Zcash is primarily a peer-to-peer digital currency. It started life in 2013 as a project known as Zerocoin. The project was designed to address Bitcoin’s lack of privacy and started life as a code fork of the Bitcoin protocol. However, by now its been upgraded to the point it’s on a completely different code base.
So let’s dive in to how it works. Zcash uses a novel cryptographic technique called Zk-Snark which basically allows transactions to be verified by miners without users having to reveal any information about themselves or their transaction.
That said, you don’t have to make all your transactions private. Sometimes it’s useful to have an audit trail, say for a payment record or for a tax transaction. Zcash offers 4 options that you, the user can control. Let’s take a look.
As you can see from the chart, you can keep your transaction completely public, just like a BTC transaction. You can shield just your recipient but not you, you can shield yourself but not your recipient or you can go completely dark and keep the whole thing private. Pretty cool.
Now switching over to coin supply – ZCash kept the same monetary-supply dynamics of Bitcoin. i.e. a block-reward halving every 4 years, resulting in a total supply cap of 21,000,000 coins that are expected to be fully mined by 2032. 10% of these will end up in a ‘Founders Reward’ fund while the rest are mined by the miners.
It’s worth noting that Zcash is very centralized mainly due to two very large mining pools. The largest called Flypool, actually has enough hash power to perform a 51% attack, should it choose to do so, although that would be quite illogical. However it is possible.
In conclusion, Zcash is has a lot of potential as a more private alternative to BTC and ETH. When institutional money gets put to work in larger quantities they may well prefer keeping their dry powder in zCash rather than in the more transparent reserve currencies like BTC or ETH. Definitely a solid project to watch.