The Best Crypto Exchanges to buy and hold Zcash (ZEC)

The Best Exchanges to buy and hold Zcash (ZEC)?

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Zcash is a low-fee-backed cryptocurrency centered on privacy guarantees. It is priced at $219.17, has a circulation of $11.6 million, and has a market cap of $2.55 billion, ranking 51st among all cryptocurrencies.

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What is Zcash?

Launched in 2016 and built on Bitcoin ’s codebase, Zcash ensures a higher level of privacy and anonymity in digital transactions.

Bitcoin has an anonymity privacy model where users’ transactions are made public, but their identities are not. Although this system is somewhat secure, it is sometimes possible to infer your identity from your transaction history and other external information. So the creators of Zcash tried to solve this problem by developing their own anonymous privacy model.

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Zero-knowledge proofs (zk-SNARKs)

In a 2014 whitepaper, the developers of Zcash presented a decentralized anonymous payment (DAP) method using a cryptographic technology called “zero-knowledge proof” or zk-SNARK. This technology allows Zcash to validate transactions and reach consensus without disclosing sensitive personal information (such as user ID, transaction amount and account balance). In October 2016, zcash officially launched a code fork of the Bitcoin protocol along with a new token.

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Zcash vs Bitcoin

Since Zcash is based on the source code of Bitcoin, the two cryptocurrencies have many similarities. Like Bitcoin, Zcash uses a proof-of-work (PoW) consensus mechanism, with a maximum supply of 21 million. Bitcoin is currently worth over 200 times more than Zcash in USD, but the mining rewards are the same. Like Bitcoin, Zcash’s mining rewards are halved every 4 years.

In addition to privacy-related improvements, Zcash differs from Bitcoin in block generation cycle and transaction time. Zcash takes about 2.5 minutes to create a new block. It’s about 4x faster than Bitcoin, but still slower than Monero, a privacy-focused competing cryptocurrency.

Trading hours depend on the type of transaction. Assuming only individual transactions, the default speed of Zcash is about 6 transactions per second (TPS), which is comparable to that of Bitcoin. However, since the space occupied by public transactions in each block is small, Zcash can reach about 26 TPS with only public transactions. In fact, the combination of public and private transactions indicates that real TPS is somewhere in the middle. Transaction speed depends on how busy the network is at any given time.

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What is Zcash used for?

1. Privacy

Zcash provides two types of addresses for Holders: private addresses and public addresses. Like Bitcoin, the public address type is an anonymous system in which addresses and transactions on the blockchain are publicly visible, but the identity of the user is not.

In contrast, private addresses are anonymous. It takes full advantage of zcash’s encryption to hide transactions related to addresses. Users can also send cryptographic notes and information about private transactions to other trusted parties. Private transactions can also be audited for tax purposes, but only with your permission.

This personal information can be important to each person for a number of reasons. Public ledgers allow users to infer a user’s identity from their balances and transaction history, making them vulnerable to fraud. Privacy-focused coins such as zcash and Monero protect users from being identified or targeted in this way. As a result of an academic study in 2020, no evidence of large-scale illegal activity through Zcash was found, but these same cryptocurrencies are also used to obtain goods and services illegally within the country.

2. Low transaction fees

Moreover, in addition to privacy features, zcash also offers low transaction fees. The basic transaction fee for Zcash is 0.0001 ZEC, which is equivalent to about $0.02 in the present value of the coin. This is well below the transaction fees that have risen due to the growing adoption of Bitcoin and Monero (the average Bitcoin transaction fee recently reached $23).

However, one reason Zcash hasn’t faced these transaction fee issues is that it’s less in demand compared to Bitcoin and Monero. If you apply the same requirements to Zcash, you are likely to face similar scalability issues (especially for private transactions). It remains to be seen whether the developers of Zcash can find a solution to this potential scalability problem.

In particular, Zcash is used in payment apps such as Flexa and Gemini, and can be used at general retail stores such as Barnes & Noble, GameStop, and Whole Foods. This has greatly facilitated the adoption of cryptocurrencies in real-world use cases.

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Who made Zcash?

Zcash originated from a protocol called Zerocoin, proposed in 2013 by cryptographers including Matthew Green, Christina Garman, and Ian Miers. Zerocoin is an extension of Bitcoin that introduces privacy-related improvements to the blockchain.

When the original Zerocoin proposal faced a lack of convincing and acceptance within the Bitcoin developer community, the core Zerocoin team decided to launch its own cryptocurrency. They collaborated with renowned cryptographer Zooko Wilcox-O’Hearn to develop the new coin, and brought in several other scientists, including Eli Ben-Sassoon and Allesandro Chiesa.

Wilcox is currently the CEO of Electric Coin, leading the development of Zcash with 30 employees. In particular, approximately 20% of all mined Zcash was used to support developers during the first four years of coin development (end 2021). In 2018, Wilcox revealed that he was receiving about $3.6 million worth of Zcash per year. When Zcash is mined, 20% of the coins are returned to the Zcash developers as a reward, but this has become a topic of controversy within the cryptocurrency community as the issue of fairness has emerged as the 20% rate works against miners. Some have accused the coin of being too centralized, while others have rather defended Wilcox, praising his transparency.

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Zcash price change

Zcash was bullish in October 2016, trading at over $4000 at launch. However, due to extreme volatility, the price dropped below $1000 the next day and below $100 the following month. The coin’s fortune rebounded from the crypto bull market in 2017, recovering back to around $700 in January 2018. But shortly thereafter, it plummeted again below $100 when it crashed in 2018, and has remained relatively stagnant since.

Recently, Zcash has been revived along with many other cryptocurrencies. Although not yet as high as in 2016 or 2018, Zcash has risen 152% over the past three months, from $86.79 to $219.17 (Bitcoin is up 66% over the same period).

This rise can be attributed in part to the current ‘altcoin season’, when significant capital flows into altcoins (non-Bitcoin cryptocurrencies). Another potential cause of Zcash’s recent appreciation is the coin’s first ‘halving’ in November 2020 ( a major milestone indicative of a new decline in the supply of Zcash).

This rise is also due to the fact that the current ‘altcoin season’ has resulted in a significant influx of capital into altcoins (non-Bitcoin cryptocurrencies). Another potential cause of Zcash’s recent appreciation is that November 2020 was the coin’s first halving.

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What is the outlook for Zcash?

Zcash’s outlook seems relatively stable for now, but it could be negatively affected by competition from other privacy-focused cryptocurrencies and regulations targeting anonymity-based coins (= privacy coins).

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Zcash vs Monero

From the beginning, Zcash has been competing with Monero (XMR), a privacy-focused cryptocurrency. Introduced in 2014, Monero has achieved complete anonymity and is enjoying its status as the first mover of cryptocurrency. Launched two years later, Zcash has since started catching up with Monero. Monero currently has a market cap of about $7.19 billion, which is 2.8 times that of Zcash. Additionally, privacy-focused coins such as Verge and PIVX are following Monero and Zcash.

As a privacy-oriented cryptocurrency based on Bitcoin, the main characteristics that differentiate Zcash are its cryptographers, its own encryption method, and its status as a second-mover. Although Zcash has overcome various obstacles relatively well so far, it is unclear whether these features will ensure continuous growth amid fierce competition with other anonymity-based coins (= privacy coins).

Another potential concern with Zcash is government regulation. Privacy-focused cryptocurrencies have long been associated with illegal activity on the Internet. Some countries (e.g. Pakistan and Macedonia) have banned all cryptocurrency-related activities, and Japan has taken several measures against anonymity-based coins. In 2018, the Financial Security Agency issued a policy banning Monero, zcash, DASH and other anonymity-based cryptocurrencies on grounds of illegal activity.

If subject to further restrictions in the future, Zcash may avoid expulsion from the market as it supports both private and public transactions and allows users to disclose information for auditing purposes. Also, since Zcash’s awareness is relatively low, this could be an advantage for Zcash if Monero is instead targeted by the governm.

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Conclusion

Zcash has undergone numerous upgrades over the years, the most recent being the Canopy upgrade (November 2020). This update aims to improve the security, privacy, and efficiency of the blockchain. The most important update to be implemented this year is the NU5 Upgrade (Network Upgrade 5), which will be implemented from October 2021. This upgrade makes Zcash much more flexible in the market and is expected to attract more users. The development team also plans to introduce the Halo 2 system to improve the security of the protocol and further enhance its scalability. If all of these are improved, Zcash is expected to gain more users in the future and at the same time receive support from developers.

Overall, Zcash has carved out a small but notable niche in the crowded crypto market. While providing anonymity, it has many Bitcoin-like features, has a respected cryptocurrency development team, and has a small but influential community.

However, given Zcash’s current status among competing coins, it seems that the continued growth of Zcash will depend on the success of the aforementioned upgrade. It also seems likely that most cryptocurrency development teams will be able to effectively market the advantages of Zcash to a wider audience. In any case, given Zcash’s recent growth and upgrade plans, it is clear that Zcash is a sufficiently noteworthy coin in 2021.

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