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ZCash: What it is?

Posted on Sep 9, 2023
ZCash: What it is?

Established in 2016, Zcash (ZEC) emerged as a derivative of Bitcoin, presenting itself as a privacy-centric alternative. Zcash is committed to ensuring the privacy of its users, safeguarding both their identity and financial transactions. Its vision is to be an inclusive digital currency, accessible to all, irrespective of societal rank or background.

Curious about Zcash (ZEC) but feeling lost? Fear not. This guide will equip you with all the essentials about the project, setting you on the path to the simplest trading experience out there.

What is ZCash (ZEC)?

Zcash, known under the ticker ZEC, surfaced in 2016 as a result of concerted efforts by a consortium of scientists, including the influential Zooko Wilcox-O’Hearn. Inspired by Bitcoin's success, this group aimed to craft a cryptocurrency that retained similarities to Bitcoin, but also offered heightened features focused on user privacy. Originally conceptualized as Zerocoin, it soon transitioned to Zerocash before finally being recognized as Zcash. Building on the foundational codebase of Bitcoin, Zcash is decentralized and open-source, but it stands out for its privacy and security provisions that safeguard users' financial records.

The true charm of Zcash lies in its customizable transaction transparency. Users can opt for either shielded (private) or transparent (public) transaction details, a feature that grants flexibility not found in other cryptocurrencies, including its chief competitor in the privacy coin realm, Monero (XMR). While it's undeniable that Zcash has faced criticism for potentially facilitating undisclosed transactions, the driving mission behind it is noble: ensuring user privacy for genuine, non-malicious purposes. For those considering Zcash, it's worth noting that while it offers enhanced privacy, it might not be the ultimate choice for those aiming for complete anonymity. Dive into an in-depth guide on Zcash to grasp a comprehensive understanding of this cryptocurrency.

How Does Zcash (ZEC) work?

Zcash, a privacy-centric cryptocurrency, stands out in the world of blockchain due to its unique commitment to user confidentiality. Stemming from a hard fork of the Bitcoin blockchain, Zcash has its roots in the Zerocash protocol, emphasizing user privacy above all else.

At the heart of Zcash's privacy feature lies the technology of Zero-Knowledge Proofs or ZKPs. This remarkable technology lets two parties validate a piece of information without revealing any associated data. Zcash went a step further by introducing ZK-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge toolkit), which ensures complete encryption of transactions on the blockchain while still verifying their legitimacy through network consensus.

To facilitate privacy, Zcash employs two types of wallet addresses: z-addresses (private) and t-addresses (transparent). Depending on the addresses used by the sender and recipient, four distinct transaction types exist:

  • Private Transactions: Both parties utilize z-addresses, keeping the transaction details and amounts concealed.
  • Deshielding Transactions: The sender employs a z-address while the recipient uses a t-address, revealing the recipient's details and transaction amount.
  • Shielding Transactions: The sender uses a t-address and the recipient a z-address, with only the sender's details and transaction amount made public.
  • Public Transactions: Both parties opt for t-addresses, making all transaction details transparent.

While the essence of the transaction remains on the blockchain, with z-addresses, the details, including the amount, are encrypted using the zero-knowledge proofs. However, users have the flexibility to disclose their z-address and associated transactions to trusted entities, catering to any compliance or auditing needs.

Furthermore, Zcash employs a proof-of-work mining algorithm. Miners are tasked with solving intricate equations to validate transaction blocks. The first to crack the code gets the privilege of adding a block and in return, receives a mining reward. This mechanism ensures not only the growth of the Zcash network but also its ongoing security and transparency.

  • Affordable Transaction Costs

A significant advantage of ZCash lies in its commitment to keeping transaction fees minimal. At a default rate of 0.0001 ZEC, it offers a cost-efficient cryptocurrency option.

  • Secure Message Integration

ZCash stands out with its feature of encrypted memos. Within its shielded transactions, there's a memo field that permits users to embed messages or notes securely. Such memos can be utilized for communication, instructions, or meeting specific compliance standards.

  • Support for Multiple Signatures

ZCash, along with its wallet functionality, also boasts support for transactions with multiple signatures. The only catch with ZCash's multi-sig transactions is the privacy constraint. However, there's ongoing work to make multi-sig transactions compatible with shielded addresses, aiming for more versatility.

  • Provision for Transparency Controls

Delving into ZCash's capabilities reveals the inclusion of viewing keys. Holders of shielded addresses can, if they wish, unveil transaction specifics for regulatory or audit needs. They can disclose particulars about received transactions and associated memos. Plans are in place to roll out comprehensive viewing keys that can display all transactional details related to an address.

  • Seamless Regulatory Adherence

One of ZCash's strong suits is its adaptability for various applications, largely due to its provision for payment transparency. While the question, "What are the applications of ZCash?" is addressed in every cryptocurrency discussion, ZCash specifically facilitates users to show transaction data to external entities for audit or compliance purposes.

  • Streamlined Transaction Management

Another feather in ZCash's cap is its ability to manage transactions efficiently by supporting transaction expiration. By discarding unnecessary or unminded transactions, it bolsters the overall efficiency of its protocol. If a transaction isn't mined within a 50-minute timeframe, it's annulled, and the user gets refunded the transaction fees.

While ZCash's feature set is rich, it's pivotal to understand its lineage tracing back to Bitcoin. The inevitable comparison, "Is ZCash superior to Bitcoin?", often centers around privacy aspects. It's crucial to recognize that ZCash originated as a Bitcoin fork and hence shares various traits with Bitcoin. A notable similarity is their capped supply, with both set at a maximum of 21 million units.

Upgrades to ZCash over the Years

A comprehensive examination of ZCash should underscore the strategic network enhancements it has rolled out over time. ZCash's notable evolutions encompass developments such as the Halo and Halo 2 ZKPs, the ZCash wallet, and network upgrades like Heartwood, Canopy, and NU5. Each of these enhancements not only advanced ZCash's capabilities but also boosted institutional backing. Here's a brief on the pivotal upgrades that have steered the trajectory of ZCash cryptocurrency.

  • Halo and Halo 2

In 2019, ZCash unveiled Halo, a pioneering approach to ZK-SNARKs, addressing dual challenges: trusted setups and scalability. ZCash's original blueprint hinged on a trusted setup which manufactures a confidential numeral, a byproduct of the figure integrated into the ZCash protocol. It's essential to recognize that this numeral is crafted in fragments, with various entities playing a part in its creation.

This means that for every hard fork, a trusted setup becomes indispensable. Yet, the security of ZCash could be jeopardized if all participants don't eliminate the cryptographic residue or if the confidential number becomes public knowledge. Such lapses can potentially allow unsanctioned ZCash token production. Halo elegantly tackled these pitfalls, sidestepping the need for both a trusted setup and the ensuing cryptographic debris.

By facilitating the compression of any data quantum, Halo substantially refined ZKP operations. ZCash followed up with Halo 2 in 2020, rolling out an enhanced ZK-SNARK framework, contrasted against the ‘Sonic’, to authenticate transactions. With Halo 2 in play, ZCash inches closer to completely phasing out the reliance on a trusted setup.

What Gives Zcash (ZEC) Value?

ZCash, like Bitcoin (BTC), employs a Proof of Work (PoW) mining algorithm, allowing miners to generate ZEC with every authenticated block. Both cryptocurrencies are decentralized, emphasizing the core value that decentralization brings to the digital currency realm. However, ZCash stands out as a more refined embodiment of digital cash, primarily due to its superior privacy features.

A shared trait between BTC and ZEC is their capped total supply, set firmly at 21 million. This finite nature ensures scarcity and potential deflationary characteristics. When it comes to introducing new ZEC into circulation, the mechanism mirrors Bitcoin's mining reward halving system, albeit at different intervals. In the nascent stages of ZCash, the mining reward distribution was structured such that miners claimed 80% of the reward, leaving the residual 20% for the Electric Coin Company, ZCash Foundation, and other pivotal contributors.

Diving deeper into ZEC's supply specifics, as of now, there are 10,922,059 ZEC in circulation, moving towards the total cap of 21,000,000 ZEC. This upper limit is unchangeable. Miners who facilitate and oversee the network's functionality earn ZEC tokens as rewards. Differing from many cryptocurrencies, ZCash opted not to initiate an ICO. Instead, the project's founders chose to allocate a portion of mining rewards for themselves, ensuring that, over its lifespan, they will receive a cumulative 10% (or 2.1 Million ZEC) of the entire ZEC production.

How to Mine ZCash

Zcash, unlike some other cryptocurrencies, does not employ a staking mechanism. Instead, it leverages a proof-of-work (PoW) consensus algorithm, akin to what Bitcoin utilizes. Within this PoW system, miners are pitted against each other in a competitive race to solve cryptographic puzzles. The one who deciphers the puzzle first gets the privilege of forging a new block and, in turn, earns the block reward.

Mining Zcash demands considerable computational power due to the rising network difficulty. While Zcash is compatible with a variety of operating systems, including Docker, Debian/Ubuntu, Mac, and other Linux versions, mining through personal computers has become less viable. The primary reason is the intensified complexity of solving the cryptographic puzzles, rendering standard PC mining inefficient in terms of time and cost.

To optimize the mining process, Zcash uses the Equihash algorithm. This particular algorithm is best tackled with application-specific integrated circuit (ASIC) miners, which are custom-designed hardware devices for mining activities. As a result, individual miners, especially those not equipped with a substantial number of ASIC devices, often pool their resources together in mining pools. This collaboration allows them to have a more consistent and regular inflow of rewards.

In essence, for anyone considering mining Zcash, it's advisable to employ an ASIC miner and potentially join a mining pool to maximize returns. Given the high network difficulty and competitive nature of PoW mining, these methods ensure the best chance of success and profitability.

How To Choose a Zcash (ZEC) Wallet

Your choice of a Zcash (ZEC) wallet largely hinges on your intended use and the amount you're planning to store.

For those prioritizing security, hardware wallets, also known as cold wallets, are often recommended. These offline storage devices, such as Ledger and Trezor, ensure enhanced security. They might require a steeper learning curve and come with a higher price tag. Thus, they are typically recommended for experienced users storing substantial ZEC amounts.

Software wallets present a more accessible option. These are available as free apps for both smartphones and desktops. You can opt for custodial wallets, where the service provider manages and backs up your private keys. Alternatively, there are non-custodial wallets, where private keys are stored securely on your device. Although convenient, software wallets don't offer the same level of security as hardware wallets, making them more suitable for beginners or for storing smaller ZEC quantities.

Web wallets, accessible via a browser on various devices, are other available options. These hot wallets might not offer the robust security of their hardware or software counterparts. If you opt for a web wallet, it's crucial to choose a trusted platform known for its security practices. They are ideal for those who trade frequently or hold minimal ZEC amounts.

Plisio provides a seamless storage solution, allowing effortless Zcash (ZEC) storage and trading. Opting for Plisio means benefiting from top-tier security combined with an intuitive interface. With Plisio, transactions involving ZEC or its exchange with other cryptocurrencies are quick and straightforward.

How Is Zcash (ZEC) Secured?

Zcash employs a proof-of-work consensus model to validate its network. It remains committed to this mechanism and has no plans to transition to any other form of consensus. Miners play a crucial role in fortifying the Zcash network by solving intricate computational challenges to validate new blocks.

For the network to function smoothly, every participant (miner or node) must agree on the sequence of the created blocks. Once this unanimity is achieved, the recorded information's state gets confirmed, allowing the network to progress to the succeeding block. This method of consensus acts as a safeguard against potential threats, as it mandates malicious entities to dominate a significant portion of the network to execute any harmful activities.

Proof-of-work's primary aim is to enhance the blockchain. Miners are motivated to persistently contribute to the Zcash blockchain due to the incentives provided. Initiating an independent chain doesn't attract many miners, as users generally gravitate towards the longest or recognized "official" chain.

The Zcash a Privacy Coin Pioneer in Crypto

Since its initial network debut in 2016, Zcash has made significant strides, consistently granting blockchain enthusiasts the power to dictate the transparency of their transaction details through its privacy-centric features. The zk-SNARK cryptographic technique has become a benchmark for ensuring privacy in blockchain-driven applications on a global scale. There's a growing demand from individual users and corporate clientele for the blend of privacy, adaptability, and efficiency the Zcash framework delivers. The journey from its conceptualization in 2014 has been transformative for Zcash. The establishment of a developmental fund and the Zcash halving event in 2020 indicate a promising path ahead, solidifying Zcash's position as a cornerstone in the blockchain sector.

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Any questions?

To buy Zcash (ZEC): Choose a reputable cryptocurrency exchange that lists ZEC. Create an account and verify your identity if required. Deposit funds (e.g., USD, EUR, BTC) into your account. Search for ZEC and place a buy order. Once purchased, store your ZEC in a secure wallet. Always ensure to do your own research before making any investment.

You can buy Zcash (ZEC) on various cryptocurrency exchanges. Some popular exchanges include Binance, Coinbase, Kraken, and Bitfinex. It's essential to choose a reputable exchange and consider using a secure wallet for long-term storage. Always check the exchange's fees, security features, and geographic restrictions before making a purchase.

To mine Zcash (ZEC): Obtain suitable hardware. Zcash uses the Equihash algorithm, which is best mined using ASIC miners. Choose a mining software compatible with Zcash and your hardware. Join a Zcash mining pool, as solo mining is often not feasible due to high network difficulty. Configure and launch your mining software, entering details of your chosen mining pool. Monitor your mining progress and regularly transfer your earned ZEC to a secure wallet.

To sell Zcash (ZEC): Choose a reputable cryptocurrency exchange that supports Zcash trading. Create an account on the exchange and complete any required verification steps. Deposit your ZEC into the exchange wallet provided. Place a sell order, specifying the amount of ZEC and the desired price. Once the order is executed, convert ZEC to your desired fiat currency or another cryptocurrency. Withdraw your funds to your bank account or a secure wallet.

Zcash mining is the process of verifying transactions and securing the Zcash network by solving complex cryptographic puzzles using computational power. Miners compete to find a new block, which is added to the blockchain. When a miner successfully mines a block, they receive a Zcash block reward as an incentive. Zcash utilizes a proof-of-work (PoW) algorithm called Equihash, and miners often use specialized hardware, like ASIC miners, for efficient mining.

Zcash uses the "Equihash" algorithm, a memory-hard proof-of-work algorithm designed to be ASIC-resistant and to promote decentralized mining by individuals using personal computers or GPUs.