Nolan Bauerle is a former researcher and writer for the Canadian Senate Banking Committee, and a member of CoinDesk's research team.
In this CoinDesk 2016 in Review special feature, Bauerle covers a topic that's been as yet undiscussed – Zcash, its privacy-powered blockchain technology and how he believes it could empower economics in the future.
In 2016, you could say that for every two crypto-people, you’d find three opinions.
The blockchain industry spawned thousands of conferences and meetups across the globe, and the constant interaction stoked debates and evolved discussion.
Whether it was block size, The DAO, forking, ICOs – all were contested.
But, one particular event this past year stood out by provoking a (near) unanimous effect in the industry. Whenever conversations turned to Zcash, most people flashed a smile.
Its bullish October launch went on to be covered in The Economist and The New York Times as excitement built for its zero-knowledge proof transaction authorization protocol, which creates the conditions for Zcash's fully anonymous cryptographic key.
In doing so, Zcash forced the world to accept the full spectrum of ownership rights that could come through the use of private cryptographic keys.
To understand the history of this achievement, we could see Zcash anonymous key as the final chapter in a story that began with Enigma, Alan Turing and the end of WWII.
Realizing the power of cryptography, the US government recognized the technology as a munition, an arm for war, a designation that restricted international commercial development and trade.
Yet, Blockstream CEO Adam Back (and others) would led a fight to change this in the 1980s.
In 1992, just before the widespread adoption of the HTTP application layer of the Internet (basically, the World Wide Web), the US government permitted international commercial freedom for the development and sale of cryptography.
Much of the cryptography developed for HTTP authentication was for service providers like email, banks and other password-protected websites.
The challenge-response mechanism for authentication in the HTTP meant that in exchange for your mother’s maiden name, your dog's name, your phone number, your social security number, or your bank account number, a service provider managed your cryptographic needs for you.
Meanwhile, Adam Back (through Hashcash) and others kept working to expand the uses of this technology.
In this context, Satoshi Nakamoto's invention of bitcoin can be seen as the first mainstream adoption of this powerful new tool, one that brought private key cryptography into the public eye and into the hands of individuals.
As we’ve come to see, though, bitcoin’s transaction authorization protocols leaves enough information to compromise privacy.
Zero-knowledge proof tech has found a way to avoid this, putting a fully private cryptographic key in the hands of the individual.
In an industry becoming known for the sophistication of its debates, Zooko Wilcox's invention managed to bring some perspective to what the blockchain revolution is about.
It's not just a database invention or a back office efficiency play or a trust machine. It’s about exploring the different ownership rights that come from individuals possessing cryptographic keys, while using them to express consent, forming digital relationships.
You could say Zcash forces the question of whether digital identity (or KYC requirements) and consent should be boiled down to ownership rights around the possession of cryptographic keys.
In 2017, we will likely see keys for identity and consent serving more digital relationships.
Banks will formalize new digital relationships between banks, developers will work to offer interesting uses on the ethereum blockchain and bitcoin will continue to offer the most useful cryptographic keys.
Other unforeseen uses for keys will be developed and new digital relationships will be formalized, but I suspect Zcash's will be behind some interesting ones.
Have an opinion on blockchain in 2016? A prediction for the year ahead Email email@example.com to learn how you can contribute to our series.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Zcash.