Zcash (ZEC) was founded by Zooko Wilcox and was launched in October 2016 as a coin that would use a series of complex equations called zk-SNARKS. The currency is intended to allow users to transact with a high level of anonymity. So far, its functional success has been more or less proven; however, some wide fluctuations in its value have made investors a bit wary.
Zcash Value, Market Cap and Volume
Zcash is currently one of the largest cryptocurrencies based on market cap and daily trading volume. Today its market cap is just under $1 billion USD with a circulating supply of 2,699,306 ZEC coins. Unlike many other cryptocurrencies, Zcash does not have a maximum supply of coins. Within any 1-day trading session, between $10 million USD and $300 million USD worth of ZEC are exchanged.
Anonymity and Zcash
To protect users’ privacy, Bitcoin uses something called CoinJoin. CoinJoin functions by combining two separate transactions into a single one. For example, Anni wants to send money from wallet A to wallet B. Zoe wants to send money from wallet C to wallet D. CoinJoin combines the two transactions into one transaction that has two inputs (A and C) and two outputs (B and D). The CoinJoin transaction is recorded on the blockchain along with the amount of Bitcoin.
While CoinJoin provides some level of anonymity, it is not completely anonymous. Compared to other cryptocurrencies, like Monero, it is relatively easy to figure out who is making what transaction. This is because of the reliance on private keys, which are random combinations of letters and numbers that can be used to identify a user.
After a private key has been identified as part of several transactions, it is possible for authorities to figure out who is making those transactions. Additionally, if private keys become associated with shady transactions, they may be refused by certain parties.
zk-SNARKS Adds More Transaction Anonymity
Zcash uses something called zk-SNARKS to verify transactions with a high level of anonymity. Neither of the transacting parties’ identities zk-SNARKS use zero-knowledge proofs to verify transactions. That is, they allow the existence of the transactions to be proven without actually knowing or disclosing what that something is.
In a zk-SNARKS zero knowledge proof, there are three things that interact with each other: a verifier, a prover, and a witness. A verifier’s goal is to convince itself that the prover has knowledge of a secret bit of information, called a witness.
Let’s use a Monty Python reference to explain this. Monty Python has a sketch about the funniest joke ever written; it is so funny that anyone who hears it will die laughing.
Imagine that you have a capsule that contains this unbelievably funny and destructive joke. This secret joke it the “witness”. You are the prover. You tell a reporter (the verifier) that you have this capsule that has all this joke in it, but you can’t reveal it because you don’t want to endanger humankind. The reporter needs to prove to herself that the joke actually exists without knowing what the joke is. You and the reporter both undergo a series of “proofs” to prove that the joke exists without revealing what it is.
zk-SNARKS uses a series of algebraic equations to accomplish this. Essentially, the prover shows the verifier that in an equation (for example: t(s)h(s)=c(s)d(s)) that both sides are equal without actually revealing what the value of all the variables are. This is possible by showing that the structure of the equation is equal on both sides.
History of Zcash
Zcash has quite a storied history. Recently, an episode of NPR’s Radiolab chronicled its somewhat “mystical” birth. Zooko Wilcox, the creator of Zcash, created a ceremonial rite to ritually set Zcash into motion. In order to create the SNARK public parameters that were required for Zcash’s system to exist, pairs of public and private keys had to be generated with the condition that the private key had to be immediately destroyed.
The keys to its code were created in “shards” between six people. When the shards were created, each of the participants burned their public key to a DVD, and destroyed the computer that generated the key pair to eliminate all traces of the keys. The public keys were then brought together to form the Zcash blockchain. The private keys were called the “toxic-waste byproduct” of the generation of the public keys because of the risk that they carried to endangering users’ privacy.
Although the creators of Zcash took painstaking measures to ensure that private keys were destroyed before anyone could have access to them, there is a theoretical possibility that a hacker could have gained access to the keys. It is also theoretically possible that the creators of Zcash conspired to keep the private keys to gain access to users’ information and to steal the users’ private keys. However, there is little (if any) evidence to support this.
Zcash as an Investment
Zcash has a highly volatile price history. When it was first publicly released on October 28 of 2016, it went off with a bang; the coin quickly rose over $4,000, but crashed to below $500 just as soon. The coin had a couple of spikes to follow, but ultimately fell into a slump between ~$40-$250. Currently, Zcash is worth about $230.
Zcash is innovative, but some in the crypto community are wary of its capabilities because the zk-SNARKS method is still relatively untested. Questions about the security surrounding its creation also have some users skeptical of its reliability.
The price Zcash has been steadily increasing over the last several months, and it does have some well-known investors–among them, Pantera Capital and Roger Ver.
While Zcash does seem to be successful so far as a platform for transacting anonymously, it isn’t the only big kid on the block. Monero, another highly anonymous coin, has been making enormous gains over the last several months.
The future Zcash is unknown. It could continue to gain in value and in popularity, but if users find another coin to be more adept at achieving similar goals, it could possibly lose all of the gains that it has made in recent months.