WHAT IS ZCASH and how is it related to BITCOIN?

Zcash is a peer to peer cryptocurrency like Bitcoin. Unlike Bitcoin, it’s sole priority is to focus on private, anonymous, and fungible transactions that Bitcoin can’t do. Zcash was forked out of Bitcoin and launched in October 2016, and it was previously known as Zerocoin. It is based on a special cryptographic protocol that shields a sender’s information, a receiver’s information, and the amount transacted between both parties.

Zcash open cryptocurrency project uses a zk-SNARK protocol. This is a new cryptographic zero-knowledge proof protocol that ensures privacy, anonymity, and fungibility of Zcash coins. However, privacy and anonymity are not implemented by default in Zcash, as it also has transparent transaction functionality like Bitcoin. So by design, Zcash has optional anonymity and privacy features for users who want to use them.

 

ZCASH COIN SUPPLY AND DISTRIBUTION

Zcash has a total maximum supply of 21 million coins, like Bitcoin, and it is mined through a POW Equihash algorithm. All 21 million are expected to be mined by 2032, and just like Bitcoin, the Zcash block mining reward is cut in half every four years. Zcash was not pre-mined nor ICO funded like many other crypto projects, rather, it follows a unique funding and distribution approach.

Zcash started with a closed investor’s group who funded the company with $1 million to kick off its development and operations. In return, these investors are promised a 10% reward of the total supply in an incremental way over the first 4 year period. Some the popular investors from this closed group are Barry Silbert, Erik Voorhees, Roger Ver, and Naval Ravikant.

This 10% reward of investors is called a “Founder’s Reward” which basically means that whatever amount of Zcash is mined for the first 4 years, 10% of Zcash will be incrementally distributed among these investors. This comes down to 2.1 million being distributed to investors in the first 4 years, which can represent a kind of tax on mining. After 4 years, the total mining reward goes to miners like in a typical proof of work system.

 

WHAT IS A ZERO KNOWLEDGE PROOF

A zero-knowledge proof means you can prove to someone that you’ve done a computation without them having to re-do the computation themselves. The effect is that you can prove a statement true without actually revealing anything about it other than that it’s true.

Zero-knowledge proofs help makes Zcash very “untraceable” by creating private transactions on the public Zcash blockchain. Transactions on Zcash cryptographically obscure the addresses of the sender and recipient, as well as the value one address sends to another. This is unique in that other blockchains to date show the value transfer from one address to another, and the value being sent can be seen by anyone on the blockchain. Unlike other blockchains, Zcash users can cryptographically fully shield their transactions. The only thing that is disclosed is that something happened at a particular point in time.

The addresses sending Zcash are all pseudonymous, meaning that if you don’t know their actual identities or real-world addresses, you cannot see where the currency is flowing to or from.

WHAT DOES ZCASH MEAN FOR ETHEREUM

There are two ways in which Ethereum developers can use the features that Zcash has pioneered. The simplest way to integrate the blockchains is by using a BTCRelay-style SPV (Simple Payment Verification) system, called ZRelay. This allows for public transactions on the Zcash blockchain to be verified by smart contracts on Ethereum, allowing Ethereum Dapps to take advantage of the privacy of Zcash for value transfers. The more powerful, but more complex way is to incorporate the zkSNARKs as a native feature of Ethereum.

 

Today, Ethereum developers are able to build experimental and functional prototypes, however, fully functional applications using Zcash can’t currently be implemented on the main network because of the network’s limit is lower than what is required by the relatively expensive proof of work verification computations. In order for Zcash to work on Ethereum, a new precompile (a new deep protocol element of the system, similar to a new opcode) would need to be added so that all of the expensive computations happen in a highly optimized native manner, as opposed to on the general purpose EVM (ETHEREUM VIRTUAL MACHINE).

Predictably, in the next version of Ethereum, we’ll be able to have this atomic swap capability between ether and Zcash, and in the future, we may have the full functionality of zero-knowledge proofs available directly in Ethereum and accessible from a variety of smart contracts.

 

Zcash is very suitable for people who want a totally confidential cryptocurrency. It can also be used in the same way as bitcoin, it’s innovative technology is promising and should ensure a bright future.

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