It should come as no surprise that cryptocurrencies that provide users with anonymity continue to be popular despite efforts from regulators and exchanges to restrict their accessibility in a world where our personal information, interests, and activities are being tracked and documented more and more.
When a group of academics decided they wanted to develop a cryptocurrency comparable to Bitcoin but had some extra features, ZCash was born in 2016. Zcash is a peer-to-peer electronic cash system that works like Bitcoin but has some unique features. By splitting the Bitcoin blockchain, the founders increased user security and anonymity, and Zcash was born.
How does ZCash Work?
The “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge” is a type of zero-knowledge proof that Zcash uses. A bit of a mouthful, yes. Thankfully, the crypto community routinely shorts it as zk-SNARKS.
Without inspecting private or confidential information, zk-SNARKS verifies that the requirements for a legitimate transaction are met. The zk proofs let a user demonstrate that they have the necessary funds and authorization without having to physically present them.
The sender has two options for completing transactions in Zcash. They have the option of a conventional transparent transaction or a protected private transaction. This contrasts with other privacy coins like Monero, where transactions can be initiated in just one way.
zk-SNARKS shields transactions with the sender, recipient, and amount encrypted. This feature marks a significant departure from other cryptocurrencies, emphasizing transaction openness more than protecting user data.
Advantages and Disadvantages of ZCash
Advantages of ZCash
ZCash currently has enhanced, optional privacy features not present in Bitcoin or any other cryptocurrencies at the moment. It utilizes zero-knowledge proofs, a top-tier, cutting-edge form of cryptographic privacy technology (ZKPs). ZCash also has a strong, respectable group of advisors, including Vitalik Buterin, Nathan Wilcox, and Zooko Wilcox.
Disadvantages of ZCash
- Compared to other projects, high inflation devalues the asset and discourages long-term investors.
- ZEC is not the only cryptocurrency that can use the zK-SNARK privacy mechanism; other cryptocurrencies can, too (like Ethereum).
- Users can choose privacy as a necessity via mixing services on Bitcoin or privacy-focused Ethereum solutions like zk.money and Aztec, or they can choose privacy by default from Monero (XMR).
The Zcash Blockchain Privacy
Starting with the Bitcoin source code, ZEC included privacy-enhancing capabilities that allow users to control the level of secrecy in each transaction (shielded addresses).
Other cryptocurrencies that strongly emphasize privacy, such as Monero, have improved privacy features. Still, they fall short of Zcash’s zk-SNARKs’ guarantee of anonymity and its bulletproof implementation.
Users of Zcash can transmit “shielded transactions,” which take longer to process than regular transactions since proof for the zk-SNARK must be built. Equihash, an impressive hashing algorithm used by ZCash, is incompatible with equipment and software for Bitcoin mining. Its larger blocks and longer hashing durations raise the network’s hash rate.
What is Zcash Mining?
Mining is used to validate transactions and create new blocks on the ZCash network. Miners or validators win new ZCash tokens as rewards. If your computer has a graphics card that can mine, you can employ an application-specific integrated circuit (ASIC) miner. ZCash is compatible with Mac, Debian/Ubuntu, Docker, and other Linux distributions. However, ZCash advises using an ASIC miner and mining pool because PC mining is no longer profitable due to the network difficulty, which has risen significantly.
Because ZCash mining uses a proof-of-work process, miners must race to solve the hash to create a new block. The block reward is given to the first miner who discovers the answer and opens a new block.
How is Zcash Produced?
The Zcash network employs miners, like most cryptocurrencies, to add transactions to the blockchain. The miners do the heavy job of securing the network, while all nodes in the Zcash network contribute to confirming the accuracy of transactions.
To protect the network, Zcash mining employs a proof-of-work technique. With proof-of-work, miners compete with one another for computing power to add a new block to the chain. The network standard block reward and any fees for any transactions added to that block go to the first miner who completes the correct computation for each block.
Zcash Coin Distribution
Similar to Bitcoin, Zcash mining has a fixed quantity of 21 million Zcash( ZEC). A new block is added to the Zcash network every 75 seconds, and the block reward is 3.125 ZEC. Until all 21 million ZEC are in circulation, the block reward will be lowered by half every four years on average.
Zcash was never meant to be a part of a large project or to use ICOs to raise money. It is therefore supported by a closed group of investors who made a $1 million investment to ensure its development course. 10% of the entire supply was distributed as the “Founder’s award” to each investment over four years.
The shortcomings of the first-generation blockchain, in this case, Bitcoin, are addressed with Zcash. It guarantees security and privacy. Additionally, it doesn’t take away the privacy right of the users. You always have the option to conduct a transparent transaction as a user or go completely anonymous.
Wilcox-O’Hearn, the founder of Zcash, said that Zcash mining should switch to a more environmentally friendly “proof-of-stake” method from the energy-intensive “proof-of-work” mechanism. Nodes on the network that support “proof-of-stake” can post holdings as collateral that could be forfeited if they behave dishonorably. ZCash has undergone several upgrades, but there’s still time before the transition happens.
Proof-of-stake can significantly lessen the carbon footprint of the cryptocurrency industry because it is lighter, faster, and more secure at a lower cost. Transparent addresses may make it simpler to figure out information for shielded wallets if too many individuals use them. The most distinctive aspect of Zcash is also one of its privacy-conscious users’ potential hazards.
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