What is Zcash? A Beginner’s Guide


Conor Maloney

March 2, 2018

If you’ve been wondering about Zcash, prepare to wonder no more.

Privacy coins have become of increased interest as the ecosystem developers, and as newcomers realize that currencies like Bitcoin are actually pseudonymous, not anonymous as is often claimed by mainstream media.

What’s the difference?

Well, with BTC and most other currencies, it’s like this; you buy coins online, and unlike making a purchase with a credit card, there’s no digital record in the blockchain ledger with your name on it. Instead of your name, your public wallet key is used and permanently stored. The wallets don’t tend to store the names of their users on their servers, meaning you can open a wallet without using your real name (or any name), and transact using only the wallet key as a “signature”.



It’s not anonymous. Your name isn’t attached to the wallet or the ledger, but the public key number attached to your wallet (or wallets) are. Think of them like a pseudonym, or an assumed name – if someone finds out your wallet keys, they can go through the blockchain and find a detailed record of every transaction you’ve ever made.

How would this happen?

Well, you could be hacked, government authorities could seize your device or subpoena your information, etc. Cryptocurrency ledgers that store keys are more private than fiat currency in many ways, especially if users switch wallets a lot and take extra steps to protect their privacy (VPNs, encrypted browsers like Tor, etc). However, in another way they could be considered less private!

Online purchases and credit card purchases are one thing, but technically spending BTC or ETH is less private than spending cash. All someone needs to know how much money your spending is your wallet key or pseudonym, hence “pseudonymous”.

True anonymity is harder to come by, but coins like Zcash have done a great job of achieving it. It’s an interesting project, with a lot of forks in the road and quite a bit of controversy as well, so let’s get right to it.

What is Zcash? History and use case

Forking from Bitcoin, Zcash was launched in 2014 as “Zerocash”. However, the Zcash project wouldn’t be formally announced until 2016 as a development of that project, developed by US and Israeli cryptographers from MIT, Technion, and Tel Aviv University.

Zcash made history by being the first ever open-source zero-knowledge cryptographic currency.

Now, you either nodded sagely in agreement or your brain just shut down a little, right?

If you didn’t know, zero-knowledge proof cryptography is a system of authentication where no passwords are exchanged. In cryptocurrency, that means the network makes transactions without disclosing the parties or amounts involved. The ledger publicly shows that a transaction has been made, but that’s it – no names, no keys, no amounts.

Zcash uses zk-snark proofs, which stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge”.


So, the zk-snark proofs “prove” or verify transactions without exchanging any data. The result is a currency offering extremely heightened anonymity, protecting user data through shielded transactions while maintaining a secure distributed ledger. No passwords being exchanged also means no passwords can get hacked, making the process an appealing one all-round.

Similarly to Bitcoin, Zcash will have an eventual total sum of 21 million coins and halving every 4 years. The method of distribution and funding has been the source of much controversy – let’s take a look.

Funding and Distribution

I’ll get right to it – 20% of every block mined goes to the backers and developers.

It’s not technically a premine, but it’s similar. Instead of being open source, Zcash is set up like a company, and they take a very hefty cut of all tokens discovered by miners. They refer to this as the Founders Reward, and point out that their cut becomes incrementally smaller as time goes on, and the last chunk of Zcash coins will go to the miners only.

Generally speaking, this makes sense, right? A company has shares, and obviously the people behind the company are going to give themselves a significant amount. In fact, when a company has public shareholders, it’s generally a good idea for the team to hold most of the shares so they can control the decisions being made.

However, with a cryptocurrency where the “shares” and the “product” are one and the same, that’s kind of the problem.

As with premining,  an unequal distribution of tokens makes price manipulation much easier (potentially), leading to serious concerns among the community.

History and Backers

zcash history

So, after forking from Bitcoin in 2014, the Zerocash protocol became Zcash in 2016. After that, the difficult issue of the Founder’s Reward actually led to a hard fork and the creation of Zclassic later in the same year, much like with Ethereum and Ethereum Classic.

The following year 2017 saw Zclassic fork to Zencash!

It got a bit complicated, but they’re all essentially Bitcoin-based currencies with the additional features like anonymity and fungibility, or interchangeability with other goods or services. Miners use the Equihash Proof of Work algorithm to mine the currency, and that keeps the currency ASIC resistant, making it difficult for hackers or bad actors to perform Denial of Service (Dos) attacks.

As a Bitcoin fork, the system confirmation speed is technically the same. However, due to the popularity of Bitcoin, your Zcash transactions are likely to go through faster. Wake me up when the Lightning Network is here!

Zcash is backed by Roger Ver, CEO of Bitcoin.com, and Barry Silbert, who owns CoinDesk and a number of other major enterprises in the cryptosphere. Ver and Seibert both invested early in cryptocurrency, and their massive fortunes are only set to increase with the Founder’s Reward of Zcash, a coin currently worth $1.3 billion and currently number 24 on coinmarketcap.com.

The coin has been overtaken recently by other altcoins in terms of value, but Zcash undeniably has a real use case as an anonymous privacy coin, an increasingly relevant issue to privacy-concerned users.

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