Zcash, the successor to Zerocoin (originally created by cryptography professor Matthew Green and his students), is now complete after being in development for two years. The protocol promises to be the most anonymous cryptocurrency on the market due to a recent breakthrough in privacy technologies called “zero knowledge proofs.”
Bitcoin’s Main Flaw
Bitcoin is currently by far the most used cryptocurrency, worth over $10 billion in market capitalization and about $200 million being transacted every day (in Bitcoin). However, Bitcoin has one major flaw: Its transactions are transparent to everyone, so everyone--not just governments--can track payments made by anyone else.
Users pay with wallet “addresses” (cryptographic hashes), which are pseudonymous because they're just random strings of characters. However, those addresses can be tracked to real names, especially when users pay through middle-men services such as BitPay or Coinbase that are required by law to ask for users’ personal information when signing up for an account.
Some people can use Tor to hide their real identities when paying with Bitcoin from their real wallets, but it’s easy to make mistakes and reveal your identity when browsing the web. Plus, the Tor browser itself can have vulnerabilities, which can sometimes allow governments to track users.
Zcash's Privacy Promise
There are multiple entities out there trying to solve the anonymity problem of Bitcoin, most of which involve "mixing services." With this solution, money is first sent to a centralized pool, and after some time you can retrieve different coins with the same total value from the pool. The level of privacy offered by this solution is given by how many people send their money to any given pool. The users also have to hope that the pool owners won’t just run away with their money.
Zcash uses advanced cryptographic techniques called “zero knowledge proofs” (zk-SNARKs) to ensure that only the payment itself is transparent, but the sender, recipient, and amount of a transaction remain private.
"This is the first protocol of its kind," said Zooko Wilcox, the CEO of the company and a well known security expert, in a blog post.
"It is the product of years of scientific research, advanced engineering, and diligent security work. Zcash is a group of scientists and hackers who came up with a way to combine blockchains for immutability with encryption for data security. These two things are separately well understood, important, and widely used, but they’ve never been put together before now."
"We encourage the Zcash community to experiment with us, and to mine, run a node, and join the growing and friendly community. Zcash is a consensual currency, a community network, and developer-supported cryptocurrency; your active participation makes the network stronger,” added Wilcox.
The team also said that if Bitcoin, whose transactions are transparent to all, is like HTTP, then Zcash is like HTTPS. The analogy is quite apt considering HTTPS encrypts traffic so that no one can see what is being sent, by spying on the network. In the same way, nobody can see what the transactions represent in the Zcash network, nor who made them or received them.
The Zcash blockchain is now live, and people can mine Zcash or make transactions with it. The official client can be downloaded from the company’s website (beware of fake clients from other parties).