Zcash is a peer-to-peer protocol that enables payment transactions where all information remains private. Users can enjoy all the benefits of the blockchain while shielding their financial data from other users in the network. Transparency, which is part of blockchain technology, becomes a choice for the user. You can choose between no less than four different transaction methods, depending on your own privacy preferences.
What is Zcash (ZEC)?
Blockchain technology brings many advantages such as security and transparency. Transactions are made in a peer-to-peer network where these transactions are validated by means of a consensus algorithm. Blockchain uses an open source character in which transparency is central. Each digital wallet has a unique address consisting of numbers and numbers. Despite the fact that no name or physical identity is directly linked to this, the concept of privacy is questioned here.
Zcash combines the privacy of cash with the technology of crypto and in this way guarantees financial privacy. The protocol keeps your financial information safe, so it can’t be viewed, shared, or in the worst case scenario, misused.
Zcash, like Bitcoin , aims to become an alternative means of payment. Despite the power and potential of Bitcoin, according to Zcash’s team, it lacked only one essential element: privacy. That is why Zcash also originated in 2016 as a fork of Bitcoin where it has taken over properties. There is also only a total stock of 21 million tokens. Similar to Bitcoin, the rewards for mining are halved every year to regulate the stock.
When we pay with cash, nobody knows how much money we actually have or where this money comes from. However, with the development of the blockchain, this is different. Due to its transparent nature, everyone has access to your financial data. This sounds crazy, but when someone has your wallet address, the information is there for the taking.
Various blockchain explorers are used to view the status of your transaction. This way you can see whether it is being processed or has already been approved. This creates trust because both sender and receiver are kept informed of the transaction. But what many do not know is that anyone can see your financial status based on your own address.
For example, you can enter a Bitcoin address via sources such as blockchain.com , where you can immediately consult all information. For example, in the example below we see the address of one person who has no less than 28,800 Bitcoins in his / her possession. Not only do you see sensitive financial information here, you can also see from which address this person has sent and/or received Bitcoins. Despite the fact that your identity with name and surname is not up for grabs, you can see how wealthy you are based on your address.
How does Zcash work?
Now if you want to send Bitcoin or satoshis, all the information is collected. Think of your public address, but also transaction details and the like. These are bundled into one block, which must then be validated by the network. So everything is public and transparent, but what about your privacy?
Users can opt for Shielded Zcash which ensures that their transactions remain confidential, while users can choose what information they share. In addition to privacy, this also provides great freedom of choice.
Zero Knowledge Proof
Zero Knowledge of encrypting all confidential information is the core business of Zcash. This Zero Knowledge Proof is a cryptographic way where miners can validate transactions without knowing any information of these transactions. This method implies that a statement is true without revealing the details of that statement.
These are thus encrypted on the blockchain, but can still be verified by the network based on consensus. It refers to a specific construction of evidence whereby one can prove the possession of certain information, which is necessary. This is possible, without actually disclosing this information, or without interacting with others.
Example: Marie and Henk make an encrypted transaction on the network using Zcash. The miners in this network must verify this transaction. Both Marie and Henk use a test key to protect the transaction information. Let’s take the random number ’17’ as an example, a code that both parties know. How is this transaction validated?
The miners don’t know the content, so they send Marie a code. For example, this is the number 22. Then Marie adds this number to her proof key, the number 17. The sum of this numerical code is then 39. She forwards this number to Henk. But together they had agreed 17 as a key, so Henk subtracts this number from the code he received, which brings him to a total of 22. He sends this number to the miner and serves as a kind of password.
This way the miner can see that both people share a key and both have authorized the transaction. This without him knowing the contents of the transaction. In practice, of course, these are complicated cryptographic proofs.
This Zero Knowledge Proof has 3 distinguishing features:
- Completeness: This indicates that a transaction has been verified and that permission has been granted to process this transaction.
- Soundness: It checks whether a transaction is correct and not part of an erroneous or fraudulent transaction.
- Zero Knowledge: The person verifying the transaction should not have any information about the contents of this transaction.
zk-SNARKs stands for ‘ Zero-Knowledge Succinct Non-Interactive Argument of Knowledge ‘ by which they refer to the anonymity of transactions. This is an extension of the Zero Proof Knowledge we discussed above. No form of interactivity is required between sender and receiver. This is realized by complex mathematical formula. This allows users to demonstrate that this information exists, but also that they are aware of its content. These zk-SNARKs can be verified very quickly and thus require no interaction.
How does zk-SNARK work?
A zk-SNARK uses 3 different algorithms that need each other to validate transactions: G, P, and V:
- The G algorithm generates available keys that are public. It uses a secret parameter called lambda for this. It generates two publicly available keys: one proof key (pk, proofkey) and one verification key (vk, verification key). Both keys are public to all parties involved
- The P algorithm is the prover that will use 3 different items as input. The proof key (pk), a random entry x (which is also publicly available) and finally a private statement (w) that they want to prove knowledge of without revealing what it actually is. The proof (prf, proof) is seen as the following mathematical formula: prf = P(pk, x, w)
- The V algorithm is a variable that has only two choices. It responds to this formula as “true” or “false”. He takes the verification key (v), the public input (x) and the proof (prf): V(vk, x, prf).
Due to this composition of algorithms, these transactions are approved or rejected by miners, without knowing the content of these transactions and without interaction between both parties.
The Zcash protocol is only possible through the implementation of Lambda. Therefore, it is essential that this parameter remains secret. If someone knew about it, this person could generate false evidence and bring the whole system down. He can make fake transactions or even make fake requests.
Types of Transactions
Zcash offers users the chance to encrypt their transactions, but this is not a requirement. So they have the freedom to choose whether or not to do this. There are 2 different types of Zcash addresses possible:
- Z-addresses: these are private
- T-addresses: these are transparent and therefore public.
This makes 4 different types of transactions possible. Users can also opt for a fully public transaction via Zcash, where the entire network can consult the data. On the other hand, they can also opt for partial protection, or a completely private transaction.
A Z to Z transaction is visible on the blockchain and is therefore public. You can therefore verify that this transaction took place and that the associated fees have been paid. However, the address, transaction costs and other information are all encrypted and therefore not public. When we consult this information on a blockchain explorer, we will receive a message that this information is protected by a ‘shield’.
With deshielding you can consult the transaction, but the data of the sender is protected. This while the public address of the recipient is visible. It is remarkable that information about the content of the transaction is also visible here. The user therefore has several options for making a transaction.
Despite being an advanced technique to ensure privacy on the blockchain, some experts criticize this method. It is essential that Lamba parameter remains secret. But it can also be said that if it is made public, the entire protocol is no longer legitimate. If this is public, transactions can be made out of thin air which can lead to manipulation.
Why Zcash (SEC)?
Privacy is central to the Zcash protocol (SEC). This concerns all users of the network. Individual users benefit from keeping this information private, but larger companies can also protect their financial transactions on the blockchain in this way. Think of competitors who no longer have access to your financial status. In this way, companies can invest further in their own company, without watching from possible competitors.
Zcash is working hard to upgrade their network called Canopy. This coincides with the first Zcash halving. In addition, Canopy will also establish a new development fund for the next four years, until the next halving. In doing so, they are developing an improved mechanism to support the financing flows. In addition, they also want to reduce complexity and are working on new security standards so that different addresses cannot be linked to each other to guarantee privacy even better.
In October 2016, Zcash was launched by Electric Coin Co, an ambitious team of independent scientists and cryptographers. Founder of the protocol is Zooko Wilcox who has more than 20 years of experience in open and decentralized systems. He is supported by the Zcash Foundation. This is a non-profit organization whose task is to maintain and continuously improve the protocol. In this way, all interests of the users are represented in the network. This foundation was established in 2017.
What is the price of the Zcash token?
If you want to invest in the Zcash token, a good place to start is to know its price. If you are already going to trade, you also want to make a profit. You can make a technical analysis to see what the best buy or sell moment is.
The Zcash token was withdrawn from CMC on June 11, 2016 at a price of $575. Within half a year, this token has already reached its preliminary ATH on October 16, 2016 with a price of $5973.83. After that, the price dropped again quite quickly and between September 2021 and October 2021 the price was low with mainly red numbers. At the time of writing, early October 2021, the price is $172.60.
At CoinMarketCap , it is just within the top 100 in place 62. I think this coin has a good prospect, especially if Bitcoin continues to rise in 2021. I think it could experience a good price development. If you want to invest in this coin, it is important to do your own research.
Where can you buy the Zcash token?
The Zcash token is not yet for sale on exchanges such as Bitvavo at this time . Most leading CEXs also offer this coin, such as Binance or Gate.io. There are also many liquidity pools on DEXs like Uniswap where you can find a Zcash pair. If you live in the Netherlands or Belgium, Litebit is a very handy option.
The emergence of blockchain technology brought a series of benefits. In addition to making transactions scalable, transparency is an important part. However, this transparency in the network is accompanied by a privacy issue. To date, no identity data has been linked to a unique wallet address, but if you know which address someone uses, the financial data is there for the taking.
This transparency is more often used to study whales’ actions in order to anticipate the market. It can therefore have beneficial effects to make predictions on the market, but this is accompanied by limited or even no privacy. This way you can immediately check, based on the unique address, which digital assets this person has and what’s more: what is the current balance of his or her wallet?
In a digital age where we enjoy privacy less and less, this concept is becoming an increasingly important aspect in the further development of cryptocurrency and dApps. Via Zcash you can guarantee this privacy by using shielded transactions where you do not receive any information about the content of the transaction. As a result, you do not know which assets have been sent, how much the value of this transaction is or who did it in the first place. The only point of criticism is of course the Lambda parameter which must be kept secret at all times. If this is hacked, Zcash’s protocol will run into problems. Fortunately, the team is optimizing and improving this parameter to continue to guarantee privacy to its users.
Thanh Lanh Tran(1989) is Chief Editor from BitcoinUSD.com