Investing in ZCash is very tempting for a lot of people, and for a lot of reasons. Cryptocurrencies have been rising in value over the past few years. Many of these digital currencies have found a decent niche and have developed a well-defined market capitalization. The problem is that most digital currencies cannot offer very high levels of fungibility and privacy.
The first digital currency to rise is bitcoin, but it has failed to provide the privacy that it promised beforehand. Interested parties can examine bitcoin’s blockchain to see the purchase history of the person or entity in question.
Privacy and Cryptocurrencies
Because of the need for anonymity regarding digital currencies, two others have risen, which is Dash and Monero. They used innovative technology to help their clients retain their anonymity when using their digital currencies.
ZCash, on the other hand, offers privacy even greater than Dash and Monero. This is one of its selling value that makes investing in ZCash profitable. Other cryptocurrencies rely on private keys to identify a user. Once these keys are attached to certain transactions, some institutions may use this as a reason to refuse the money of that particular user.
ZCash utilizes zk-SNARKs, a zero-knowledge proof construction. This allows anonymity between two users who are engaged in a transaction. Thus, investing in ZCash provides anonymous deals, unlike most others. Contrary to bitcoin blockchain, this does not contain the identity of the person who has been engaged in a transaction nor the amount involved. It only records that the transaction took place.
Developer Zooko Wilcox has founded Zerocoin Electric Coin Company and ZCash. They use a protocol called Zerocoin which turns bitcoin into zerocoins. This is to provide higher anonymity for the user regarding their purchases, something that Bitcoin fails to offer.
ZCash is the improved version of Zerocoin after the company collaborated with MIT cryptographers, as well as from Tel Aviv University and the Technion of Israel. ZCash offers even greater privacy than Zerocoin can provide.
This allows greater fungibility or the ease in which one asset is used to purchase another asset. When vendors can view someone’s purchase history, they can easily reject the payment of that person based on their transaction record. This way, one person’s money is not as good as another’s. ZCash aimed to address this problem.
Risks for ZCash
ZCash also has their security concerns. According to developer Peter Todd, ZCash is still experimental and weak compared to traditional cryptocurrencies. The creation of the SNARK public parameters, which was done by six people who each got a separate part of the parameter called a shard, can be replicated.
That is if they are somehow able to get the data contained on the destroyed shards, or from the computers used to create it, which has been damaged as well.
ZCash, or ZEC, is still relatively new to the market. There are many drawbacks like the inability to distinguish real ZCash coins from counterfeit ones as was feared by Peter Todd. There is also the high price fluctuations, but that is expected in new cryptocurrencies.
ZCash uses mostly the same mining model as bitcoin, but it awards 10% of the value mined to the founders. This is cut in half every year, and in four years, the miner will enjoy 100% of their rewards. ZCash had also used a slow start mechanism that allowed it to test for problems in the protocol. This is to ensure that no problems will arise, whether it’s errors in the algorithm or counterfeits.
The value of ZCash will depend on supply and demand. Investing in ZCash is something that many may find opportunity in especially in the future.