Anonymous Cryptocurrency Zcash Launched Today
UPDATE – 10/31/16:
Ethereum founder Vitalik Buterin commented on Zcash’s privacy technology being integrated with Ethereum, saying, “[Z]ero knowledge proofs are on Ethereum’s roadmap and have been for over two months.” It’s currently unclear if zero knowledge proofs would be integrated at the smart contract level or directly into Ethereum’s protocol. Seeing as how a zero knowledge proof transaction would take longer to process than an ordinary transaction, due to the complex math involved, the Ethereum team still has some testing to do. Regardless, Buterin seems very interested in the potential applications of these types of anonymous transactions. “[C]ombining blockchain tech and strong privacy may well be one of the next major frontiers in secure application development.”
Zcash (ZEC) has officially launched, mining their genesis block Friday morning, October 28th.
Zcash is different from other cryptocurrencies because it focuses on privacy. Transactions across their network are kept anonymous through the use of zero-knowledge proofs. The Zcash team took Bitcoin’s model and added their own cryptographic tool called a zk-SNARK, based on zero-knowledge proofs, that allows parties in a transaction to remain completely anonymous. Using their zkSNARK verifier in Ethereum, through “baby ZoE” (Zerocash over Ethereum), discreet amounts of ETH could be traded. Since these protocols allow a prover and verifier to share a common reference without having to exchange any data, this would add another layer of security to Ethereum.
What’s interesting about the Zcash launch is the “trusted setup” required to create integral network parameters. To be able to create the zero-knowledge proofs, they needed to generate a master private key. A major issue with this master private key is if it is not destroyed, someone with access to the key would be able to generate an infinite amount of Zcash, anonymously. That’d obviously be a huge problem for the network, so during their launch they used a multi party protocol.
The Zcash team used six people in their setup, making sure that at least one of the six was an outsider to the Zcash team: Peter Todd, a bitcoin developer. As long as one of the people involved in generating the master private key is honest and deletes their portion of the key, then the key is destroyed, and no longer able to be used to counterfeit Zcash.
The level of privacy Zcash is offering is a double-edged sword. There are fears that this level of anonymity could lead to money laundering. It’s certainly an attractive currency for users of the dark web, as well. Not all uses of Zcash are suspicious though; the banking industry might be interested in that amount of privacy. For example, if they don’t want their trading strategies revealed through a competitor analyzing a public ledger, Zcash would provide a secure platform.
Currently, the Zcash launch is going smoothly. Zooko Wilcox, CEO and co-founder of Zcash, tweeted:
Newsflash: Zcash launch going so smoothly that the engineers, who mostly stayed up all night last night, are eating cold pizza breakfast.— zooko (@zooko) October 28, 2016
As of the writing of this story, over 460 blocks have been mined, with miners currently receiving rewards upward of 0.2 ZEC. The Zcash team designed it so 50 ZEC will be mined every ten minutes. 80% of the newly minted ZEC will go to miners, with 20% going to the ZEC founders.
If things keep running smoothly, Zcash and their privacy protocols might mark a new direction for blockchain technology.