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What is Zcash (ZEC)? A fork of Bitcoin with improved privacy

Cryptocurrency NewsAug 07, 2018 05:41AM ET
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What is Zcash (ZEC)? A fork of Bitcoin with improved privacy

What problem does Zcash solve?

Zcash (ZEC) was launched at the end of October 2016. It is developed by Zerocoin Electric Coin Company, a.k.a. Zcash Company, founded by Zooko Wilcox-O'Hearn, who is also the CEO of the project.

Zcash is based on Bitcoin (BTC) and its primarily differentiator from BTC is that users have the option to encrypt the details of their transactions. This means that the sender address, recipient address and the amount sent can be obscured from public view on the blockchain.

Why this is so important?

Because Zcash solves the biggest disadvantage of Bitcoin– that BTC leaks information about your actions.

Many people still believe that using Bitcoin is private because their names or home address are not attached to the Bitcoin wallet. Just like in the early days of the Internet many people didn’t know that their identities may be discovered through their ip address.

Of course, Bitcoin is not completely private.

Imagine that every payment in the world today is made with Bitcoin, despite the current technical impossibility of the protocol. Let’s assume that your salary is paid in BTC, when you go to the grocery store you pay with BTC, when you shop online you pay with BTC, etc.

In order your boss to transfer your monthly paycheck in Bitcoin he should know your public address. The problem is that by knowing it he can trace every transaction from that address. If everyone in the world is accepting Bitcoin your boss will be able easily to find out that you go to zumba twice a week, you eat junk food every evening and visit a striptease club on Saturdays.

On the other hand, you and all of your colleagues will be able to see your employer’s financial balance at any time because you will also know his public address.

As you see, the transparency of the blockchain will turn into a huge problem for many people and this example represents the most basic reason why Bitcoin will never be the only payment method in the world.

Technology:

Zcash is built upon and extends the Bitcoin protocol and that’s why it uses Proof-of-work (PoW) as a consensus mechanism. However, its core difference with BTC is the technology that Zcash is using to hide users’ identities and balances. This is the zero-knowledge proof construction called zk-SNARK.

A zero-knowledge proof is a cryptographic method by which one party can prove to another that she knows a value X without revealing any information apart from the fact that she knows the value X. I know it sounds tricky, but I will try to illustrate it simpler.

Let’s say that Bob wants to take a shared ride from New York to Boston and he is looking for a driver through a Facebook (NASDAQ:FB) group. He finds Alice who is willing to give him a ride. However, Bob would like to be sure ...


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What is Zcash (ZEC)? A fork of Bitcoin with improved privacy
 

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