope you have relished this beginner’s guide on ZCash! I know it’s been a long read, but if you read from start to finish, you should now better understand what ZCash is and its uses in the real world.