A cryptocurrency with the promise to bring a new kind of anonymous digital transaction is expected to launch today.
With the mining of the first block of code, a new immutable ledger of transactions, known as a blockchain, will enter an already thriving market, one that boasts notable entries including bitcoin and ethereum.
But the Zcash blockchain differs from bitcoin, the first public blockchain, in two key ways. First, the transactions clear in a fraction of the time. Second, and arguably more important, Zcash is based on an internally developed cryptographic tool called a zk-SNARK that doesn’t require that the parties involved in a transaction exchange information.
Though the Zcash team tends to shy away from describing the functionality as anonymous, for most purposes, that’s exactly what the technology offers.
And while the Zcash cryptocurrency (ZEC) is mined by a community of users on a public blockchain (a common criticism against bitcoin), this increased control over who can see the transactions holds the potential to attract a whole new set of users and businesses that like the idea of fast, cheap transactions, but not the audit trail that any data miner can track down.
In spite of the obvious appeal such privacy would offer to those in dark markets, Zcash’s co-founder and CEO, Zooko Wilcox, says that for the digital currency to really take off, the whole gamut of people and companies that that stand to benefit need to get involved.
Wilcox told CoinDesk:
“I’m very greedy about where Zcash should go, into how many niches it should be pushed because the benefit is directly related to how many people use it. The diversity of users, and languages, and cultures not only makes it stronger and more resilient, it also makes it more and more valuable.”
It takes a village
With a proof-of-work algorithm that depends on how much RAM processing the miner owns, Zcash launched into beta earlier this year and quickly developed a small but passionate ecosystem of developers.
An open-source challenge hosted by the company resulted in multiple submissions for new ways to mine the currency. Then, earlier this month Genesis Mining announced its miners would integrate with the cryptocurrency.
At the time of launch, multiple exchanges and wallets are rumored to already be working on product integration. Digital currency wallet Jaxx told CoinDesk it will launch its own Zcash service “a few days after the launch”, and digital currency exchange Shapeshift said it will support ZEC “as soon as we have the liquidity available.”
While there is also a healthy futures market developing, Zooko said he would prefer Zcash be used in “real financial exchange, not speculative applications.”
The bottom line
Though Zcash is a for-profit company, it does not currently have a sales team.
Instead, Zooko said he personally leads an informal outreach effort that relies heavily on the open-source community and the Zcash integration guide to help build products.
At least one firm is interested in selling “professional services to extend the Zcash technology”, Wilcox told CoinDesk. Further, Zcash itself is currently in the early phases of exploring selling similar services to enterprises interested in transaction privacy for their customers, he said.
“Clearly there’s a lot of value here,” said Alan Fairless, an early investor in Zcash and the co-founder and CEO of Spideroak, a zero-knowledge security firm. “But, I expect the market will have to experiment to find the ideal business use cases.”
Fairless said the reason he invested in Zcash is because he believes the cryptocurrency is part of a bigger-picture change that will find consumers and companies placing a premium on not having to hold expensive customer data.
Data breaches as a result of losing that information cost an average of $4m per hack according to an IBM report earlier this year.
“For most businesses the most valuable things they hold is payment information,” said Fairless. “And this provides a workaround.”
While Zcash’s proof-of-work and privacy functionality is significantly different from bitcoin’s, at its core, the cryptocurrency still has a lot of the same DNA.
This design choice was no accident either, according to Zcash technical advisor, Arthur Breitman, who is also the co-founder of distributed consensus platform, Tezos.
Breitman has been an advisor to Zcash from its early days and tells CoinDesk that the decision to build on a fork of bitcoin was about more than leveraging the blockchain’s proven security.
“Zcash was designed on purpose to be as similar as possible to bitcoin,” he said, in statements that showcase the impact bitcoin continues to have on the wider blockchain industry.
“The reason is to make it easier if you have coding knowledge for bitcoin then you can easily use Zcash.”
The skeptic’s ceremony
In coversation with CoinDesk, Todd called into question everything from Zcash’s business model (which puts a large chunk of the early mined coins in the hands of the developers) to the decision to introduce new code to the bitcoin codebase.
As part of a “ceremony” earlier this month, Zcash hired Todd and five others to help create the code that would eventually form the foundation of Genesis Block. Even more complex, the firm developed a special protocol that required multiple participants in separate geographic locations cooperatively construct the public key needed to launch the chain.
Though Todd says he would “be surprised” if anyone attacked the launch ceremony, he warns that possible future improvements to the blockchain requiring a hard fork would require another ceremony.
“If you try to do this with a live system, you’ll want to be very very careful,” he said.
Amid listing his other concerns about the strength of Zcash’s security, Todd conceded one use case he was interested in.
Todd places Zcash in a category with Monero, which he says is useful to purchase different currencies as a way to disguise one’s transactions.
“It’s only if you want to hold Zcash that any of this even matters,” he said.
As for Zooko, he waxed poetic about what the official launch of the currency means to everyone — including skeptics — who helped make it a reality.
“The genesis block is kind of beautiful. It’s almost a collective simultaneous expression of a whole bunch of people uniting together and agreeing that they are are all going to use this as a common point of reference.”
Disclaimer: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Zcash.
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