In a world where our personal information, hobbies and activities are increasingly recorded and documented, it’s no wonder that cryptocurrencies that offer users anonymity continue to be popular, despite the efforts by regulators and stock exchanges to restrict their accessibility.

According to a 2021 Big Brother Brands analysis, companies such as Uber and Meta (formerly Facebook) capture between 56.41% and 79.49% of their consumers’ personal information. If the controversial Meta-backed digital currency succeeds in reaching the mainstream (a big IS), Meta will inevitably gain access to its users’ transaction data. This implies that the tech giant not only knows who you are and what you like, but also what you buy and how much you spend.

Zcash is one of the leading digital currency blockchains that aims to solve this growing problem and give back control and privacy to its users.

What exactly is Zcash?

medium.com

Zcash is a blockchain-based payment network that focuses on privacy by using zero-knowledge proofs (ZKP) to protect transactions, allowing the contents of a transaction to remain secret even on a public blockchain. Zcash, which originated from the Zerocash protocol, diverged from the Bitcoin network in 2016. ZEC is the symbol for its native token, zcash.

ZKPs are the result of a cryptographic approach developed in the 1980s. They allow two parties to verify information with each other without sharing the underlying data.

For example, you can demonstrate that you are over 21 without revealing your actual date of birth (or any other irrelevant information that some forms of identification, such as your driver’s license, may contain).

The Electric Coin Company (ECC), which produced Zcash, has expanded the ZKP toolkit with Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, or “zk-SNARKs”.

This cryptographic enhancement essentially allows protected Zcash transactions to be fully encrypted on the blockchain while still being validated by network consensus.

There are two types of addresses in Zcash:

Transparent addresses: Transparent addresses, or t-addresses, can be monitored on the Zcash blockchain in the same way as Bitcoin transactions.

Protected addresses, or z-addresses, are encrypted, meaning you cannot see the data on the blockchain, so transactions sent to them cannot be accessed, nor can the number of funds carried by z-addresses.
Observers will not be able to know where the funds went if the at address forwards them to an address z. When a z-address sends a transaction to another z-address, the transaction is completely hidden from prying eyes, making it one of the most private and secure alternatives available.

What has happened to Zcash in recent years?

Since its fork in 2016, Zcash has continued to refine and develop the main services it offers. Halo, a “trustless recursive” version of ZKPs; the release of an open source, shielded first and fully functional Zcash wallet in 2020; and the activation of the Heartwood Network upgrade, also in 2020, which added support for Shielded Coinbase and FlyClient, are significant advancements over the past few years.

Not to mention an increase in institutional support and the first-ever Zcash price halving.

Halo and Halo 2 In 2019, Zcash announced Halo, a new zk-SNARK that solved two of the privacy coin’s criticisms: scalability and reliable configurations.

Zcash was released with a secure setup. A trusted configuration generates a secret number and the Zcash protocol uses a derivative of this number. This number is performed in many parts by a variety of actors. They must then all destroy the “cryptographic toxic waste” without exposing what it was. Each hard fork would have required a trusted configuration.

Zcash’s multiparty calculation ceremony, which used a trust setup, was captured on YouTube and even appeared on NPR’s Radiolab.

Halo removed the need for a trust configuration along with the “cryptographic toxic waste that came with it”.
At the time of Halo’s announcement, CoinDesk Chief Content Officer Michael Casey wrote:

“Halo allows a user to verify that no one was involved in the initial setup of a large-scale, zero-knowledge proof system, built a secret backdoor through which to later modify the code, and that this secure state has existed throughout continuous system updates and changes.”

A reliable framework has created zero-knowledge proofs, which are still in their infancy, bulky, and relatively impractical for use other than proof of specific point facts.

More here: EY launches zero-knowledge layer to deal with rising Ethereum costs

“Granted, trustless point solutions known as ‘bulletproof’ have been around since 2017, but they lack the recursive quality required to verify the information that is constantly accumulating in a vast, expanding database. and changeable,” Casey wrote.

According to Steven Smith, Engineering Manager at ECC, Halo improves on ZKPs by allowing them to compress any amount of data into a short piece of evidence that can be reviewed quickly. Smith said in an email that removing a trusted configuration is a “critical step toward our Scalability 2021 initiative.”

Halo 2, which released in 2020, improved Halo by using PLONK, a revolutionary z-SNARK, rather than “Sonic” to verify transactions. PLONK is more efficient than Sonic and would allow Zcash to scale further while bringing it closer to eliminating the need for a trusted setup.

According to the Halo 2 blog post, PLONK is an example of proof that can verify itself, “allowing any amount of computational work and data to produce a concise proof that can be verified quickly.”

Zcash Wallet
Zcash began development of the ECC Reference Wallet in December 2019, a lightweight client reference wallet that enabled shielded transactions in Sapling (an upgrade that provided major performance improvements for shielded transactions) to work on mobile .

Then, in June, ECC released an open-source, shielded-first, and fully functional Zcash wallet that demonstrates and tests its software development kit (a set of software development tools in a single installable package).

Smith said one of the goals was to “ensure that at least 40% of the world can read and understand the ECC benchmark portfolio.” The app has been translated from English into five languages ​​with the help of the community: Simplified Chinese, Russian, Spanish, Italian, and Korean.

“Additionally, thanks in large part to work on our SDKs, Unstoppable has become the first multi-currency wallet to offer shielded Zcash compatibility for iOS and Android,” Smith added.

Improved Heartwood Network

ECC launched the Heartwood Network Upgrade Activation in July 2020, which adds Shielded Coinbase and FlyClient functionality. Shielded Coinbase has enabled Zcash users to fully shield ZEC of its generation, thus enhancing privacy. It also allowed miners the ability to have mining profits deposited directly into a z address. Luxor and Poolin, two mining pools that account for around 40% of Zcash’s hashing power, have adopted Coinbase protected.

FlyClient is a more efficient technique for “light client block header verification,” or verifying blocks on a blockchain, and it has the potential to expand the usability and market of Zcash. FlyClient supports thin client use cases as well as a class of cross-chain interoperability efforts such as tZEC, an Ethereum-enabled ZEC coin.

Zcash is halved.
Zcash saw its first halving at the end of 2020, which resulted in a reduction in block rewards for miners from 6.25 ZEC to 3.125 ZEC, as well as the launch of the network’s fifth upgrade, Canopy, which removed the controversial “Founders Fund,” which some members of the Zcash community claim returned too many ZEC tokens to founders.

Instead, 8% of mining rewards will now be transferred to the Major Grants Fund, which will be controlled by the Major Grants Review Group (MGRC), a community-appointed five-member committee. The fund will support development and adoption activities in addition to the work of the ECC and the Zcash Foundation.

Problems to solve
Zcash has a few hurdles to overcome.

“As with all cryptocurrencies, there may be vulnerabilities or concerns that we are not aware of,” said Josh Swihart, vice president of growth at ECC. “Although the possibility of an exploit is statistically negligible, Zcash’s trust arrangement poses a risk to some.”

It is expected that the wider implementation of Halo 2 in 2022 could eliminate trust setups and the “toxic waste” they generate.

“If Zcash is going to be used for global payments by billions of people, it will also need superior scalability,” Swihart said.

Finally, several exchanges have delisted privacy coins such as Zcash, which may continue to be an issue. Due to their propensity to mask illegal behavior, key privacy features built into protocols such as Zcash and Monero have alarmed authorities and lawmakers. Shapeshift and BitMEX are among the cryptocurrency exchanges that have pulled ZEC (along with XMR and DASH), allegedly due to regulatory pressure. Meanwhile, cryptocurrency exchange Gemini was the first to allow users to withdraw Zcash using its anonymize feature in September 2020.

“Since its launch in September, 11.8% of Zcash withdrawals on Gemini have been transferred to protected addresses,” according to Electric Coin Company’s Zcash 2020 Review.

“As for what we didn’t do as quickly as we would have liked,” Smith said, “we were hoping we had done more work on supporting the shielded hardware wallet.”
The Future of Zcash The Halo and Halo 2 improvements to Zcash provide the best opportunity for the privacy currency to address some of its most vocal critics. However, the possibility of privacy coins being delisted by exchanges does not seem to diminish and seems like an endless forest to navigate.

But when it comes to private coins and old challengers like Dash that have pretty much ditched the label and collateral, Zcash is firmly entrenched in the discourse and will continue to push forward as such.
Proceed to Proof of Stake.
On November 19, 2021, ECC revealed plans to transition Zcash from its equihash-based proof-of-work consensus method to a more energy-efficient and interoperable staking-based approach.

In a blog post earlier that year, ECC CEO Zooko Wilcox-O’Hearn proposed such a change, stating that it “[reduce] downward pressure on ZEC prices and [provide] more utility for the ZEC.

Additionally, staking would provide value by allowing more users to participate in validating network transactions in exchange for incentives. Not to mention that upgrading to PoS would significantly reduce power consumption, making Zcash a greener project than it currently is.
Although no specific timeline has been set for the implementation of this transition, ECC has stated that it should take place within the next three years.