What is Zcash?
A groundbreaking cryptographic algorithm may make it the most cryptocurrency ever
Everytime you send Bitcoin, information is recorded on the blockchain about your address, the address you sent to, and how much bitcoin was sent. And while no one knows who owns those addresses, anyone can see how every bitcoin flows through the network, step-by-step. That’s why Bitcoin is anonymous (no one knows who is moving money), but not private (because everyone can see the money moving).
In October 2016, Zcash was launched with the goal of making a making a cryptocurrency that was both anonymous and private. It achieves this through a new type of cryptographic algorithm called zk-SNARKs.
What are zk-SNARKs?
zk-SNARK is short for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge” and are a type of cryptography that allows a person to prove that they have certain information without revealing what that information is. In the case of Zcash, it allows the sender of a transaction to prove that they have a secret key which will let them spend Zcash, without revealing that secret key to the world.
In the Bitcoin network, every time you send bitcoin you have to reference one or more previous transactions that were sent to your address to prove that you own the bitcoin you want to send. You also have to include the address of the person you’re sending the bitcoin too and secure everything using your private key.
When a person sends Zcash using what’s called a “shielded” transaction, they construct a proof which shows that they are the valid recipients of one or more previous transactions and that the output values is equal to the input values from those transactions. Unlike Bitcoin, in Zcash the transactions the sender is referencing, and who they’re sending it to, is completely opaque to the outside world. The transaction is not just anonymous, but private as well.
zk-SNARKs are relatively new, which has led to some skepticism. Peter Todd, one of the Bitcoin core developers, had this to say:
zk-SNARKs are a very sophisticated mathematical technique, but you’ve got to remember how novel this math is. It would not surprise me and many other cryptographers if, in the future, that math got broken, making the entire system no longer secure.
However, Vitalik Buterin, co-founder of Ethereum, is a fan and plans to bring zk-SNARKs to Ethereum in the future.
“Personally, I think zk-SNARKs are a hugely important, absolutely game-changing technology. They are the single most under-hyped thing in cryptography right now.”
The Zcash codebase was forked from Bitcoin, but Zcash has two types of addresses – t-addresses, which work just like a Bitcoin address in that every transaction is transparent, and Z-addresses, which use (z)k-SNARKs to make the transaction private. While most transactions are still sent in a transparent manner, the amount of private transactions has grown to 20% as of December 2017.
Generating a private transaction takes slightly longer than a transparent transaction, which may be why the majority of transactions are still sent in a transparent manner. If you’re sending Zcash from an exchange, expect it to be sent transparently.
Like Bitcoin, Zcash works on a blockchain that is secured by miners. In turn, miners who successfully generate a new block (roughly every 2.5 minutes) are rewarded with new Zcash. Currently, every new block generates 12.5 Zcash.
Baked into Zcash is something called the “Founder’s Reward”, which means that 20% of the new Zcash created from mining goes directly to the founders of the currency. At the current rate of block reward and the price of Zcash, that means the founders stand to receive over $300 million each year.
In terms of privacy, Zcash’s only rivals are Monero, which isn’t as technically advanced but doesn’t suffer from some of the ill-will that Zcash’s Founder’s Reward has caused, and Zcoin, which isn’t quite as private. Additionally, since transactions in Zcash are not private by default, it leaves open the possibility that someone could analyze the blockchain to undo its anonymous nature.
How to Buy Zcash
Unfortunately, Zcash isn’t as easy to purchase as Bitcoin. You can’t buy Zcash with a credit card, so you’ll have to use one of the cryptocurrency exchanges to buy Zcash using Bitcoin.
Buy Bitcoin at Coinbase
To start, if you haven’t already, head over to Coinbase and sign up. Coinbase will let you use a credit card to buy bitcoin, which is what you’ll be using to purchase Zcash.
Sell Bitcoin for Zcash at Binance
After you’ve purchased Bitcoin, you’ll need to sign up for a cryptocurrency exchange – we recommend Binance. It’s fairly easy to use, has good uptime, and is responsive to customer issues. After you’ve signed up, you’ll send the Bitcoin from Coinbase to Binance. Head to the Binance deposit page, find BTC in the list and click on the Deposit button to get your deposit address. Put that address into the field on Coinbase that lets you send Bitcoin.
After your deposit arrives on Binance, you’ll be able to head to the Binance Zcash/BTC market where you can Buy ZEC (the Zcash currency symbol) using the Bitcoin you deposited.