Zcash

Zcash is a privacy-focused cryptocurrency which features an encrypted ledger using zero-knowledge proofs.

Launched in October 2016, Zcash was developed by cryptographers at Johns Hopkins University and MIT and derived its code from Bitcoin. Zcash was one of the first large-scale implementations of zero-knowledge proofs outside of academia.

Design

Zcash is modeled on Bitcoin, sharing its 21 million coin supply cap and proof-of-work consensus mechanism. Unlike Bitcoin, where all transaction details are publicly visible on the blockchain, Zcash offers an optional privacy layer using a cryptographic technique called zk-SNARKs (zero-knowledge succinct non-interactive arguments of knowledge). This method allows transactions to be quickly verified as valid without revealing the sender, recipient, or amount transferred.

Zcash supports two types of addresses: transparent addresses, which function similarly to Bitcoin addresses with publicly visible transactions, and shielded addresses, which use zero-knowledge proofs to encrypt transaction data. Users can transact between the two types, allowing funds to move between the transparent and shielded pools. This optional privacy model is intended to preserve fungibility, ensuring that all units of the currency are treated equally regardless of their transaction history. Users also have the option to share private viewing keys, allowing designated third parties to see their transaction details for auditing purposes.

Adoption

As of December 2017, around 4% of Zcash coins were in the shielded pool, and at that time most cryptocurrency wallet programs did not support shielded addresses. A 2018 study found that the anonymity set of the shielded pool could be reduced through heuristics-based analysis of usage patterns. Both analyses predated subsequent protocol upgrades to the shielded transaction system. In his 2022 book on cryptocurrency tracing, journalist Andy Greenberg described Zcash's shielded transactions as "provably inaccessible" to surveillance and said he had not seen evidence that its anonymity could be compromised.

History

In 2010, Bitcoin's pseudonymous creator Satoshi Nakamoto discussed the potential of zero-knowledge proofs to improve Bitcoin, but noted the difficulty of applying them.

Development work on Zcash began in 2013 by Johns Hopkins University professor Matthew Green and his graduate students Ian Miers and Christina Garman, who developed the Zerocoin protocol. They subsequently joined forces with a team of cryptographers including Alessandro Chiesa and Madars Virza from MIT, and Eli Ben-Sasson from the Technion and Eran Tromer from Tel Aviv University, who had developed a more efficient variant called zk-SNARKs. The development was completed by the for-profit Zcash Company, led by Zooko Wilcox, a Colorado based computer security specialist. The Zcash Company raised over $3 million from investors including Naval Ravikant.

Zcash was first mined in late October 2016. The initial demand was high; within a week, ZEC was trading at over $5,000. To generate revenue, 10% of all coins mined for the first four years were automatically distributed to the Zcash Company and the Zcash Foundation.

In late 2017, Grayscale Investments, a subsidiary of Digital Currency Group, launched a Zcash Investment Trust, making it one of only three cryptocurrencies for which the firm offered a dedicated fund alongside Bitcoin and Ethereum Classic.

In 2018, MIT Technology Review named Zcash co-founder Alessandro Chiesa, an assistant professor at the University of California, Berkeley, to its Innovators Under 35 list for his work on the zero-knowledge proof technology underlying the cryptocurrency.

The instantiation of the Zcash network required the creation of a master private key. To ensure privacy, this private key must later be destroyed, otherwise counterfeit Zcash coins could be generated. To maximize the chance that no one person could obtain the private key, software was written which allowed individuals from six different locations to collaboratively generate the private key, use it to instantiate Zcash, and then destroy the computers used in the process afterwards. In 2019, Electric Coin Company researcher Sean Bowe discovered Halo, a technique for generating zero-knowledge proofs without requiring a trusted setup ceremony. This eliminated the need for the elaborate multi-party ceremonies used at launch. In 2022, Edward Snowden revealed that he had participated in the creation of Zcash under the pseudonym "John Dobbertin." Other participants in the ceremony included Peter Todd, a Bitcoin core developer, and Peter Van Valkenburgh, director of research at Coin Center.

In 2017, JPMorgan Chase integrated Zcash's zero-knowledge proof technology into its enterprise blockchain platform Quorum to enable confidential transactions for business clients. Fortune reported that Zcash's fundamental technology would be added to the Ethereum network. In May 2018, the New York State Department of Financial Services approved Zcash for trading on Gemini, the first such approval for a privacy-focused cryptocurrency in the United States.

In 2018, the Freedom of the Press Foundation began accepting Zcash donations alongside other cryptocurrencies. The Human Rights Foundation and the Electronic Frontier Foundation have also accepted Zcash donations.

In May 2018, Bloomberg and Galaxy Digital launched the Bloomberg Galaxy Crypto Index, which included Zcash as one of approximately ten tracked cryptocurrencies.

On February 21, 2019, the "Zcash Company" announced a rebranding as the Electric Coin Company (ECC).

In 2018, Bloomberg reported that Zcash was not known to have a significant criminal following despite its privacy features. A 2020 research report by the RAND Corporation found that less than 0.2% of the cryptocurrency addresses mentioned on the dark web were Zcash or Dash addresses, concluding that there was "little evidence" that privacy coins were preferred by criminals despite their anonymity features. A 2023 analysis of cryptocurrency and crime similarly found that Zcash held less appeal to criminals than other privacy coins, noting that it "featured very rarely on the dark web" compared to Monero.

In 2020, the Electric Coin Company transitioned to nonprofit ownership, becoming a wholly owned subsidiary of the Bootstrap Project, a 501(c)(3) organization.

In September 2023, a mining pool named ViaBTC had seized control of over half the hashing power on Zcash. This 51% dominance raised worries about a 51% attack, where they could potentially manipulate transactions and harm the network. In response, Coinbase placed Zcash markets into "limit-only" mode in an effort to prevent significant price swings.

See also

• Legality of bitcoin by country
• Zerocoin protocol
• SNARK