Zcash – most interesting Bitcoin alternative

Published : 07 November 2019

logoZcash (ZEC) is a popular cryptocurrency (top 30 on Coinmarketcap) and is the second most popular privacy coin because of its distinctive privacy features.

In this article, we will focus on what Zcash is, what makes it different from other privacy coins, and why Edward Snowden said that Zcash is the most interesting Bitcoin alternative.

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ECC believes in the right to privacy. The company builds software that facilitates economic freedom and opportunity.

Zcash in a few words
Launched in 2016, Zcash (ZEC) was founded by Zooko Wilcox and the Electric Coin Company (formerly known as Zcash Company). Although ECC helped create ZEC and currently supports it, it does not control the currency (neither mining nor distribution). ZEC was created in collaboration with scientists from various academic and scientific institutions (MIT, John Hopkins).

Besides privacy, the focus is on efficiency and low-cost transactions.

Zcash vs Bitcoin
Zcash is an open-source protocol, based on Bitcoin.

Just like the original cryptocurrency, ZEC is meant to solely be a payment token and relies on Proof-of-Work (PoW). And just as Bitcoin, ZEC’s supply is capped at 21 million, with halving roughly every 4 years.

However, contrary to BTC’s 1MB and 10-minute block size and time respectively, ZEC’s block size is 2MB and the average block time is 2.5 minutes.

Transaction types with Zcash
You can transact either privately (with shielded z-addresses) or publicly (transparent t-addresses).

In a private transaction (Z-to-Z) the only information known is that a transaction has taken place and that the fees have been paid. Other information including addresses and the transaction amount are encrypted and not publicly visible. The two kinds of addresses are interoperable, so you can send tokens from a z-address to a t-address and vice versa.

Various transaction types available with Zcash; source

Be aware that the percentage of fully shielded transactions is very small. In the past month, less than 2% of the transactions were fully shielded, according to usage statistics. This means that the pool of addresses to hide your private transaction is quite small. The small number could be due to the fact that hardware wallets (e.g. Ledger Nano S and Trezor) only support t-addresses, or that the Zcash users simply don’t feel the need to fully shield their transactions.

Z-cash encrypts transactions using Zk-SNARKs, explained below.

Zero-knowledge-proofs allow one person to prove to another person that they know or have certain information, without revealing what that information is. Zk-SNARKs are a form of this kind of cryptography.

Zk-SNARK is an acronym which stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge”.

“Zero-knowledge” refers to zero-knowledge-proofs explained above. “Succinct” reflects how quick the proving process is, milliseconds. That is thanks to the “non-interactive” aspect of Zk-SNARKs. Earliest zero-knowledge protocols required multiple back-and-forths between the prover and the verifier. But in the non-interactive ones, the proof is sent via a single message. In order for the proofs to be non-interactive and short enough to be saved in a blockchain, there is an initial setup phase, where a reference string shared between both parties is generated. Zcash refers to it as the public parameters of the system in its documentation. “Argument of Knowledge” is similar to a proof of knowledge. However, while proofs are statistically sound, arguments are computationally sound (may have perfect zero-knowledge).

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Founders Reward
10% of the eventual 21 million monetary supply of ZEC will be given to the stakeholders of Zcash Company (founders, investors, employees, and advisors) to reward initial investors and ensure the continuous development of the project. Every ten minutes, 50 ZEC is created; 80% of which goes to the miners, while the remaining 20% is designated as the Founders Reward.

This will go on until the first halving 4 years from when the first block was mined, estimated to be around October 2020. After this, Founders Reward is scheduled to end, and 100% of the newly created ZEC will go to the miners. However, the community is currently discussing whether to keep the Founders Reward or not, considering how it may impact the post-halving development of Zcash.

Edward Snowden’s favourite crypto
In 2017, Snowden described Zcash and “the most interesting Bitcoin alternative”. He values the professional and academic team behind the coin’s tech. At a conference in 2018, Snowden confessed that Zcash is his favourite crypto, as it offers ultimate privacy thanks to a unique protocol. A few months ago he has also come out in support of the Founders Reward, tweeting that “that tax funds a quality team that catches and kills serious bugs in-house, before they get exploited”.

But Zcash has more to offer than kind words from the world’s most famous whistleblower. There are interesting real-life use cases already working or coming soon.

In September Zcash, along with Monero and Dash, has been added to the new Binance Lending. We have also recently found out that Zcash is developing a wrapped token that will allow ZEC to enter Ethereum’s decentralised finance (DeFi) ecosystem. This means that users of Ethereum Dapps will be able to invest in Zcash (increasing its market) while enjoying the privacy offered by the coin.

As Cointelegraph explains, wrapped tokens are assets hosted on the Ethereum blockchain, backed by an underlying asset (ZEC in this case) either via smart contract or backed one-to-one. This allows for much faster transactions, as payments are not done across blockchains.

Be aware of privacy coin crackdown
Several countries have cracked down on privacy coins, citing concerns over money laundering. This has resulted that a few exchanges have delisted Zcash, among other (privacy) coins, in a few locations.

Coinbase UK has delisted Zcash in August 2019. It is commonly believed that the move was a result of Coinbase changing their bank. In September, very likely due to South Korean new Financial Action Task Force (FATF) guidance for virtual asset service providers, crypto exchange OKEx Korea has delisted five altcoins, including three privacy coins: Zcash, Monero, and Dash to ensure compliance. Just days later, Upbit, another South Korean exchange, has also delisted a few coins for the same reason, including the same privacy coins as OKEx.

Ycash – a Zcash fork
logoAnnounced in April 2019 and launched on 19th of July that same year, Zcash has forked and a new blockchain was created – Ycash (YEC). As the new coin was based on Zcash, all holders of ZEC received the same amount of YEC.

The reason behind creating Ycash was twofold, as explained in the announcement. Firstly, to achieve the original goal of mining on commodity hardware, which has been abandoned on the Zcash blockchain. And secondly, to keep a promise that the Zcash Founders Reward would be capped at 2.1 million coins forever. According to the team, both of these will ensure a fair distribution of coins, which in turn will lead to widespread adoption.

There are several differences between the two forks. Although the discussion regarding the Founders Reward is still ongoing in the Zcash community, Ycash has already decided to reduce the Reward down from 20% to 5% (2.1 million coin cap). The remaining Founders Reward will be used in its entirety for the Ycash Foundation, a nonprofit. Another change should come right about now (planned no later than Zcash Blossom update estimated for late Q4 2019), when Ycash will transform the Proof-of-Work algorithm to one that is more favourable for mining on commodity hardware (e.g. CPUs, GPUs).

The new token is also independent of all entities overseeing Zcash, that is the Electric Coin Company (the company behind Zcash mentioned earlier) and the Zcash Foundation. But similarly to Zcash, Ycash is capped at 21 million. Trading at just under $0.3 ($0.293) with a market cap of just over 2 million USD ($2,260,447), Ycash is a fraction of Zcash ($39,45 price and a $305,082,579 market cap).

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Where can I buy Zcash?
You can purchase Zcash via several exchanges, including Binance, Coinbase (excluding Coinbase UK), Gemini, Kraken, Huobi, and Gemini. If you’re looking for a regulated exchange, we recommend etoro.


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