The Zcash network (ZEC), which was launched in 2016, aims to offer more privacy for transactions than Bitcoin does. With the help of a cryptographic technology called zk-SNARKS, Zcash provides users with the option to shield information about the sender, receiver and balance of a transaction.
Zcash’s native token is referred to as lowercase zcash. The total possible supply of zcash is 21 million coins. Like with Bitcoin, the amount of zcash minted each block will decrease over time.
Similar to the way Bitcoin operates, “miners” are responsible for securing the network. With each block of transactions that they successfully “mine,” the winning miner receives a reward in zcash, and 20% of those rewards traditionally goes to the founders. At first, Zcash split that “founders’ reward” so that 15% went to the founders and 5% to the Electric Coin Co., which founded Zcash and continues to fuel development of the cryptographic project.
The founders’ reward has always been controversial. At the behest of Zcash’s community, Zcash changed the allotment of the founders’ reward with its Canopy hard fork upgrade
in November 2020. The upgrade changed the 20% founders reward so that 8% goes to new “major grants funds” that fund projects that advance the usability and privacy of Zcash, 7% goes to Electric Coin Co., and 5% goes to the nonprofit Zcash Foundation.
ZEC hit an all-time high of $1,624.58 the day after it was launched in October 2016, according to data market provider CoinMarketCap
. But by the following month, ZEC’s price plunged to as low as $54.02. ZEC’s price surged again to $800 in January 2018 at the peak of the crypto-wide bull run. Since then, the highest price ZEC has seen is $318.92 in 2020.
How Zcash works
One problem for Bitcoin is that transactions on the network aren’t private. In fact, they are more public than fiat currency. Any curious person can use block explorer websites like Mempool.space
to view any transaction that was ever sent on the network.
The founders of Zcash decided to launch a new coin solving the privacy issue by obscuring personal and transaction data through zero-knowledge proofs called zk-SNARKS. Zero-knowledge proofs make it possible for one party to prove to someone else that they know the value of something without revealing any additional information.
Users must choose between two types of transactions when using Zcash – transparent transactions that make data publicly visible on the blockchain or private transactions called “shielded” transactions that don’t reveal data.
So far, most zcash users don’t use shielded transactions. Still, the number of users shielding the zcash in shielded pools has been trending upward
Like Bitcoin, Zcash uses the algorithm proof-of-work
to secure the network, ensuring no one can mint new zcash tokens. Still, Zcash uses a version that requires that its miners use more random-access memory, or RAM, a computer’s memory.
Key events and management
Because the privacy scheme was too complex to add to Bitcoin, others decided to launch a new coin employing the technology. Computer scientist and cypherpunk Zooko Wilcox-O’Hearn started it by way of the Electric Coin Co.
In order to use zk-SNARKS to create zcash, the developers needed to execute a “trusted setup,” sometimes referred to as a “ceremony.” Because 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. Because improved zk-SNARKS technology allowed more developers to be involved, the initiative lowered the chance of the trusted setup failing. In 2021, Zcash announced plans
to remove the trusted setup completely for future upgrades.
The Zcash team has been working to make shielded transactions easier to use, because the transactions now guzzle up more computational power than regular, non-private transactions. As such, they executed
the Sapling hard fork
upgrade in 2018 to improve performance and privacy of the cryptocurrency’s shielded transactions.