What is Zcash and ZEC token?

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FinanceX

3 min readJan 25, 2019

What is Zcash?

Zcash is a cryptocurrency just like Bitcoin and Litecoin, but with a few improvements to the blockchain technology. Enhanced privacy, zero-knowledge transfers and, in theory, total anonymity mark it apart as a payment system. It uses cryptography to enhance user privacy, so Zcash transactions can either be transparent like Bitcoin, or shielded through a zero-knowledge proof called zk-SNARKs.

What problems are solved by Zcash?

Privacy is the top priority

As an innovative blockchain project, Zcash is developing a completely anonymous open-source transaction network leaving zero traces. So the privacy issue, which is sometimes associated with other blockchain-based cryptos, is nonexistent with Zcash. So in terms of privacy, Zcash is not only untraceable but also unbeatable.

Power-efficiency comes to the fore

Zcash miners are concerned about the power invested in mining this digital currency. Which is why, this crypto aims to develop a mining process that is friendly for every involved CPU and GPU. Mining Zcash has to be memory intensive that prevents the process from getting dominated by application specific integrated circuits that are popularly known as ASICs.

Solving the issues of fungibility

Zcash’s model is very similar to the one employed by bitcoins; the only difference is that its transactions can remain anonymous, and that is what helps in solving fungibility issues that are often faced by the owners of other digital currencies. The main issue with having every transaction openly and clearly traceable on public ledgers is that the coins could be easily tainted. For this reason, some leading bitcoin exchanges have the right processes in place to shut down all the accounts that either have tainted coins or are sending funds to gambling sites. As Zcash is an open-source network, its code can be used for fixing the gaps in the current bitcoin protocol as well.

How is Zcash different from bitcoin?

Zcash, itself, is a fork of the bitcoin protocol. While ZEC is a separate cryptocurrency and maintains its own blockchain, the infrastructure is built on top of bitcoin’s core code. Additions to the underlying code that are specific to Zcash include updating the proof-of-work consensus model and introducing zero-knowledge proofs to enhance user privacy.

Bitcoin, and many other cryptocurrencies, rely on private keys to identify users. While these keys are cryptographically generated, an address that is used for multiple transactions over time can become linked to a particular key, leaving a “paper trail” of sorts that is tied to that user. The bitcoin blockchain keeps a record of every transaction, including the addresses of both parties involved and the amount of the transaction, which is accessible to the public. The Zcash blockchain, on the other hand, only shows that a transaction occurred, without revealing the amount exchanged or information about the identity of either the sender or the recipient.