Zcash

Zcash is a cryptocurrency utilizing zero-knowledge proof cryptography to protect the privacy of transactions. Zcash publishes all the payments on a public blockchain but the identity of the sender and the recipient, as well as the amount of transaction, remain private. Zcash is an implementation of the "zerocash" protocol, which is initially based on Bitcoin's design, but offers a higher standard of privacy through zero-knowledge proofing schemes.

Zcash was founded by Zooko Wilcox and grew out of the Zerocoin project. The founding scientists of Zcash are Alessandro Chiesa, Christina Garman, Eli Ben-Sasson, Eran Tromer, Ian Miers, Madars Vizra, and Methew Green. The team hired Zooko Wilcox as a founder and CEO of Zcash company. The cryptocurrency was officially launched on October, 2016. In 2017, the Zcash Foundation, which was a 501(c)3 nonprofit entity launched to further advance Zcash and its principles in the cryptocurrency community. In 2019, the Zcash Company rebranded itself as the Electric Coin Company and relinquished control of the Zcash trademark to the Zcash Foundation.

The Electric Coin Co. and Zcash Foundation developed the Zcash Developer Alliance (ZDA) which is intended to help promote the Zcash ecosystem and to support similar initiatives, such as economic freedom and Zcash interoperability across the cryptocurrency ecosystem. Participating ZDA organizations in 2020 included Agoric, Bolt Labs, ConsenSys, iqlusion, Kyber Network, Thesis, and Electric Coin Co.

The original Zcash token was forked from the original Bitcoin codebase. This was based on the initial founder's belief in security flaws in the way transactions were tracked through Bitcoin's blockchain. To ensure that Zcash tokens are secure and can still be verified without revealing information to others on the network, they use zk-SNARKs. The zk-SNARK enables a fully shielded transaction in which the sender, recipient, and amount are encrypted, allowing Zcash transactions to be anonymous and transparent. This is done through encryption, rather than elimination, of transaction information, which makes tracking transactions impossible, but ensures user security and anonymity.

ZEC is the native token of the Zcash network. The token can be used on many exchanges, and is used for anonymous transactions. ZEC tokens can be used by both T-addresses and Z-addresses on the Zcash network. The token can be mined using the Equihash proof-of-work algorithm. Zcash can also be purchased on exchanges, and Zcash offers a list of supported exchanges which can preserve users anonymity, including Gemini, Sideshift.ai, and Flyp.me. The ZEC coin offers fast transaction with low fees. And for encrypted transactions, the coin offers a memo field in which the sender can include relevant information to the receiver.

Zcash also offers a series of preferred wallets for their cryptocurrency. These wallets are intended to continue to provide users with the anonymity and privacy that is associated with ZEC. The only wallets officially endorsed by Electric Coin Co. and Zcash Foundation are the Zcashd and Zebrad full node wallets for advanced users; otherwise there are wallets which offer privacy.

Zcash, like many coins, relies on miners which verify the transactions and help to secure the network. To do this, Zcash uses a proof-of-work mining algorithm, in which miners compete against each other using processing power to complete the proper computation and be awarded the next network block and any fees from that transaction. Given the network difficulty, miners are required to use an ASIC to mine Zcash. The mathematical problems miners have to solve are defined by the Equihash hashing algorithm.

ASIC stands for Application-Specific Integrated Circuit and describes a type of processor designed for a single purpose. The ASIC processors tend to be a popular choice for mining cryptocurrencies because they offer higher efficiency than CPU or GPU miners. More ASICs have been deployed to work on Equihash problems, which previously were being mined solely by GPUs as Equihash can be ASIC resistant. But as more ASICs have been deployed and achieved greater network growth, and the ASIC can be used with the Zcash network to mine Zcash with lesser costs to power and to help miners generate better risk-adjusted returns.

Equihash has been offered as a solution to solve the problem of SHA-256 blockchains being fully exploited by users of ASICs, which can lead to groups of miners using ASICs to conspire and negatively affect a network. With Equihash, Zcash can maintain the sovereignty of the network and maintain the privacy in the network.

Further, Zcash offers optional anonymity. To do this, the Zcash offers two types of addresses: transparent addresses, or T-addresses; and private addresses, or Z-addresses. Transactions between T-addresses are viewable on the Zcash blockchain, and Z-address transactions are shielded and therefore not visible. T-addresses and Z-addresses are interoperable, with funds capable of being transferred between the two. The Z-addresses are those which use zk-SNARK's cryptography protocol.

Through these address types, Zcash offers four types of transactions: private transactions (Z-address to Z-address); deshielding transactions (Z-address to T-address); shielding transactions (T-address to Z-address); and public transactions (T-address to T-address). Private transactions are made possible through the use of zk-SNARKs.

The technology behind Zcash protocol is called zk-SNARK— an acronym for Zero-Knowledge Succinct Non-interactive ARgument of Knowledge. zk-SNARK is a new form of “zero-knowledge cryptography” that makes all the transactions in Zcash, fully encrypted on the blockchain and to ensure that the confidentiality of transaction metadata is fully preserved. The zk-SNARK protocol allows one party to prove to another that a statement is true, without revealing information beyond the validity of the statement itself.

In May 2022, Zcash upgraded from previous zk-SNARK zero-knowledge protocols to Halo 2 zk-SNARK that has solved two issues in Zcash: removing the trusted setup while also offering the performance targets and scalable architecture for private digital payments. Halo on Zcash is developed to enable circuit upgrades for trusted setups, and make the protocol more capable of supporting future improvements, such as supporting additional assets, and making it easier for other projects to benefit from Zcash features.

Visualization of how zk-SNARKs work in the network.

Three organizations receive issuance from the Zcash development fund, which totals 20 percent of the mining rewards, while the other 80 percent of Zcash issuance is distributed to miners. The Electric Coin Co. and the Zcash Foundation work together on the development of Zcash and both parties are required to agree on any network upgrade. Zcash governance also depends on community input, in which a "clear consensus" is determined through a community advisory panel which includes a group of volunteers with extensive interest or knowledge of the Zcash ecosystem.