So you have surely heard about Zcash https://z.cash and would like to learn more?
In this beginners guide to Zcash, lets explore this cryptocurrency that promises privacy.
Zcash is a relatively new cryptocurrency. It was launched on 28 October 2016. That was the day that the genesis block was announced. It is a form of currency comprising of a decentralized blockchain which offers anonymity for the users and transactions. However, its key differentiator is the principle that privacy is the only way to ensure fungibility.
What is Zcash
The successful debut of Bitcoin back in 2009 has inspired many other alternative cryptocurrencies (altcoins). While not all have managed to cement their status in the financial world, several have found success.
Blockchain technologies, such as Bitcoin and Ethereum, are essentially distributed databases (or ledgers, if you prefer). These databases keep growing in size but are also very transparent. Knowing an address on the blockchain, means you can have the history of transactions that took place. This is not bad in its own right. This was the purpose of the blockchain. However, for larger members of the cryptocurrency community, privacy was a growing concern.
I highlighted how Monero approaches this probelm in my article on Monero. Dash is another cryptocurrency that facilitates privacy. I can discuss that some other day.
Zcash aims to guarantee an even better fungibility level by facilitating complete anonymity of its users.
The cryptocurrency was established on 28 October 2016 by Zooko Wilcox. Its underlying objective is to offer the much-needed privacy feature for internet users. Zooko along with other scientists are part of the Zerocoin Electric Coin Company (ZECC). Its role is to offer updates to the Zcash protocol. It leaves the decision to the community, where these updates are to be implemented or not. Another interesting body involved in Zcash is the Zcash Foundation. Its mandate is to guide the evolution of Zcash.
Fungibility is basically the simplicity by which one commodity can consequently be substituted to acquire another. This is essential since it guarantees that the value of each coin remains the same no matter the user. This is due to the fact that the coin is unlinked from its history. As such, compared to Bitcoin which is an exclusive open ledger, Zcash is, on the other hand, an encrypted one. This means that although every transaction is documented on the blockchain, they are only viewable by the respective users who have access.
Similar to its crypto currency predecessor Bitcoin, Zcash is set to have a coin supply of approximately 21 million. To facilitate private transactions, the cryptocurrency incorporates a special technology known as zero-knowledge proof.
Simply defined, zero-knowledge proof represents a method by which you can verify to another individual that you have completed a computation devoid of them being forced to redo it themselves. You can prove the validity of a statement without revealing any other aspect about it.
With this technology, Zcash attains the untraceable’ characteristic through establishing confidential transactions on the open Zcash blockchain. Zcash transactions automatically conceal both the identity of the senders and receivers. It also conceals the subsequent value of the transaction. This is particularly unique considering that with other blockchains, the value of currency being sent and the transfer of value from an address to the other is visible on the blockchain.
With Zcash the only information that is open to the public is that an ‘action’ took place at a given time period. All addresses from where Zcash is being sent from are characteristically pseudonymous. This is to say that without you knowing their real identities or addresses in real time, you cannot trace from where the currency is coming from or going to.
For instance, assume you have 200 wallets with each having a single Zcash coin, and that is everything available on the respective blockchain. Now assuming there are 50 individuals who have cryptographically shielded their coins by means of zero-knowledge proofs. There then will be 200 transparent coins and 50 shielded ones. Both the network and the blockchain track a number of shielded coins. These coins consequently go into one big pool but as soon as you pull out any coin out, it cannot be correlated in any way to what had earlier gone into the big pool. The zero-knowledge proof technology prevents users from pulling out more than what they had immersed into the pool initially.
zk-SNARKs stands for ‘Zero-Knowledge Succinct Non-Interactive Argument of Knowledge’. It is a new form of zero-knowledge cryptography that Zcash uses.
This is the currency code used by Zcash.
Where can you buy ZCash
A cryptocurrency exchange is a distinct marketplace where one can buy and sell crypto currencies such as Zcash. Some of the best exchanges where you can purchase Zcash include:
1. Kraken – https://www.kraken.com/
Established in 2011, this is the biggest crypto currency exchange with respect to liquidity and euro volume. It allows you to purchase and even sell Zcash and even trade between digital currencies and US Dollars, Euros, and other major currencies. It also allows you to trade other digital currencies including Bitcoin, Litecoin among others.
2. ShapeShift – https://shapeshift.io
This is foremost exchange which supports diverse crypto currencies including Zcash, Bitcoin, Dash, Monero, and others. It is ideal for any user seeking to make instant and easy trades. This site allows you to convert your cryptos with out the need to register for an account.
3. Bitfinex – https://www.bitfinex.com/
I recently came across Bitfinex. While it is stopping support for those in the USA, it is still a good option for others. If you live in other parts of the world, try Bitfinex to buy ZEC.
Some other exchanges that you can buy ZEC include:
I have written about my favourite cryptocurrency wallets earlier.
Here are some wallets that you can use to store your ZEC securely.
1. Zcashd – https://z.cash/download.html
This is the official client that is provided by the team behind Zcash. It is available for Linux, but there are versions maintained by the community for Windows and Mac. This wallet syncs the entire blockchain on your local drive.
2. Jaxx – https://jaxx.io/
A multi-token wallet, Jaxx offers the user an integrated experience across numerous devices and platforms inclusive of Mac, Linux and Windows desktops, Android and Apple mobile devices not to mention tablets and Firefox and Google Chrome extensions. This wallet facilitates crypto-to-crypto trading with a smooth in-wallet conversion. The control of keys is always with the users and the customer funds are independent and free from access by Jaxx.
3. Cryptonator – https://www.cryptonator.com/
This is a unique online wallet which enables users manage diverse crypto currencies under a single personal account. It allows easy and secure storage, retrieval and subsequent sending of crypto currencies including Zcash. Finally, it also offers its users with an automatic and instant exchange between Zcash and any other supported crypto currencies.
4. Cockpit UI Wallet – https://github.com/hellcatz/zcash-cli-cockpit
From the Cockpit site, “This wallet allows users to access their ZCash wallet remotely via a Web UI. This makes it ideal for managing multiple systems mining ZCash. A guide on how to install the ZCash Cockpit UI Wallet may be found on GitHub.”
5. Desktop GUI Wallet – https://github.com/vaklinov/zcash-swing-wallet-ui
As the name suggest, it provides a Graphical User Interface for the zcashd software. This wallet interacts with zcashd which is installed on your computer. When installed, it is packaged as one executable Java based JAR file.
6. TREZOR – https://wallet.trezor.io
This is a hardware multi-cryptocurrency wallet that supports Zcash. With TREZOR, transactions are completely safe even when initiated on a compromised or vulnerable computer. TREZOR Wallet provides a simple interface for your TREZOR device. From this Wallet, you can easily control your coins, manage your balance and initiate transfers.
What is a ‘t’ address and a ‘z’ address?
Zcash supports two types of addresses: the ‘t’ or transparent address and the ‘z’ or the zero-knowledge proof address. You can tell the difference by clearly seeing the first letter of the address. Its not very difficult to tell.
Zcash is based on the Bitcoin blockchain technology. As you know, the Bitcoin blockchain is transparent and publicly viewable. Address which start with the alphabet ‘t’ is transparent and similar to Bitcoin addresses. You can view the details of the balance and transactions that take place on this address. Address which start with the letter ‘z’ provide all the Zcash privacy features. These addresses are also known as ‘shielded addresses’.
You can decide which address to use for your ZEC. Currently, only the Zcashd official client wallet supports ‘z’ addresses.
Just like is offered by other crypto currencies, Zcash also allows interested parties to subsequently mine blocks. It uses a special algorithm that is called proof-of-work and it depends on the overall quantity of RAM the miner possesses. The proof-of-work algorithm that Zcash uses is called Equihash. This algorithm is designed to ASIC resistant.
Mining of Zcash is not as easy as it sounds. However, it can be done using any platform including home computers. Miners set their computers loose in order to decipher cryptographic puzzles and get Zcash as the reward. They are required to attempt numerous computational puzzles until at least one unlocks the asset.
One interesting bit about their method of acquiring these currencies is that theoretically, virtually anyone can set their respective platform to crack the numerous cryptographic puzzles in efforts to acquire rewards. The catch, however, is that using public blockchains to acquire rewards continually needs more power since more and more miners invest in better and enhanced hardware.
- Selecting mining hardware:Prior to kick starting your venture of acquiring crypto currencies such as Zcash, you will, of course, need to have special equipment to dedicate for mining. Mining hardware is classified into two: Graphical Processing Unit (GPU) and Central Processing Unit (CPU).As opposed to CPUs, GPUs, such as those provided by Nvidia or AMD, exhibit a significantly advanced hash rate. Therefore, they are faster in solving cryptographic puzzles. These are the most reliable options for anyone seeking to mine Zcash.Choosing the best GPU for your mining venture is a difficult task but there are several factors that determine their efficiency and usefulness. Mostly, the main underlying factors are power consumption and hash rate performance among others.
- Installing the mining software:
After settling for your preferred mining hardware, the next important and crucial step is the installation of mining software.First, you must install some mining software. You can use numerous available software such as Zcash Official Software or Gateless Gate (for CPU), Optiminer, Claymore or Genesis SGminer (for AMD GPUs) or NEHQ, EWBF Cuda or Nicehash EQM (for Nvidia GPU)Other than simply mining, the software offers an interface that deploys your individual smart contracts while also allowing the sending of transactions via the particular command line.
- Joining a Zcash mining pool:
When mining for the cryptocurrency, it is unlikely that you will effectively perform the mining individually especially if you are a first timer. Why? It requires heavy investment into powerful machinery which can be quite expensive. This is why miners come together ‘pool’ and combine their respective computational power in special ‘mining pools’ in order to boost their probability of cracking difficult cryptographic puzzles to earn ZEC. Subsequently, they share the profit among themselves in proportional amounts depending on the individual contribution of each miner.The two recommended pools are Flypool and Suprnova.The commands for example to run the Nicehash EQM miner on Supernova are:
./nheqminer -l zec.suprnova.cc:2142 -u Weblogin.Worker -p password -t 4
./nheqminer -l zec.suprnova.cc:2142 -u t1gmg4yJuwDvErGbzVERx69zt9qsa4ZpMYG -p x
Unique mining model
The supply model of Zcash is fairly similar to that used by Bitcoin, although there are several notable disparities. As is with Bitcoin, the exclusive Zcash protocol states the overall token number at an approximate 21 million. Moreover, its subsequent mining reward is then slashed by half after a period of 4 years, similar to Bitcoin.
One key difference however which sets apart Zcash mining is that 2.1 million (10%) of the units that are mined by use of the exclusive Zerocash protocol goes directly to the stakeholders of Zcash I.e. Founders, investors, employees and such- This is referred to as the ‘Founder’s Reward’.
However, this reward is not received by the stakeholders in a consequently linear fashion. At the start, the said protocol leads to a creation of approximately 50 ZEC after every 10 minutes, and 20% of this going directly to all the founders with the remainder then going directly to all miners. After every four years, the cutting incentive is then slashed by half, although after the initial four years, all the resulting incentives will go directly to the miners.
How does Zcash work
Zcash encrypts all contents of the shielded transactions. Since the payment details are encrypted, the protocol utilizes a characteristically novel cryptographic technique to ascertain their validity.
Zcash utilizes a unique proof known as zk-snark (proof of construction) that offers the network the much-needed security. This technology allows this network to maintain a completely secure balances record that conceals the parties and the amounts that are contained in any transaction.
The system utilizes zero-knowledge proof provision to effectively achieve this goal. All payments made with respect to Zcash are all published on the characteristic public blockchain, with the sender, amount, and recipient in the transactions concealed.
Zcash similar to Bitcoin allows its users to send typical public payments. Supported by both transparent and shielded addresses, the users can decide to either send Zcash publicly or privately. Zcash payments that have been sent from an address that is shielded to one that is transparent reveals the balance received, while the payments from transparent addresses to one that is shielded conceal the consequent receiving value.
What are the future prospects of Zcash
Zcash is a new addition to the virtual currency realm and has surprisingly been an overnight success since it was launched in 2016, gaining popularity by its unparalleled privacy protection. As of August 2017, ZCash (ZEC) price was $216 with a market capitalization at $428,585,460. It is among the top digital currencies on the market alongside Bitcoin, Monero, Ethereum and Dash among others.
You can check the value and price of Zcash (ZEC) in this friendly widget from CoinMarketCap (http://coinmarketcap.com)
Zcash is attracting many Russian, Venezuelan, Chinese and even South African consumers. Zcash is bound to have an acceptance into various industries in the future such as the medical industry, financial, banking and trade industry among the many industries seeking to maintain privacy in its transactions and activities.
Do let me know your thoughts in the comments section below. Also share this Beginner’s Guide to Zcash on your social network, so your friends can learn more about this coin.