An introduction to Zcash

Zcash is a cryptocurrency that combines superb privacy with broad availability from exchanges. Its software wallets include some very easy to use options that specialize in maximizing privacy. Its 75-second block time means your transactions clear quickly with fees that are much less than a penny. Zcash is the most innovative privacy coin in existence, and well positioned to dominate the cryptocurrency industry in the future.

Zcash uses ZEC as its unit of measure. Like Bitcoin, Zcash has a maximum ceiling of 21 million ZEC.

Bias disclaimer: I am a huge fan of Zcash. It is my favorite cryptocurrency. Naturally, I keep a positive balance that I hope to spend at supporting merchants everywhere I go.

The best wallet

I have tried several Zcash wallets. The best by far in my opinion is YWallet, which offers superb privacy features, the fastest sync times, and supports the latest Zcash network innovations. It lets you keep a contact list, which it correlates with your transaction history for easier reading. It can even save your contacts list to the blockchain in encrypted form, so you have a backup or can keep your wallet on multiple devices with synchronized contacts.

Privacy

Most cryptocurrencies have no privacy features beyond the common pseudonymous addresses common to all cryptocurrencies, which time has proven provides virtually no privacy.

You may not feel you need privacy. You may feel you have nothing to hide. But pause a moment to reflect. You don’t need to be doing something nefarious or unlawful to value privacy. Though you trust your bank to keep your secret (you didn’t really have a choice before crypto, did you?) bank tellers have been known to pry into your private details and judge you and even share it with friends. Wouldn’t you love for your financial situation to be yours alone to share or keep private?

Would you want your neighbor to know how much money you have, how much you make, and be able to see every payment you make or receive? Most people wouldn’t want to share that information. Would you want your babysitter to know? The store clerk? Cryptocurrencies without privacy features expose all this detail to the world, and the only thing someone needs to know is your address and they can look you up. Since you can’t send or receive crypto without exchanging an address with someone, this means everyone you transact with even once now can link you to all your transactions and balances from the past, now and forever in the future. We take privacy for granted because our bank tends to honor our privacy, and when you pay with cash, that doesn’t tell the receiver anything about your financial situation. Standard cryptocurrencies make privacy virtually non-existent.

Zcash is the first cryptocurrency (and perhaps the first software of any kind) to utilize Zero-Knowledge Proofs (zk-snarks) to provide total privacy. This means you can send and receive Zcash without fear that anyone can see your account balance or transaction history. Even the person receiving Zcash from you will not know who it came from unless you choose to include an identifying message in the transaction note field.

Zcash has two faces: one has the best privacy in the industry, the other is as transparent as bitcoin. We call the privacy side shielded. The reasons for having both transparency and privacy as options are complex and oft-debated. Check out my blog post Is Zcash really private? for details.

To benefit from Zcash’s privacy features, use a Zcash wallet that supports shielded funds. You’ll recognize this by its ability to generate a Z or U address for you (possibly in addition to T addresses), whereas some non-privacy wallets will only produce T addresses. When offering your receiving address to someone, of the several addresses your wallet may offer you, you should prefer them in this order:

  1. U- address
  2. Z- address
  3. T- address

In other words, if the person sending you ZEC can accept a U- address from you, that’s always preferred. Some wallets don’t support U addresses, but may support Z addresses, and that’s a great option as well. Some lesser wallets and crypto exchanges only accept T addresses, and you may offer your T address to these folks.

If you ever see a non-zero balance for transparent funds or see a “Shield transparent funds” button in your wallet, go ahead and shield them right away. The goal for maximum personal privacy is to keep all your funds ‘at rest’ in a shielded state.

Censorship resistance

Governments, banks and other entities have been known to block users’ access to their own money when they fell out of the good graces of these controllers. One recent event in history was the Canadian truckers strike, where both some of the truckers and donors to their movement had their accounts frozen. The United States government has blacklisted certain cryptocurrency wallets and threatened legal action against exchanges that redeem crypto from those addresses.

Shielded Zcash is fungible, which means it is impossible to tell one zcash token from another. This makes it impossible to censor specific Zcash tokens or users. This provides strong protection for a person’s rights to keep and spend their own Zcash as they wish.

Other features

Every Zcash transaction to a shielded address has the option to include a 512-byte message (typically translating to 512 characters). This message is encrypted with the rest of the transaction so that only the sender and receiver can read it. With Zcash’s very low transaction fees, some people use Zcash as a decentralized communication network.

What Zcash does not have

Zcash does not have smart contracts (like Ethereum and some other chains do). No privacy coin does, to my knowledge. Folks simply haven’t yet figured out a way to blend smart contracts with privacy. Future innovation may resolve this in whole or in part.

As a consequence of no support of smart contracts, and fungibility, Zcash has no means to ‘wrap’ other cryptocurrencies. You might see wZEC or renZEC on other blockchains, which claim to hold ‘wrapped Zcash’ (but without any of its privacy features since it isn’t an the Zcash blockchain). But to date you’ll never see “wrapped ETH” or similar on the Zcash blockchain. This is an area where R&D is working to innovate (see Zcash Shielded Assets).

Zcash has not (yet?) overcome the fundamental throttling limits of the public blockchain. Bitcoin is limited to about 7-9 transactions per second. Zcash has a higher limit, but not much higher. Like all cryptocurrencies, it simply cannot blast an infinite amount of transactions onto a public, distributed ledger. While Zcash fees are tiny fractions of a penny per transaction today, that could change if Zcash grows in popularity before further innovation in this area can happen. There is exciting innovation happening in this area though (see recursive proofs), so I have hope that the limitation can be resolved one way or another in the future. The best cryptocurrency I know of today for scaling is Nano.

Zcash miners still consume a lot of electricity, because it is based on Proof of Work (PoW), like most cryptocurrencies. But a few early innovators have changed to Proof of Stake (PoS), which dramatically reduces electricity consumption. The Electric Coin Company is planning to transition Zcash to Proof of Stake, but this is likely years away.

I have never seen a great cryptocurrency wallet app (for any crypto). YWallet is the best I’ve seen anywhere, but like so many other wallets, it has some usability quirks that are likely to confuse most users who don’t know how blockchains work underneath. I hope and expect all wallets to gradually improve over time.

Community

The community support for a cryptocurrency is important, as it can indicate where the crypto is going in value and roadmap.

Zcash is supported by a vibrant and active community as well as the Zcash Foundation (ZF) and Electric Coin Company (ECC). These groups and others drive innovation that enriches Zcash and even other cryptocurrencies that copy these ideas and code into other cryptocurrencies. The international community is growing too, with Shielded Labs recently announced as a Switzerland-based organization to help drive Zcash innovation.

The ZF, ECC, and Zcash Grants are funded by a miners’ fee. Zcash miners keep the network running and are paid in Zcash for their efforts, and a portion of this reward is redirected toward the Foundation. This ensures the Foundation has the funds necessary to continue R&D. Zcash users pay nothing and yet win with each innovation to the cryptocurrency.

Governmental compliance

Zcash provides the tools for its users to comply with their government’s regulations without sacrificing user privacy.

Zcash has been accused of catering to government regulations. These allegations typically come from other communities whose preferred privacy coin alternative makes it a point to defy governmental regulations. These allegations may foster fears that Zcash has or will create backdoors for government to to break Zcash’s strong privacy, but there is no evidence to support this fear.

Instead, Zcash gives everyone strong privacy (by default, for most wallets) and gives their users the option to either move their coins to a transparent address or to share a viewing key suitable for allowing an audit of balance and transactions without granting the ability to spend funds. Having the tools to comply with government regulations allows Zcash users to openly use and accept Zcash without fear of governmental reprisals.

This gives Zcash a more positive outlook for use as a common currency than some privacy coins that proudly defy governments that may lead them to be declared unlawful in the future.

Summary

This page certainly cannot teach you all there is to know about Zcash, but hopefully you see how Zcash is valuable today and holds even more promise for tomorrow. If you have questions, please comment below and I’ll try to answer them. I reserve the right to delete comments that shill other coins or spew FUD about this one.

And hey, if you want to drop me a line or send a monetary thank you for the blog post, my Zcash address is: u1vv2ws6xhs72faugmlrasyeq298l05rrj6wfw8hr3r29y3czev5qt4ugp7kylz6suu04363ze92dfg8ftxf3237js0x9p5r82fgy47xkjnw75tqaevhfh0rnua72hurt22v3w3f7h8yt6mxaa0wpeeh9jcm359ww3rl6fj5ylqqv54uuwrs8q4gys9r3cxdm3yslsh3rt6p7wznzhky7.

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