ZCash is a cryptocurrency with a decentralized blockchain that seeks to provide anonymity for its users as well as their transactions. As a digital currency, ZCash is similar to Bitcoin.
Like Bitcoin, ZCash has open source code too, but their main difference lies in the level of privacy and comparability that each one provides.
Understanding Zcash
The success of Bitcoin has paved the way for hundreds of alternative cryptocurrencies to come to the community, including ZCash. The demand for privacy increases when cryptocurrency users understand that their transactions are easily tracked on the blockchain.
As information, ZCash was founded by Zooko Wilcox-O’Hearn in October 2016 in response to demands from Internet users for an open financial system with additional privacy features.
Bitcoin is a pioneer in the open financial system; while ZCash strives to maintain the same structure as Bitcoin but with privacy and comparability as additional features.
Equivalence refers to the ease with which one commodity can be substituted for another. Money – whether it’s gold or fiat currency like the US dollar – is worth it because you can trade it for other things.
Because equivalent instruments are susceptible to fraud and theft, gold is stored in underground vaults and fiat currency requires constant oversight by the treasury and central bank. Bitcoin’s solution to fraud and theft is to make all transactions completely transparent and one hundred percent traceable.
Unfortunately, the Bitcoin privacy outage is also a drawback that it wants to solve. Some real Bitcoin users mistakenly believe that because the wallet address is a pseudonym, the use of Bitcoin is anonymous.
However, legal action against darknet sites like Silk Road proves that all it takes is a tiny amount of information to reveal the true identity behind the Bitcoin wallet owners.
Innovation
Zcash innovated by adopting the Bitcoin open ledger (DLT) system and encrypting information about the user of the ledger. This means that even though all ZCash transactions are recorded on the blockchain, they are encrypted and can only be seen by users who have been granted access to them.
Most of the digital currencies that provide anonymity – for example, Monero – rely on private keys that are constructed with alphanumeric characters.
Crytocurrency users are also assigned a unique public address that acts as their identity (similar to Internet Protocol, or IP, the address assigned to computer network users).
A public address is required to receive funds from other users; it also means that the sender must be assigned the address of another user to facilitate the transfer.
The user’s private key gives them access to their funds and the key is attached to the specific transaction they make.
With sufficient transactions from time to time, their public address can be associated with these transactions, which makes it easier for interested parties to identify the public address holder.
Additionally, if a seller of a product can track a buyer’s previous transactions based on their public address (given to the seller by the buyer), the seller may feel more inclined to refuse payment from the buyer, particularly if their purchase history reveals differences in opinion or moral behavior.
zk-SNARK
ZCash uses a cryptographic tool called zk-SNARKs, which stands for Zero-Knowledge Proofs. This retrieval allows two users to make transactions without either party revealing their payment addresses to each other.
This tool also makes ZCash transactions untraceable on the ZCash blockchain by obscuring the payment addresses of both parties and the amount involved in each transaction.
Since the payment address recorded on the blockchain is not the address of the actual user, it is almost impossible to trace the path of any funds provided to the sender or recipient.
This makes ZCash different from Bitcoin and other blockchains in letting the public know the amount transferred from one user’s real payment address to another user’s address.
