ZCrash, Here be dragons!

Yes I know click bait title.

Been extremely busy with Zcash mining since the Zcash launch on 28 October.

First a bit of background: I mined a bit of BTC back in the day when you could do it on your PC; I did it to support the network. Then life took hold and I lost interest until, like everyone else I saw the price at $1 000. Of course, by that time I had decommisioned that computer and had lost the private keys, so no BTC.

Investigating Bitcoin again, I came across Ethereum. But, I missed the crowdfund, which I definitely would have supported. I was however involved in mining Ether in the test network and during and subsequent to launch.

My discovery was this: Mining sucks! Basically if I took the capital and electricity costs and just bought Ether at the start, I would have been in for 80c per Ether after capital and electricity. In mining I am in for approximately $2 per Ether. Approximately, because I still have the mining rigs, which I have now pointed at Zcash. So simplistically buying and holding seems to beat mining.

Now on to Zcash.

My Ethereum experience was completely different to Zcash. Firstly the Ethereum foundation offered a reward 10% of the live network reward for mining on the test net. That allowed me to test and get used to the Go ethereum client, geth. They also released an optimized GPU miner ethminer. I mined solo, until a few months ago, when the difficulty became too high. Which meant I ran a full geth node, thus supporting the network with mining power and as a node. I found the developers extremely helpful, especially Jeffery Wicke. In hindsite its not surprising that Ether took off like it did.

Now, in the case of Zcash: Only a Linux client and no miner, which foolishly led me to buy a cloud mining contract from Toomim brothers. I massively over paid it, but that is a story for another time. Suffice to say that cloud mining is always a ripoff!

From the get go, it never paid to solo mine Zcash, only to pool mine. I think the developers at Zcash are good, but basically they are implemeneting zk-snarks into a fork of Bitcoin, that’s it, the rest is up to the community. So it’s sink or swim! As a result there are “sharp’ operators out there that are willing to take your money or BTC with no value in return.

So the launch on the 28th went off without mishap. Except that mining was chaotic, pools could not pay, one pool coinsforall.io cleverly offered mining software that was good and worked on older cards, but mined only to the coinsforall.io pool at a 4% fee (its subesequently been reduced to 1%); there are pages and pages of people complaining because of not being paid. They were all aventually pai,d but the frustation and aniexity was off the scale.

Then yesterday, 4 November this was released: https://github.com/mbevand/silentarmy far and away the best miner: It’s free, compiles fast and works on any pool. I will definitely be donating to Mark http://www.zorinaq.com. Right now mining Zcash is more profitable than mining Ether. Ethereum’s difficulty has halved since Zcash started.

At the start, trading in Zcash was chaotic, 3300 BTC per 1 ZEC. There is a trading strategy for this its called, painting the tape, basically you trade with yourself or a trusted counterparty to create the illusion of liquidity and of price, to sucker people into trading. MtGox did it with BTC and someone did it with ZEC. Too my mind ZEC is not worth more than $200: At the moment its $500. But at $200 I am a buyer and a holder.

Another issue is that, a 20% payment on each block mined, for the next four years, goes to the founders. So instead of 12.5 ZEC (after the slow start of a month), a miner gets 10 ZEC and the founders get 2.5 ZEC. Over 21 million ZEC the founders reward comes to 10%. https://decentralize.today/zcash-miners-stop-paying-20-genius-tax-486d9f40884f#.ial784k5

At 20%, the initial reward is too high. We need to be very careful with Zcash, the use for crime is obvious, its already attracting dodgy operators. There are fake wallets that steal your Ether and BTC if you download them. https://forum.z.cash/t/best-gpu-for-zcash/4714 (scroll down to post 5).

So although I like the technology and the client works well and is very stable, this coin is a true anarchists coin. It’s been thrown into the wild: Let’s see if it thrives or dies?

Either way the technology is out there, pandoras box has been opened, there’s no putting it back now.

Never a dull day in crypto land!