Zcash is a decentralised and open-source cryptocurrency system, which has as its unique selling point its emphasis on security and anonymity. Whereas other cryptocurrency systems expose users’ transaction details on the public ledger or blockchain, Zcash (through its token ZEC) promises additional security protocols protecting recipient, sender and amount from public view. This page will examine how it does this.
Zcash (ZEC) Chart
Innovations of Zcash
Zcash is essentially built on open-source Bitcoin infrastructure, which means it has attempted to retain the best parts of Bitcoin, while innovating it further in terms of security.
One such key innovation is connected to Zcash’s approach to so-called “zero-knowledge proof”. This phrase means that the system makes it possible for a user or system to prove that something is accurate (for example that a transaction was carried out correctly) without necessarily releasing any identifying information about this transaction.
The type of zero-knowledge proof that Zcash uses is called zk-SNARKs (or “zero-knowledge succinct non-interactive arguments of knowledge”). This means the sender of a transaction must provide a string of data, but also a cryptographic proof. This proof means that the string of data could not have been generated unless the transaction is valid, which means the cash involved belonged to the sender and he was allowed to spend it. This proves to the blockchain that the transaction is correct and can be verified. In this way, nobody except the sender and recipient of the money will be able to see details of the transaction; it will simply be automatically encrypted and proven.
In this way, Zcash’s emphasis on privacy means it is fully fungible as a currency in a way other currencies are not. This means that every coin can be exchanged for another of the same value, which can normally be an issue if one is dealing with, for example, a coin previously involved in a criminal transaction.
Because of such a coin’s history, users may be wary to exchange other coins for this “tainted” coin – even if the “tainted” coin is now owned by an innocent user. Because Zcash privileges privacy, however, no single coin can be thus identified and earmarked as “tainted”; it cannot be individually blacklisted by users or organisations.
The mining system used by Zcash is very similar to that of Bitcoin and is based on proof-of-work: users who put their processing power at the disposal of the blockchain and who thus verify blocks will be rewarded for their efforts in the form of payment in ZEC.
Nonetheless, Zcash has made a few adjustments compared to Bitcoin. Maximum block size, for example, is 2MB rather than 1MB, and with a processing speed of one block every 150 seconds, blocks are mined at four times the speed to that of Bitcoin.
In terms of the amount of ZEC mined, Zcash used a slow-start mining system, to minimize the impact of any launch problems: the amount of ZEC mined started at 0 and then ramped up to 12.5 ZEC per block within 34 days. Each 4 year period (or 840,000 mined blocks), the ZEC creation amount will halve (from 12.5 to 6.25 to 3.125 to 1.5625 and so on), so just like Bitcoin, Zcash too is a finite currency that will eventually stop being able to be mined.