Blockchains have been heralded as the next big thing in the realm of cutting-edge technologies, just as the personal computer and world wide web revolutionized how people approached computing and the sharing of information. But despite coming from a new age, there is no doubt that there are some inherent flaws with blockchains that have yet to be solved. Two of these, as we'll learn more about in our ZCash review, are the curious cases around fungibility and privacy.
Although, ZCash's arrival might mean the end of those lingering questions. Built as a decentralized, privacy-first blockchain to facilitate practically anonymous cryptocurrency transfers, ZCash is among the first of the chains dedicated to removing the traceability factor of public blockchains. Instead, it promises to bring maximal user privacy wherever they may send their monies to, and a whole lot more as a side effect. If you're excited, then read along our ZCash review to know more.
What Is ZCash?
Founded in 2013 as ZeroCoin, ZCash was initially an experimental privacy extension to the Bitcoin blockchain but later spinning off through a hard fork into its own blockchain. This is since Bitcoin's developers considered it impractical to implement ZCash and their ‘zero-knowledge proofs,' or zk-SNARKs cryptography, into the Bitcoin blockchain. However, ZCash does share a lot of Bitcoin's underlying code but then adds their privacy layers and unique novel solutions on top of that.
ZCash is arguable a more suitable form of a day-to-day currency compared to Bitcoin, as it has a speedy block timing of just 1.25 minutes compared to Bitcoin's 10. Overall, ZCash's main goal is two solve two key issues of Bitcoin and other UTXO-based ledgers or public blockchains, which are the problems surrounding their potential lack of or questionable fungibility, as well as the apparent absence of any privacy features, seeing how every single transaction can be traced.
What Does ZCash Want to Solve?
As highlighted earlier in our ZCash review, their blockchain wants to solve two significant issues within most blockchains today. Firstly, it would be a matter of fungibility.
By definition, ‘fungibility' means that a particular asset is interchangeable with one another based on its value. For instance, one pound of gold bars is worth the same as a pound of gold coins. Using this example, it means that gold is inherently fungible, as they are equally worth the same thing.
This is even if they're of a different shape or state as most cryptocurrencies are fungible. For example, one whole Bitcoin is worth the same as a series of fractional Bitcoins making up a complete unit. However, there have been questions about this since Bitcoin is traceable. This means that a person asking for 1 Bitcoin could deny 0.25 Bitcoin in the transaction, as they suspect that it has been used in criminal activity, for instance. Therefore, the argument lies in that Bitcoin is not always fungible.
Speaking of, the second issue would be privacy. Contrary to popular belief, most blockchains are not completely anonymous. In fact, they're pseudo-anonymous at best, where all your transactions are still being recorded on a publicly accessible ledger. This complete transparency does come at the cost of privacy, however, as anyone could see your address and the amount you've transferred. They could thus be able to trace this, even if they don't precisely know that it's actually you.
What Are ZCash's Unique Features?
So far in our ZCash review then, we can directly corollate privacy with fungibility. You can't guarantee 100% fungibility if other blockchain users are able to trace your transactions through the use of individual addresses. If they see that you've made transactions to someone they don't like, for example, they could deny you a fraction of the cryptocurrencies that you're sending to them. Thus, your crypto transfer isn't always worth exactly what it says, as its value could be rejected at will.
In that case, how does ZCash fix this? At its core, ZCash's Proof-of-Work (PoW) consensus natively embeds privacy-enhancing zk-SNARKs (zero-knowledge succinct non-interactive arguments of knowledge). Thereby, the network can be able to validate transactions without revealing any personal information. In short, a user can prove their possession of specific data, such as their secret keys, without revealing that information and without interaction between the prover and verifier.
Primarily, users will be able to see this in action as they send cryptocurrencies to another user. There are two types of addresses on the ZCash blockchain that could be chosen from; ‘z-addresses' and ‘t-addresses.' These two addresses are interoperable, meaning that users can transfer funds between a z-address to a t-address. The main difference here, as we'll explain a bit for our ZCash review, is their anonymity within the ZCash blockchain network;
Z-addresses are completely private and anonymous addresses. Therefore, a Z-to-Z transaction will still appear on the chain, as ZCash's blockchain is publicly accessible. This is to make sure that users are aware that a transfer has happened and that the fees for that transaction are paid for. However, the two z-addresses, including other data such as the transaction amount and memo, are completely encrypted. Thus, no one would be able to see who sends how much to whomever.
Meanwhile, t-addresses work similarly to other blockchains. A T-to-T transaction will make it publicly known on the ZCash blockchain of who the sender and receiver are (through addresses), as well as how much was sent and all other accompanying information. Users are also given a lot of choices of which address they could pick when making a transaction. Even with a fully encrypted z-address transaction, the owner of that address could voluntarily disclose all transaction data if they want to.
What Else Does ZCash Offer?
As we've learned in our ZCash review, this versatility makes ZCash incredibly powerful by offering maximal privacy as a choice that users can opt-out of. This is especially helpful for users, for example, who would like to disclose their private z-addresses and all their transaction details for audits, or perhaps to comply with regulations. But other than that, ZCash offers a lot more features and functionality, as we're going to take a closer look at in our ZCash review.
1. Low Fee Transactions
ZCash expects you to use its ZEC cryptocurrencies as you would with any other regular currency, like using it for payments or to share money with your friends or family. To make this more accessible, ZCash's blockchain supports fast transactions that cost a very low fee of just 0.0001 ZEC tokens. This makes ZCash very cheap to use, and businesses that choose to integrate ZCash as an acceptable means for payment needn't have to pay any fees (read: fee-less), as well.
2. Encrypted Memos
Just like a bank transfer, you can attach memos to a transaction, such as a short note or a set of instructions. ZCash combines this with their focus on privacy and makes it so that you could encrypt them. For example, the Z-to-Z address transaction that we noted earlier in our ZCash review could pass along messages through those memos without anyone else on the ZCash blockchain being able to see them. Alternatively, users could choose to decrypt and disclose those memos.
3. Viewing Private Keys and Payment Disclosure
We've learned thus far that users that opt in to send tokens through those private, anonymous, and ‘shielded' z-addresses can have their keys encrypted. However, ZCash allows users the option to disclose that along with any other transaction details if they need to comply with regulations or for auditory purposes. Currently, you (as the sender) can't disclose the receiver's z-address with this feature, but in the future, ZCash will allow all transaction data to be viewed in full as an option.
4. Transaction Expiration
Another unique feature embedded onto the ZCash blockchain there is a transaction expiration functionality that is designed to reduce the impact of a non-mined transaction. This way, a transaction could expire and not be processed if it hasn't been mined after a set number of blocks without affecting the funds themselves. Currently, the limit set on the ZCash network is a transaction expiration after 50 minutes or 20 blocks.
5. Multi-Signature Transactions
ZCash natively supports multi-signature (or multi-sig) transactions, whereby multiple signatures are needed before it can be validated. For example, a transaction might require two or three other users to agree to sign it off before it can be verified by the network. Although, multi-sig abilities are currently restricted to public t-addresses. That said, ZCash will keep working in the future to extend this feature for the private z-addresses, as well.
What Are ZCash's ZEC Cryptocurrency Tokens?
The native cryptocurrency of the ZCash ecosystem is the ZEC token. For the most part, ZEC is a utility token that is used to sustain incentives on the blockchain, such as being rewarded to miners or being used to pay for transaction fees. Other than that, ZCash has designed ZEC to be functional alternatives to other forms of currency, like the US Dollar. You could then use ZEC tokens for payments, where ZCash's ZEC has been integrated a variety of all-in-one crypto PoS systems.
That said, ZCash's ZEC tokens are not as volatile as some other cryptocurrencies. As of this ZCash review, the price of a single ZEC token is worth around $214.07, which is 96.40% down from its all-time highs and 1,030.47% up from its all-time lows. With a circulating supply of 11,618,169 ZEC tokens, this gives ZCash's native cryptocurrencies a market capitalization value of $2,487,122,368, hence making ZCash the 48th-most valuable token on the market.
As for its tokenomics, ZCash works rather similarly to the Bitcoin code that lies underneath. There is a fixed supply cap of 21,000,000 ZEC – just like Bitcoin's BTC – and therefore inherits the latter's deflationary economics. ZCash also has a halving of block rewards every 4 or so years. At the time of writing this ZCash review, the halving, which took place in November 2020, has halved the block rewards from 6.25 ZEC per block to just 3.125 ZEC.
What Are ZCash's Future Roadmap Updates?
ZCash has had a number of network upgrades in the past. The most recent was the Canopy update in November 2020 (coinciding with the halving), which was the fifth major update on the blockchain. With this update, a new development fund will be set up, whereby miners will receive 80% of all block rewards, while the remaining 20% will be distributed as follows; 8% to the ZCash Open Major Grants (ZOMG), 7% to the Electric Coin Co., and 5% to the ZCash Foundation.
The next big update that we've found while writing this ZCash review was the NU5 upgrade. The main features of this proposed update include enhancing user privacy even further with an upgraded Halo 2 zero-knowledge proving system, enabling cross-chain interoperability and compatibility with other blockchains, as well as preparing for future scalability by integrating layer 2 scaling solutions, among many more.
ZCash Review – Conclusion
In completing our ZCash review, it left us impressed with how focused they are at embodying the spirit of protecting user privacy at all costs while bringing fungible value to cryptocurrencies, as well as a host of additional features. As a regular currency, since it was originally designed that way, ZCash's blockchain could happily transact any amount of ZEC tokens not just quickly but also with negligible fees. In short, it works rather well as you'd expect any currency to be.
However, its blockchain is not as powerful or as versatile as others. For example, it doesn't have any capabilities to support smart contracts, dApps, and you can't build anything on top of its blockchain that could be used for anything other than payments, such as DeFi or NFTs. However, when it maintains a steely-eyed determination to provide the best privacy for anyone using its blockchain, our ZCash review does show that you can certainly be anonymous on a blockchain… If you want to.
- Ease of Use
- Project Values
- Tokenomics Model
- Long Term Sustainability
- Users are able to remain anonymous for transactions, or they could transact funds publicly, as an option.
- Strong privacy features thanks to the native integration of zero-knowledge cryptography like zk-SNARKs.
- Users have the choice of disclosing their private and encrypted data for regulatory compliance or audits if needed.
- Transactions through the blockchain are quick and cost little to nothing in fees.
- Blockchain is only made for payments, with no support for smart contracts, dApps, etc.