Zcash is an altcoin that provides privacy and selective transparency of transactions. Zcash payments are published on a public blockchain, but the sender, recipient and amount of a transaction can remain private. The Zcash Trademark, ZEC, is not an official ISO 4217 and, like Bitcoin, Zcash Coin has a fixed total supply of 21 million units.
Comparison Of Data Protection
For traditional blockchains such as Bitcoin and Ethereum, each entry in the blockchain shows both the amount of the transaction and the parties involved in the transaction. Bitcoin’s CoinJoin disguises the amounts and recipients by allowing users to match transactions. It does not hide the total amount of pooled transactions, but only how the total amount is divided between future transactions. It also requires active participation between customers.
Bitshares 1.0 has the ability to hide the entire transaction amount, but not the recipient of the transaction. However, the total transaction amounts can be calculated by checking the previous and future values of the transactions. Monero goes one step further by creating a large number of dummy inputs and outputs for each transaction, connecting a much larger set of addresses to the given transaction.
This can also release information because clients need to create dummy transactions that mimic real transactions. Between April 2014 and January 2017, 62% of all Monero transactions could be linked, as the client software generated dummy inputs for wallet transactions without credit. Other patterns release over 90% of transaction information.
Zcash Coin uses novel zero perception cryptographic proofs (zk-SNARKs) to protect both the amount and the recipient on specially “shielded” transactions. This increases the amount of potential inputs and outputs for a given shielded transaction to potentially any shielded address in the Zcash blockchain that an opponent cannot exclude through other information sources.
Although the probability of a shielded input corresponding to any previous shielded output is not equal (for example, older addresses are less likely to be used), no information has been released by the transaction itself, other than what can be derived from timing and metadata (number of shielded transfers, etc.). In principle, anonymity is as great as it can only be for the public blockchain, since a transaction must be recorded.
Zcash also enables transparent transactions that do not offer any private property rights at all. This is due to protected addresses that lack certain features (such as multi-signature wallets) and the hardware requirements to create a shielded transaction (a copy of the blockchain and ~ 3 GB RAM). It is therefore possible to correlate transactions when a transparent address sends a given amount to a shielded address and this amount is later transferred to a transparent address. What is private can now be derived through indirect knowledge, through the knowledge of “inputs and outputs”.
It is also possible that a network opponent watches IP addresses to correlate transactions. VPNs, Tor and I2P can be used to hide IP addresses and there are ongoing efforts to enable Tor by default.
Zcash supports the “selective disclosure” capabilities that allow a user to optionally prove that transactions have occurred or to discover keys that allow their transactions to be viewed by another party. One motivation for such possibilities is to make it easier for users to comply with money laundering or tax regulations. This means that transactions are auditable, but disclosure is under the control of the participants. Zooko Wilcox, the founder of Zcash, has held virtual meetings with law enforcement agencies around the US to explain these basics. Wilcox has had it recorded that “they have not developed the currency to facilitate illegal activities”.
Zcash differs from most crypto currencies in that the monetary base requires the generation of parameters that could be misused to counterfeit Zcash if the “toxic waste” generated in the process was not destroyed. A compromise of “toxic waste” would not affect the anonymity or security of individual transactions, but would only allow secret inflation.
This threat was mitigated by the use of a multi-party system in which six people had to work together to manipulate the currency. Participants included Zooko (CEO of the company behind Zcash) and Bitcoin core developer Peter Todd, a well-known Zcash critic. Zooko’s plans were also observed by reporters and three of the participants took part in the filming.
All parameter generations took place on the new hardware, which was separated from the Internet, whereby communication took place to a coordinating server with read-only DVDs. The DVDs were archived and hashes of their contents published online.
Currently Zcash Mining with GPU and CPU is possible. Zcash remains resistant to mining with ASIC-based mining circuits, due to the Equihash algorithm.