Zcash Informational Report - The Zero Knowledge Privacy Protocol Launches October 28th 2016
This is a live document and will be updated based on most recent information.
The following report is NOT intended as advice to purchase software tokens. This report is presented for informational purposes only. ALWAYS conduct your own research before buying digital tokens associated with any software project.
The Zcash network and protocol is the culmination of several years of cutting edge work on zero knowledge proofs. At its core Zcash offers the opportunity for users of a public blockchain to have an unprecedented level of privacy. While Bitcoin has a degree of privacy in that the addresses are not directly connected to the identity of the user, other information about the transaction is exposed to everyone on the public chain, including the amount of the payment. For adoption of public blockchains to reach enterprise users, who require a greater degree of privacy than Bitcoin provides today, Zcash holds the promise of offering a high level of privacy while on a public blockchain.
This report was compiled with information provided by Zooko’s Shanghai presentation, plus an interview with Jay of the Zcash team also while in Shanghai and publicly available papers and content on the Zcash website.
Technology: Zcash was originally proposed as “Zerocash” in a white paper released on May 18th 2014. The proposal put forth in 2014 and refined there after is designed to leverage “zero knowledge proofs” (a relatively new experimental type of cryptography) in order validate transactions without having any details about them (hence the term “zero knowledge proofs”). The end result and benefit of this approach offers a greater degree of privacy for blockchain transactions. Zcash is the first fully implemented version of this proposal and functions on its own blockchain, though there is lengthy discussion about how to connect Zcash to Bitcoin and Ethereum network transactions.
Specifications can be found here: https://github.com/zcash/zcash/wiki/specification
Team: Lead by Zooko Wilcox, the Zcash team includes a number of impressive members who have a long history in the cryptography space, including top scientists in cryptography from UC Berkeley, Johns Hopkins, MIT, Technion, and Tel Aviv University. In addition the team boasts very experienced engineers in blockchain development. Zcash’s advisors include some of the most important movers and shakers in the Blockchain industry, such as Gavin Andresen and Vitalik Buterin. Lastly the team includes top legal counsel in the space.
Terms: Mining only token creation - Already a competitive set of miners have created hardware geared toward mining new Zcash tokens and based on the level of discussion and chatter its reasonable to presume a significant number of miners will begin mining Zcash immediately upon its launch.
Timing: Zcash will be launching the 28th of October.
Timing release details are here on the Zcash forum and @Zooko on twitter will likely be the first to tweet out the official launch.
Pricing: Since all the Zcash tokens are mined after the Genesis block is created and the network goes live, the open market is determining the price via futures exchanges right now and soon via traditional digital token exchanges.
Funds Committed: The Zcash website reports a $1 million investment from a “dream Team” of investors. Including Roger Ver, Erik Voorhees, Naval Ravikant, Ben Davenport, Barry Silbert, Fred Ehrsam, and Vlad Zamfir.
Legal and Organizational Structure: Unlike many other blockchains Zcash structured their token sale, as investment directly in their for profit entity “Zcash Electric Coin Company”. The “Founder Reward” tokens are created over time as part of the standard block reward in the Zcash network. The block reward is divided up 80% to miners and 20% to the “founder reward” during the first 4 years the Zcash network is operational. This has the desirable effect of creating a four year pay out period. So the Founders and early investors effectively have to stick around and continue building value in the network, instead of receiving their reward immediately upon the launch.
A. Risk of Security Weaknesses in Zcash’s Software
The zero knowledge proof cryptography is relatively new having only been proposed a few years ago and Zcash representing the first implementation of those proposals. The highest risk that many foresee is that some aspect of the less tested cryptography is exploited by a clever hack and the privacy aspects of Zcash are compromised. A great deal of work has been done by the Zcash team to have the protocol and code audited by third parties, however putting the code into live production is the only true way to determine its robustness.
B. Risk of Weakness in the Zcash underlying blockchain, and Network
The second major risk is in the key creation ceremony for the Genesis block. This process, if compromised by enough bad actors would undermine the privacy of the Zcash network. This is a one time risk at the launch of the network, which the team is seeking to minimize by having multiple security and auditing groups involved in the key creation ceremony. If even one or two of the participants is honest most of the privacy advantages of Zcash will be preserved.
C. Pairing Crypto Selection Risk
One of the main areas of risk technical experts point to is in the cryptographic assumptions of the pairing crypto the Zcash system is based on. See here for details, https://z.cash/blog/pairing-cryptography-in-rust.html This relatively new crypto primitive is an important part of how Zcash functions and if it has any unforeseen issues then that will be a fundamental problem for Zcash.
D. Long Term Scalability Risk
Compared to transactions on the Bitcoin network, Zcash proofs are a good bit larger due to the use of Zero Knowledge Proofs cryptography. This will lead to a heavier load on nodes running the Zcash network software. Though its worth noting some optimizations in proof size have already been made and this will be a continued area of research and development.
E. Regulatory Risks
While privacy is required for many enterprise applications and is also enshrined as a fundamental human right in most jurisdictions, there is always the concern that a regulator will take a negative view of the technology or its use cases and seek to censor its usage or otherwise prevent its use in their jurisdiction.
The Zcash project has attracted a great deal of attention from the blockchain community and has the support of many longtime cryptographers, bitcoiners, ethereum technologists, and generally those dedicated to decentralized systems development.
There remains a fundamental risk with the newness of the zero knowledge proofs and where or not someone will find a way to compromise them. However I’m of the opinion that testing and theory only go so far, and that ultimately this technology has to be put into live production in order to see if it will withstand the clever attacks the world’s hackers will throw at it.
Best of luck to the Zcash team and those interested in owning Zcash should read deeply about the technology before getting involved, so as to make an informed choice for themselves.