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Coin Profile - Zcash (ZEC) and the fight for financial privacy

Zcash (ZEC) has a long and storied history, having originated in 2013 as a way to improve on Bitcoin. With an impressive, top-tier team of OG advisors, cryptographers and blockchain developers, the Zcash payment solution has evolved to become a prominent privacy coin in the crypto space.

What is Zcash (ZEC)?

Zcash is a fork of the Bitcoin blockchain, meaning it used Bitcoin core technology to create a new blockchain and cryptocurrency, $ZEC.

ZEC_Zcash_Price_HistoryZCASH Price Evolution

The vision of the Zcash creators was to improve the utility of Bitcoin by introducing a privacy shielding technology that was safe from blockchain data analyzers (i.e., Chainalysis), which use Bitcoin public addresses to triangulate behavior and identify users.

So, like Bitcoin:

With a focus on user privacy and anonymous crypto transactions, Zcash utilizes a Zero Knowledge Proof (ZK Proof) protocol called zk-SNARK. This enables network nodes to verify transactions without revealing any sensitive information, including the public blockchain addresses. Users can choose to activate the privacy technology to protect their personal data or they can select a Bitcoin-like transaction with a publically viewable (and trackable) address.

  • Zcash supports faster block times than Bitcoin, at every 75 seconds as opposed to Bitcoin’s every 10 minutes. The fees are also much lower, with the default at 0.0001 ZEC (~$0.008/ts). Currently, BTC’s average fee is at $1.08/ts.
  • Zcash is supported by hundreds of retailers around the world for fast, cheap payments with the option for privacy.
  • When using Zcash, addresses beginning with a “t” indicate Bitcoin-like transactions where the public address is, well, public. A “z” signifies that the ZK Proof privacy features are active and the transaction is shielded.

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Project status
2013 - Zerocoin privacy protocol, an early rendition of Zcash, is proposed.
2014 - Zerocash protocol is published via the IEEE Security and Privacy Conference.
2016 - Zcash mainnet was launched, introducing an improved implementation of the Zerocash protocol.
2017 - Zcash Foundation nonprofit is formed to build a public good Internet payment and privacy infrastructure.
2019 - Zcash Company rebrands to the Electric Coin Company.

Team

  • Zcash’s 7 Founding scientists include Alessandro Chisa from UC Berkeley and Christina Garmon of John Hopkins University.
  • CEO Zooko Wilcox-O’Hearn has been with Zcash since 2016 and while his LinkedIn looks like a ghost town, Zooko is very active on Twitter and widely recognized as a leader in the financial privacy space.
  • Lead Bitcoin Core Developer Gavin Andresen, Google X and Tezos Engineer Arthur Breitman, and Ethereum Founder Vitalik Buterin have all been advisors (Breitman and Buterin currently are).

Making headlines
2015 - Zerocoin revives the dream of truly anonymous money
2017 - Grayscale Investments launches Zcash Trust
2022 - Ed Snowden identified as anonymous co-creator of Zcash, “John Dobberton”
2022 - Zcash Community Grants Committee awards $420,000 in content grants

Does it have staying power?

Competitive?
$ZEC is the number 2 privacy coin by market cap, coming behind Monero (XMR), which has about double the daily volume of Zcash. However, Monero as well as its former lead developer, Ricardo “Fluffypony” Spagni, have been the target of regulator scrutiny.

In the aftermath of the US sanctioning addresses related to Tornado Cash, (a privacy mixer protocol), privacy technologies have entered the spotlight. Shortly after the sanctions were revealed in August 2022, the Zcash team announced they’d hired a Head of Global Regulatory Relations.

Hiring?
The Electric Coin Company website has listings for 4 positions.

Social traction
Zcash, the Foundation and ECC combine for a total of about 200,000 followers. Regardless of the seemingly low numbers, there is a high level of awareness around Zcash amongst the crypto community. $ZEC saw a spike after the news of Tornado Cash being sanctioned, as the crypto community turned its focus to privacy protocols.

Ever been hacked?
No, BUT - A Zcash cryptographer discovered a potentially, highly dangerous code vulnerability on March 1st, 2018. Other team devs were made aware of it but no one else. A fix was deployed over six months later. If the vulnerability had been exploited, it would have meant that attackers could mint an infinite number of ZEC tokens.

“The vulnerability was specific to counterfeiting and its exploitation would not have impacted privacy.” - Zcash team

Partnerships & Affiliations

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$ZEC Tokenomics

ZEC is the native cryptocurrency for the Zcash network. Zcash’s tokenomics are similar to Bitcoin’s; the supply is capped at 21 million and a block reward (currently 3.125 ZEC) goes into circulation every 75 seconds as each block is mined. A halvening mechanism is hard coded in to decrease inflation by reducing by half the block reward.

Interestingly, $ZEC is one of the few OG coins that has a negative ROI (at the time of this writing, down 98.22%).

Total supply
15,057,744 ZEC

Max supply
21,000,000 ZEC

Token distribution
Zcash had a built-in Founders' Reward that was initially set to expire in 2020 and which was the source of some controversy regarding the team allocation. The Reward equalled 10% of the outstanding tokens and was distributed through miner block rewards for the first 4 years as follows:

ZEC_Original_Founders_Reward_Distribution$ZEC Original Founders’ Reward Distribution 2016 - 2020

As the initial Founders’ Reward program phased out in 2020, a new more controversial distribution schedule rolled out through the Canopy upgrade that same year. Now, each time a block is mined, the tokens are distributed as follows.

80% - Miners
7% - Electric Coin Company
5% - Zcash Foundation
8% - Grants for independent 3rd party development

Token vesting

  • Zcash and ECC employees that were part of the founding team are fully vested.
  • Employees that were not part of the founding team are on a vesting schedule.
  • As time goes on, the ratio of vested to unvested for employees will increase.
ZEC_Supply_Curve_Zcash_Coin_ProfileEmissions Schedule for Zcash (ZEC)

Funding
The Zcash ecosystem raised $3 million over 2 venture rounds. Investors included Pantera Capital, Winklevoss Capital Management, Barry Silbert, and Erik Voorhees.
Additionally, the protocol has a built-in "founders' reward" that originally was set to expire in 2020. IT was eventually replaced through the Canopy upgrade

Token utility

  • Peer-to-peer payments
  • Private transactions
  • Regular blockchain-based transactions (public address can be tracked)
  • Vendor option to accept ZEC as payments

Decentralized?

  • Zcash brings decentralization to a new level because it enables decentralized access to financial privacy.
  • There are 8331 active nodes running the Zcash network with the biggest share of ZEC miners (59%) having IP addresses from the US and Denmark.
ZEC_Zcash_node-locationsZcash node global distribution

Burning Mechanism
N/A

Code Audit
Zcash has been through multiple rounds of audits and reports are available on the Electric Coin Company blog. The most recent audit was completed in September of 2021 with no critical issues found.

Team Transparency
There are some members of the Zcash team that are anons (this is common in cryptocurrency startups, especially privacy software) but much of the core team and advisors are sufficiently transparent.

Bug bounty?
Zcash’s website gives a contact email address where people can submit security vulnerabilities and/or initiate “sensitive discussions” with the security team.

Next up for Zcash

The project roadmap for Zcash is focused on 3 key deliverables:

  • An official Electric Coin Company (ECC) wallet so ECC can engage directly with ZEC users.
  • A merge to Proof-of-Stake (PoS) consensus mechanism
  • Cross-chain Interoperability via Cosmos integration

Continue your DYOR…

Website
$ZEC on Quadency
Blockchain explorer
Documentation
Github
Twitter
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Disclaimer: The content of this article is for general market education and commentary and is not intended to serve as financial, investment, or any other type of advice.