On November 18, Zcash will undergo its first halving which will drop its inflation rate from 25% to 12.5%.
What is Zcash Block Halving?
Block halving event happens every 4 years on Zcash blockchain. Zcash’s initial block reward was 12.5 ZEC, new block reward will be 3.125 ZEC. The block reward splits every 4 years (840,000 mined blocks). This lowers the rate at which Zcash is generated. The halving is periodical and programmed into Zcash’s code.
Why Halving?
Conventional FIAT currencies allow governments or banks to print money and cause inflation. In Zcash’s case, the total supply will be maxed out at 21,000,000 ZEC. Printing extra money causes inflation, if there is no extra money printed, the value of the Zcash should increase as demand rises (more people will start to use Zcash) as supply lowers or stays flat (no more Zcash are "printed"). This makes Zcash similar to gold, which has limited supply and cannot be "printed" or artificially created.
This is the same concept with Bitcoin and other cryptos with the halving code such as Grin, Litecoin, Bitcoin Cash, among others.
But will Zcash Halving Matter?
Where does Zcash fit into the cryptocurrency monetary stores of value?
One fundamental problem with Bitcoin, and nearly every other cryptocurrency, is that they’re completely transparent.
Even just making a simple payment to a counterparty may reveal your entire financial history on Bitcoin - a status quo that is unacceptable to many.
“Cryptography used to be an obscure science, of little relevance to everyday life. Historically, it always had a special role in military and diplomatic communications. But in the Information Age, cryptography is about political power, and in particular, about the power relationship between a government and its people. It is about the right to privacy, freedom of speech, freedom of political association, freedom of the press, freedom from unreasonable search and seizure, freedom to be left alone.” - The Code Book, Simon Singh
Cryptocurrencies are built upon the philosophy that power is better distributed in the hands of the many rather than concentrated in the hands of the few.
With the invention of Bitcoin, Satoshi Nakamoto put this philosophy into action. Bitcoin was created with the explicit goal of providing a check on central bankers around the world prone to mismanaging money supplies and abusing their immense power as gods of the global monetary system.
Storing your assets in transparent addresses and attempting to “anonymize” them through technologies such as mixers, only to return to transparent addresses doesn’t solve this privacy problem.
“Unfortunately, almost everyone has this backwards: they think that privacy comes from putting your money through something, which is why one of the most common uses of Shapeshift when Yousaf etal investigated was converting BTC to XMR and then back to BTC.”
One of the defining features of a cryptocurrency is that its ledger, containing all transactions that have evertaken place, is globally visible. You can see the transactions by scanning on the relevant block explorer. As one consequence of this degree of transparency, a long line of recent re-search has demonstrated that even in cryptocurrencies that are specifically designed to improve anonymity, it is often possible to track money as it changes hands, and in some cases to de-anonymize users entirely. With the recent proliferation of alternative cryptocurrencies, however, it becomes relevant to ask not only whether or not money can be traced as it moves within the ledger of a single cryptocurrency, but if it can in fact be tracedas it moves across ledgers. This is especially pertinent given the rise in popularity of automated trading platforms such as ShapeShift, which make it effortless to carry out such cross-currency trades. In this paper, we use data scraped from ShapeShift over a thirteen-month period and the data from eight different blockchains to explore this question. Beyond developing new heuristics and creating new types of links across cryptocurrency ledgers, we also identify various patterns of cross-currency trades and of the general usage of these platforms, with the ultimate goal of understanding whether they serve a criminal or a profit-driven agenda.
This is why Zcash was invented. Storing your assets privately, not just transacting them privately, may be the only way to ensure absolute financial privacy in the crypto world.
When Zcash (ZEC) launched in 2016, it was one of the most hyped cryptocurrencies ever (it was momentarily worth more than Bitcoin, in its first day of very low-liquidity trading).
However, since its launch, ZEC has declined significantly in price to say the least.
Beyond general educational issues around Zcash, some Zcash observers suspect ZEC’s downward price action has been attributable to miners selling their newly mined ZEC.
Zcash’s annual inflation has been extremely high in its early years.
The hope then is that Zcash’s first halving set to occur on November 18, 2020 could provide important relief in this respect.
However data indicates hope for this specific reason may not be rewarded.
Assuming miners sell all their ZEC as they mine it, they still have only historically made up less than 5% of ZEC daily trading volumes over the past year.
The measure isn’t perfect, but its a good enough proxy to show that miners may not be what’s holding ZEC back.
A more interesting narrative for Zcash’s halving is that it may reinforce ZEC’s sound money principles.
While I’d somewhat agree with this view, focusing on the halving as a catalyst misses the point. Reason being, fixed supply cryptocurrencies like Zcash and Bitcoin aren’t interesting because their issuance rate halves every four years, they’re interesting because their issuance schedule is predictable and deterministic.
This is why from a narrative perspective it's not incredibly noteworthy that Zcash’s annualized inflation rate will drop to 12.5% on November 18.
This is all predetermined.
What then does matter for Zcash this month?
Zcash’s upcoming Canopy upgrade, Zcash’s roadmap beyond 2020, and commentary on monetary maximalism, price buzz …?
Zcash may be finally reaching a light at the end of the tunnel. Only time will tell what’s on the other side of it.
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Have a Z-reat Z-cash halving moment, Adios! 😎
