ZEC Uses zk-SNARK to Improve the Privacy of Bitcoin Transactions

• 1 Launched in 2016, the Zcash (ZEC) network aims to provide better transaction privacy compared to Bitcoin.
• 2 Zcash provides users with the ability to hide information about the sender, recipient, and transaction balance using zk-SNARKS.
• 3 The native token of Zcash is ZEC.

Zcash (ZEC) is a decentralized cryptocurrency focused on privacy and anonymity. It uses zk-SNARK zero-knowledge proof technology that allows nodes on the network to verify transactions without revealing any sensitive information about these transactions.

Cypherpunk founded Zcash on October 28, 2016. Zooko Wilcox O’Hearn is the founder and computer security expert. He is also the founder of Electronic Coin Company (ECC), which created Zcash.

He has more than 25 years of experience in cryptography and data security and has worked on projects, such as the defunct electronic cash company Digicash, peer-to-peer data storage software Mojo Nation, and Tahoe. It is the minimum required data storage information.

He also founded Least Authority Enterprises, a technology company focused on improving digital security and preserving the fundamental right to privacy. Additionally, he co-invented the BLAKE3 cryptographic hash function.

It’s a misunderstanding that the majority of the cryptocurrencies on the market are not anonymous but rather pseudonymous. It means that they do not explicitly reveal the identities of their users. Each user has a public address or addresses, which can be traced back to them via the methods of data science and blockchain forensics.

Uniqueness of Zcash

The main advantage of Zcash is its optimal anonymity. It allows for a level of privacy unattainable with regular, pseudonymous cryptocurrencies like Bitcoin or Ethereum.

ZEC token transactions are sent in two ways: transparent and shielded. Transparent transactions work in about the same way as in Bitcoin, whose codebase Zcash was originally based on. They are sent between public addresses and are recorded on an immutable public ledger.

All essential information about these transactions is available online for anyone to see. This information includes sending and receiving addresses and the amount sent.

These public transactions do not reveal user identities in an apparent manner. An outside observer can access the only identifiers on the blockchain, which are public addresses.

A method of blockchain analysis has been developed where an interested party can reliably connect a public address on a blockchain to the real-world identity of its owner, essentially making private transactions impossible.

It allows Zcash to offer its users the right to privacy while still utilizing the advantages of a decentralized, permissionless digital currency.

Working Mechanism of Zcash

Zcash operates on a public blockchain, but it distinguishes itself from other cryptocurrencies through its optional anonymity feature.

Zcash transactions are sent in two ways: transparent and shielded. Transparent transactions are similar to Bitcoin transactions, with all essential information about the transaction available online for all users to see.

zk-SNARKs technology to enable completely anonymous transactions over a public blockchain. Shielded ZEC transactions leverage the technology of zero-knowledge succinct non-interactive arguments of knowledge (zk-SNARKs).

In fact, every change that occurs is recorded on the list. However, information such as sending and receiving addresses and shipping costs are not disclosed to the public.

Potential use cases for Zcash

Zcash aims to offer its users the right to privacy while still utilizing the benefits of a decentralized, permissionless digital currency. It is a useful tool for individuals and businesses who need to protect their personal information for various reasons. For instance, users can use it for money transfers, online purchases, or other transactions that they want to keep private. Moreover, Zcash is a versatile and customizable tool with the ability to view transaction data for analysis or management purposes.

ZEC Token

Zcash’s native token is referred to as Zcash and abbreviated as ZEC. Similar to Bitcoin, the amount of ZEC minted per block will decrease over time. Miners are responsible for securing the network.

With each block of transactions that they successfully mine, the winning miner receives a reward in the form of certain native tokens. 20% of those rewards traditionally go to the founders.

Initially, Zcash split the founders’ reward so that 15% went to the founders and the remaining 5% to the Electric Coin Co.

In this regard, the founders’ reward has always been controversial. For the benefit of the community, Zcash changed the allotment of the founders’ reward with its Canopy hard fork upgrade in November 2020.

The upgrade changed the reward distribution of 20% for founders in such a way that 8% goes to new major grant funds that fund projects to improve the usability and privacy of Zcash, 7% goes to Electric Coin Co., and the remaining 5% goes to the nonprofit Zcash Foundation.

Tokenomics

Its tokens are initially distributed among mining rewards, grants, Electric Coin Co., and the Zcash Foundation. The distribution percentage is mentioned in the following diagram.

Price Statistics

The market cap of ZEC is $457,644,864, with a fully diluted valuation of $663,841,266. It has a circulating supply of 14,477,168 ZEC. Its total supply is 21,000,000. Its maximum supply is also capped at 21,000,000.

Conclusion

In 2013, researchers from Johns Hopkins University, Ian Miers, Christina Garman, and Matthew D. Green, wrote the paper “Zercoin: Anonymous Distributed E-Cash from Bitcoin,” describing a way to Bitcoin using zk-Snarks.

The privacy scheme was too complex to add to Bitcoin, so others decided to launch a new coin employing the technology. It was launched by the company Electric Coin Co.

To use zk-SNARKS to create Zcash, the developers are required to execute a trusted setup, sometimes referred to as a ceremony. The ceremony requires that developers never intentionally or unintentionally leak secret data during the setup process. It was subject to some criticism.

Zcash launched a second trusted setup in 2017 to improve the process. Improved zk-SNARKS technology allowed more developers to be involved. This initiative lowered the chances of the trusted setup failing.

In 2021, Zcash announced plans to remove the trusted setup completely for future upgrades.

It then made attempts to make shielded transactions easier to use. Transactions now imbibe more computational power than regular, non-private transactions.

They executed the Sapling hard fork upgrade in 2018 to improve the performance and privacy of the cryptocurrency’s shielded transactions.