What is Zcash?
The Zcash network is a code fork of the Bitcoin protocol that uses two types of addresses — transparent addresses and shielded addresses. Transparent addresses (or t-addresses) work similarly to Bitcoin addresses, as they are publicly visible on the Zcash blockchain. Shielded addresses (or z-addresses), on the other hand, are encrypted, making the contents of a transaction private even on a public blockchain.
The Zcash network’s digital asset token, ZEC, is a cryptocurrency that uses the advanced applied cryptography of shielded addresses to provide enhanced privacy and optional anonymity for its users. This superior level of anonymity is achieved through the use of zk-SNARKs, a specific type of zero-knowledge proof.
Zcash supports fast block times (75 seconds), low fees (default 0.0001 ZEC), and large block sizes (2 MB). It utilises a proof of work (PoW) hashing algorithm called Equihash.
A brief history of Zcash
Zcash was initially launched in 2013 as ‘Zerocoin’. It was first offered as an experimental privacy addition to Bitcoin utilising sophisticated mathematical methods termed ‘zero-knowledge proofs’.
Due to the Zerocoin protocol’s uniqueness and computational complexity, however, Bitcoin core engineers found it difficult to incorporate into the Bitcoin protocol. Subsequently, with significant enhancements to its protocol that resulted in much more efficient zero-knowledge proofs, Zerocoin’s founding scientists from Johns Hopkins, in partnership with MIT and Tel Aviv University, produced a new protocol named ‘Zerocash’ (Zcash).
Upon appointing its CEO, Zooko Wilcox, to manage the project in 2016, the Zcash protocol started development under the Zcash Company. That same year, it launched its native token ZEC and the Zcash blockchain, securing US$3 million from a collection of angel and venture investors in two consecutive rounds.
In 2017, as a distinct corporation, the Zcash Foundation was founded as a 501(c)3 charity with the aim to build privacy infrastructure and an Internet payment system for the benefit of the public. In 2019, the Zcash Company rebranded to the Electric Coin Company.
How Zcash works
Zcash employs Equihash, a PoW mining algorithm based on the notion of the generalised birthday problem, sometimes called the birthday paradox, which says that it’s more likely than you’d expect that two people in a group have the same birthday.
Zcash’s monetary base is the same as Bitcoin’s — a fixed supply of 21 million ZEC. Every 75 seconds, a new block is mined to the Zcash blockchain and a block reward of 3.125 ZEC is introduced into circulation. The amount of the block reward cuts in half about every four years until all 21 million ZEC are in circulation. The first halving happened in 2020, four years after the launch of Zcash. As of May 2022, the block reward is set at 1.5626 ZEC, and this will halve once more sometime in 2024.
Transactions on Zcash may be ‘transparent’, similar to Bitcoin transactions regulated by a t-address, or they can be ‘shielded’ (controlled by a z-address). A shielded transaction employs zk-SNARKs, a sort of zero-knowledge proof that offers anonymity to the transaction’s coin holders. ZECs are either in a transparent pool or a shielded pool.
What is Zcash used for?
The primary issue that Zcash seeks to address in the market is a lack of privacy. People mistakenly imagined that their crypto transactions were secret in the industry’s early days. In actuality, the opposite was true. However, it took years for blockchain forensic businesses to gain traction and shed light on it. Zcash allows users to conduct anonymous transactions using the network’s unique systems.
People may use Zcash to transact efficiently and safely while paying modest fees. Shielded Zcash ensures transaction confidentiality while allowing people to selectively share addresses and transaction information for auditing or regulatory compliance.
Zcash brings certain beneficial advantages to the industry. Users may make purchases, investments, and contributions confidently since the network ensures visible and private transactions.
