In his Permanent Record memoir, former CIA employee turned dissenting whistleblower, Edward Snowden, states: “Saying that you don’t care about privacy because you have nothing to hide is no different from say you don’t care about free speech. because you have nothing to say. When you say, “I have nothing to hide,” you say, “I don’t care about this right. “
As Snowden discovered, three-letter government agencies have made efforts to invade the privacy of its citizens time and time again. Add to that the Big Tech monopoly controlling and negotiating every digital fingerprint, and it’s clear that the erosion of our privacy has been on a truly unprecedented scale. Loss of privacy can inflict tangible damage on individuals, ranging from unconscious elbow nudging and behavioral manipulation to identity theft and financial ruin.
Zcash is a leading cryptocurrency aimed at putting the balance of power back in the hands of users as the world accelerates its transition from the analog to the digital realm. Launched in October 2016, Zcash is a fork of Bitcoin aimed at using cutting edge cryptography to provide increased privacy to its users. Comprised of computer security specialists with roots in the underground Cypherpunk movement, the Zcash team has pioneered the development of succinct, non-interactive knowledge argument cryptography (“ZK-SNARK”).
ZK-SNARK serves as the technological basis for private transactions and allows users to securely transmit transactions on the Zcash blockchain while concealing crucial information related to each transaction. Unlike the Bitcoin blockchain where all wallet addresses and address amounts are publicly visible, “protected” Zcash transactions allow Zcash users to possibly conceal their wallet addresses and amounts traded.
During a conversation about Zcash’s mission, Andre Serrano, Business Development Manager of Electric Coin Company, said, “At ECC, we believe that everyone should have access to a fair and open currency without censorship or surveillance. We are building Zcash to give everyone the same opportunity to access economic freedom. Today, Zcash offers the strongest form of privacy among any cryptocurrency on the market. Electric Coin Co. engineers and cryptographers have developed the first practical implementation of zero-knowledge evidence to provide secure and confidential transactions and we continue to develop these capabilities.
Halving event in 2020 could act as a catalyst
Beyond offering private P2P transactions, Zcash aspires to be a global store of value similar to its predecessor Bitcoin. Like Bitcoin, Zcash coded a cap of 21 million units with a halving event that cuts the inflation rate in half every four years. At 7:37 a.m. EST on Wednesday, November 18, Zcash successfully completed its first halving in which the miners’ rewards were reduced from 6.25 ZEC to 3.125 ZEC per block. Annual inflation then fell from ~ 25% to ~ 12.5%. This is significantly higher than Bitcoin’s annual inflation rate of ~ 1.8%; however, Zcash is earlier in its life cycle and its inflation rate is expected to decline over time.
Cryptocurrencies that have a halving event tend to perform well shortly after the event. Measured from six months before the event to six months after it, the main assets with a halving event recorded an average gain of 78%. Among the assets measured, the only asset that did not perform after its halving event is Bitcoin Cash.
New developments on the horizon
Perhaps even more important than the reduction in supply, the Halving event came with the fifth network upgrade, called Canopy.
Zcash’s governance and funding decisions are determined by a delicate interaction between Electric Coin Company (ECC), the non-profit Zcash foundation, and the broader community of token holders and third-party developers.
Whereas previously the Zcash Miner Award incorporated an unpopular Founder’s Award (rewarding early investors, founding scientists and employees with 20% of the overall award), Canopy allocates 20% of the overall award to three entities: the new fund major grants (8%), ECC (7%) and the Zcash Foundation (5%). The Major Grants Fund will support long-term development and administer the funds with input from the wider community.
Serrano noted, “With the Canopy upgrade, a new community development fund is secured from 2020 to 2024. We believe this will foster a diverse and resilient ecosystem with greater decentralization. We will continue to double our mission and continue to innovate, develop and evangelize in the name of Zcash and financial privacy. “
As a privacy-focused cryptocurrency, Zcash presents unique risks distinct from other cryptocurrencies. Due to the protected pool and the ability for users to trade anonymously, investors were concerned that Zcash would be delisted from major stock exchanges. Regulators and policymakers have expressed concerns over the use of privacy coins such as Monero and Zcash for money laundering and illicit activity. In fact, the Shapeshift crypto exchange delisted Zcash, Monero, and Dash earlier this month due to regulatory pressure.
However, the New York-based crypto exchange Gemini took the opposite approach allowing users to withdraw funds to protected addresses, the first major US exchange to do so. Much like ATM transactions, crypto ramps and disconnects can be scrutinized and regulated, but P2P transactions themselves might look like anonymous cash transactions.
Regardless of the legal apparatus surrounding privacy coins, users and businesses will prioritize privacy elements in order to conduct meaningful business transactions and facilitate a truly crypto-native economy.