BMJ Score: 4.5
Description14 Investors read this
Zcash is a privacy-oriented digital currency that leverages the latest advances in cryptography to allow its users to make anonymous transactions.
This digital currency leverages zero-knowledge proofs, which are mathematical proofs that allow two participants to verify transactions without disclosing any other information. As a result, digital currency enthusiasts can use Zcash to make transfers without revealing the sender, recipient, or amount sent.
The Problem and Solution
The first bitcoin came in to existence in 2009, and in the years since, many different digital currencies have been created. Some of these digital assets, including bitcoin, have made efforts to provide users with privacy.
Bitcoin has failed to provide anonymous transactions, instead offering users pseudonymous ones. Bitcoin transactions take place between addresses, which are randomly generated strings of letters and numbers. Over time, many transactions can attach to one of these addresses, offering transparency in to the history of the user associated with the address.
Zcash takes a completely different approach, leveraging zero-knowledge proofs called zk-SNARKs, which are proof constructions that let a sender and recipient verify a transaction without revealing their identities or the amount sent.
Zcash, which is "built upon and extends the Bitcoin protocol," according to the website's FAQ section, offers a marked improvement over bitcoin in terms of offering privacy.
As a result, the units of Zcash are fully fungible, meaning that they are completely interchangeable. Since there is no history to these coins, differentiation is nearly impossible.
Whereas some units of bitcoin have been red-flagged after being involved in high-profile hacks, Zcash's anonymous nature should prevent it from suffering this same fate.
Investors should keep in mind that not all Zcash transactions are anonymous. The digital currency has transparent addresses, which function just like bitcoin addresses, and shielded addresses, which offer the protections that come from leveraging zero-knowledge proofs.
Certain third-party wallets will only support transparent addresses, and this factor has detracted from the fraction of Zcash users leveraging shielded addresses.
At the time of this writing, less than 15 percent of Zcash transactions were shielded, according to data provided by Zchain.
The Zcash Company has some impressive team members, including a CEO with an established reputation, scientists from top-shelf universities, and advisors who are essentially famous in the field of digital currency.
Zooko Wilcox, founder and CEO, has more than 20 years' worth of experience in cryptography, decentralized systems, information technology, and startups.
The scientists listed on the Zcash Company website include professors and Ph.D. students at Johns Hopkins University and the Massachusetts Institute of Technology.
Further, both Gavin Andresen, who was previously the lead developer of bitcoin, and Vitalik Buterin, a co-founder of Ethereum, serve as advisors to the Zcash Company.
Zcash trades under the token ZEC.
By purchasing ZEC, you are acquiring a speculative asset. ZEC prices have enjoyed sharp increases at some points, surging to more than $2 million during their first day of trading, according to CoinDesk. However, the value of this digital currency quickly fell from this peak, trading for roughly $70 less than a month later.
The total circulation of this digital currency is capped at 21 million, a factor that could help contain inflation.
Zcash has a lot going for it. The digital currency benefits from cutting-edge technology, high-profile team members, and a lot of positive media. Edward Snowden, for example, stated on Twitter that "Zcash's privacy tech makes it the most interesting Bitcoin alternative."
However, due to its anonymous nature, Zcash must also cope with concerns about its use in illegal activity. The regulations surrounding this digital currency are uncertain going forward, so it is impossible to know how the decisions of government officials will affect Zcash.
Further, there are many substitutes for Zcash, for example monero, another privacy-oriented digital currency that has managed to gain significant adoption.
In spite of these concerns, BMJ analysts gave Zcash a positive evaluation, rating the digital currency a 3.8 out of 5 for its short-term potential and a 4.2 out of 5 for its long-term potential.
If you are considering investing in digital currencies like Zcash, keep in mind that investing is risky, and due diligence is crucial. Fortunately, there are many resources available for those interested in learning more about these innovative assets.
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Bitcoin Market Journal analyst briefing for Zcash.
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