Zcash (ZEC) is a cryptocurrency with the purpose of addressing security concerns surrounding transaction tracking on Bitcoin's public ledger. By employing the zk-SNARK security protocol, the team behind Zcash focuses on improving user privacy by enabling fully shielded transactions that encrypt sender, recipient, and transaction amounts. ^[1][2][3]

Overview

Zcash was launched in 2016 after a team of researchers identified vulnerabilities in Bitcoin's transaction tracking mechanisms. To address these concerns, they introduced the concept of Zerocash in a whitepaper, which later evolved into the cryptocurrency known as Zcash. The Electric Coin Company played a key role in its development, eventually overseeing the rebranding from Zerocash to Zcash in 2016. Unlike Bitcoin, Zcash prioritizes user privacy through zk-SNARK, ensuring that transaction parties are verified without revealing any data to each other or the network. SNARKs are the engine that can verify a transaction and add it to the blockchain without revealing any details to the public, requiring a set of public parameters that allow users to construct and verify private transactions. These parameters are set up in an elaborate secure multi-party computation; for Zcash, this is known as the Trusted Setup. This approach distinguishes Zcash from traditional cryptocurrencies, where transaction transparency is a fundamental aspect. ^[1][3][4]

History

Pre-launch

ZCash's roots trace back to 2014 when a team of researchers, including Eli Ben-Sasson, Alessandro Chiesa, Christina Garman, Matthew Green, Ian Miers, Eran Tromer, and Madars Virza, Zcash grew out of “Zerocash/Zerocoin,” an experimental proposal from the seven scientists to improve privacy protections in Bitcoin. ^[5]

Launch

Zcash was launched on October 28, 2016, by The Zerocoin Company, known today as the Electric Coin Co., a private company founded by Zooko Wilcox. Before the launch, Electric Coin Co. aided the development of the initial protocol by raising $3 million in funding. ^[5]

2016 - 2018

After the Zcash launch, the Zcash engineering team released a series of upgrades known as the “Sprout series.” The team also put forward plans for two core protocol upgrades known as Overwinter and Sapling. The Sapling upgrade made efficiency improvements and enabled new kinds of core protocol features. The Zcash Foundation was formed in March 2017 with an initial endowment of 273,000 ZEC, taken from the Founder’s Reward. The Zcash Foundation organized the Powers of Tau ceremony, which was at the time the largest multi-party computation ceremony ever performed. In 2017, enterprise partnerships like the Zcash collaboration with JP Morgan further fueled a wider interest in blockchains and zk-SNARKs. The Sapling upgrade was activated on October 29, 2018, almost two years from the date of the initial Zcash launch. ^[5][7][8]

2019 - 2020

In early 2019, the company behind Zcash, Zerocoin Company rebranded to the Electric Coin Co. to differentiate from Zcash the protocol and the Zcash Foundation. The Zcash community began a several-month-long governance discussion regarding the continuation of the Founder’s Reward and the Zcash trademark. In February 2019 it was revealed that a serious cryptographic flaw had affected the zk-SNARK proving system, called BCTV14, that was used by Zcash before the Sapling upgrade. This flaw could have allowed counterfeiting. The Electric Coin Co. stated in a blog post that they “believe that no one else was aware of the vulnerability and that no counterfeiting occurred in Zcash”. Electric Coin Co. announced a research project to increase the scalability of Zcash by 2021. One of the results of this research is the Halo proving system. ^[5][6]

Blossom, the third network upgrade for Zcash, was activated in December 2019. This upgrade halved the target block interval, to 75 seconds. Funding discussions culminated in early 2020 with community consensus around ZIP 1014, a Zcash Improvement proposal that describes a structure for a newly established Zcash Development Fund. Heartwood, the fourth network upgrade is scheduled to activate in July 2020. Heartwood includes Flyclient support and a shielded coinbase. Then on July 16, 2020, Heartwood, the fourth network upgrade was made ahead of Zcash’s fifth network upgrade, Canopy, that took place on November 18, 2020. ^{[5][9][10][13]}

2021 - 2022

On May 31, 2022, Zcash's sixth major network upgrade, NU5 or Network Upgrade 5, was made to enable full support for the Orchard shielded protocol and Unified Addresses. ^[14]

Key Features

Addresses

Zcash introduces two distinct address types: private (z-addresses) and transparent (t-addresses). While private addresses start with a "z," transparent addresses use a "t" prefix. An important feature of ZCash is the interoperability between these two address types, allowing the transfer of funds between them. This capability presents privacy implications as users can choose to shield or deshield transaction information based on their preferences. Currently, the majority of wallets and exchanges predominantly support t-addresses, but support for shielded addresses is accessible through mobile and desktop wallets. ^[11]

Transactions

Zcash transactions come in various types, depending on the involved addresses. Transactions between two transparent addresses (t-addresses) follow a pattern similar to Bitcoin, with the sender, receiver, and transaction value being publicly visible on the blockchain. On the other hand, transactions involving shielded addresses encompass shielded (z-to-z), shielding (t-to-z), and deshielding (z-to-t) transactions, with the primary focus on safeguarding z-address privacy. Among these, the most secure transaction is the shielded (z-to-z) variety, where both sender and receiver addresses, as well as the transaction amount, are encrypted. All transactions are recorded on the public blockchain, confirming the occurrence of a transaction and disclosing associated fees. ^[11]

Viewing Keys

Zcash offers a feature allowing owners of z-addresses to share transaction details with trusted third parties by employing viewing keys. These keys grant read-only access to the address, ensuring that third parties can audit transactions without the authority to spend funds. This capability facilitates "selective disclosure," where users have control over which transactions are revealed. Viewing keys prove invaluable for compliance with auditing requirements, tax regulations, or anti-money laundering protocols, enabling participants to adhere to such standards while maintaining their privacy. ^[11]

Operational Components

Units and Divisibility

ZCash operates with a unit of account known as ZEC, and its corresponding ticker symbol is "ZEC." Similar to Bitcoin, the smallest divisible unit in ZCash is called a zatoshi, which represents 0.00000001 ZEC, equivalent to one hundred millionth of a ZEC. ^[12]

Mining

Initially, ZCash mining could be undertaken using standard home computers equipped with CPUs or GPUs. As mining technology advanced, ASIC machines emerged as the preferred choice for professional miners and mining pools due to their superior performance in comparison to CPUs and GPUs. In 2018, the ZCash community rejected proposals for ASIC-resistant protocol updates, citing security concerns. Notable mining pools for ZCash include Flypool, Nanopool, and Slushpool. ^[12]

Scalability

ZCash is actively addressing scalability concerns through ongoing initiatives. Scalability improvements are pursued both at the protocol layer (layer 1) and the application layer (layer 2). Researchers, such as Sean Bowe from the Electric Coin Co., have proposed innovative techniques like Halo, which presents practical recursive zero-knowledge proofs. Additionally, there are research proposals exploring sharding architecture as a means of partitioning the blockchain into sections or "shards" to enhance throughput and accommodate high transaction volumes, as presented by ECC researcher Daira Hopwood. These endeavors aim to ensure ZCash's ability to handle a growing demand for transactions efficiently. ^[12]

Zcash Improvement Proposals (ZIPs)

Zcash Improvement Proposals (ZIPs) serve as a crucial avenue for proposing new features, elucidating their rationale, specifying implementation intricacies, and engaging the community in discussions. These proposals are open to contributions from anyone, with the authors bearing the responsibility of fostering community consensus and addressing dissenting viewpoints. ZIPs play a central role in shaping the protocol's evolution. ^[15]

Tokenomics

The ZEC Token is the Zcash network's native cryptocurrency, used to manage all transactions and mining rewards. The total supply of ZEC is capped at 21 million with 80% of block rewards allocated to miners and the remaining 20% distributed to the development fund. Similar to Bitcoin, mining rewards are scheduled to half every four years, as a means of controlling inflation. ^[16][17][18]