Should You Invest in ZCash? (Opinion)

ZCash decidedly built upon the Bitcoin’s values; they took the best of Bitcoin and refined the key aspects of it while implementing stronger features that Bitcoin was lacking.

However, their methods have left many feeling like their moves are too controversial to make ZCash a coin that will last. Others say it didn’t go far enough to go shoulder-to-shoulder with coins like DASH.

Does a coin need to be 100% open source, fully decentralized with no legal liabilities today or tomorrow, and have no government backing to survive public opinion?

ZCash is one of those crypto coins that took a few steps outside of what makes cryptocurrency appealing while adding features that the world’s most popular cryptocurrency lacks; additional privacy measures, one kilobyte transactions, faster transaction processing.

Plus they’ve got one hell of a panel of advisors: Vitalik Buterin and Gavin Andresen among others. That’s an explosive line-up.

At the time of writing, ZEC (ZCash) is ranked 15th of all cryptocurrencies with a coin value of $269.28 USD, and a market capitalization of $705.14 million. It has held this position, or higher, for quite some time.

But where did it stumble to deserve such controversy and vitriol from the cryptocurrency community at large? Let’s take a deep look at ZCash from all sides and consider its merit in the emerging cryptocurrency market.

History of ZCash

ZCash originally began back in 2013 as a project that was commonly known as “ZeroCoin”, originating from the University Department of Computer Science at John Hopkins University in Baltimore, United States.

ZeroCoin was intended to build upon Bitcoin technology with a focus on privacy. Years later, it settled down as ZCash; an open-source technology operated by a private company.

ZCash is backed by a leg of the Israeli government and this is going to rub a lot of people the wrong way.

ZCash was founded by a gentleman named Zooko Wilcox-O’Hearn, a very, very established cryptographer. In spite of my criticisms, I greatly respect his work, with Least Authority being one such technology he’s championed. Additional team members include names like Roger Ver, Barry Seibert.

What Does ZCash Do?

The purpose of ZCash is intended to all the things that Bitcoin can do, but more securely, faster, and cross-chain.

Simply put; ZCash is like Bitcoin with a much more astute application of truer privacy, making it one of the best platforms for financial anonymity at this time in the cryptocurrency market. Hands down, great work. But does it hold up when compared to Dash or Monero?

ZCash is a method of unregulated value transfer that is gaining popularity among cryptocurrency enthusiasts and professionals alike. This is due to its baked-in privacy measures and faster transaction speeds.

However, just like Bitcoin, it still doesn’t offer double-spend protection in real time (something that Dash does). Confirmations take around 2 and a half minutes for first confirmation with ZCash; not exactly great for buying anything at a convenience store, if that’s your thing.

One perk of ZCash is its ability to commit cross-chain transactions, meaning that you can exchange other cryptocurrencies across its protocol.

What Makes ZCash Different?

ZCash is, in a nutshell, a much more secure and private version of Bitcoin. It still operates in many of the same ways that Bitcoin does; changes to the technology requested by the community outside of its governing body will result in a fork, the code is open source, and it operates on the same kind of subsidies that Bitcoin does; miners are subsidized, nodes aren’t.

Where ZCash differs is that it’s run by a private company. Transactions have the option to be truly anonymous and private, go cross-chain, and transactions are so lightweight they can be processed in under six milliseconds. That’s a massive improvement over Bitcoin.

ZCash protocols like zk-SNARK which allow for anonymous transactions have even been partially adopted by competing blockchains like Ethereum. ZCash is truly a hybrid worth looking at.

But the party ends there. Some say that it being run by a private company with politically charged backers (note the typo “demoninations” in this article, at the time of this article’s writing) is questionable and not in the spirit of cryptocurrency, and transactions –mining—having a kind of “tax” for the founders leaves a bad taste in many mouths.

Like Bitcoin, ZCash will have 21 million units by the time it’s done issuing coins. In the first 4 years, 20% of its coins will be transferred to “Founder’s Rewards”. It is a private company, after all.

Another key differentiator is that ZCash makes cryptocurrency transactions – and the coins themselves – fungible.

In lay terms, coins are swapped constantly, making them hard to trace and everything is optionally encrypted.

If I was being “ultra lay”, I’d say it’s sort of like money laundering is baked into the platform, if only metaphorically (can I say that?). This is an editorial piece, so I may have my terminology wrong. But you get the idea.

The coins you hold or spend are algorithmically mixed up so it’s impossible to trace them; combined with transaction encryption, you can’t follow the crumb trail as you would with Bitcoin if you choose to.

This makes it harder for the IRS to do its business (and it makes them a prime target for the IRS). I’m not so sure I’d trust a private company, with all the legalities that entails. A private company owning this bad boy means it can be subpoenaed.

Their zero-knowledge protocols may protect them today, but it leaves a bad taste in my mouth. Sort of like Apple and that whole iPhone decryption scandal with the FBI. If I were to be sneaky, I’d rather be sneaky on my own and not rely on the platform to be as such.

ZCash also handles mining subsidies differently. It bakes in a “tax” called the “Founder’s Reward” into every transaction; meaning that the employees of the business behind ZCash are getting a kick back every time you use it. Personally, I don’t take issue with this. Transaction sizes are so small –1 kb—so even with that little “tax” I would make money as a miner, even over and above Bitcoin. But again, that doesn’t sit well with everyone and is a large part of the controversy surrounding ZCash.

On the flip side, Ethereum is borrowing aspects of zk-SNARK technology and implementing it into their platform. So ZCash is a bit of a leader. But red flags abound.

Does ZCash Solve a Problem?

ZCash wants to solve Bitcoin’s privacy problem, but can it do that as a private company? It’s a whole lot easier to nail a business to a legal cross than it is a fully decentralized system.

Oh, in addition to that Founder’s Reward “tax” of 10%, they donate 1% to nonprofits or charities, so I guess they help solve some problems. But so did the Body Shop, and we all know they’re full of it, too. It’s a little too “feel good” for this blogger. Maybe it’s good, but I feel like it’s playing on the sympathies of their prime market to influence investment decisions. Millennials need to be cold when it comes to choosing the world’s next currency. Donations are a hidden complexity you may not want to endorse.

I’ll invest; but only because I watch the crowd, not the coin.

Last Thoughts

ZCash improves upon Bitcoin, but does it do so in ways you approve? Controversial funding, still no double-spend protection beyond a minute and a half, and it claims to be anonymous (I believe it really is) yet it registered itself as a business instead of remaining open source, through and through. It’s a tough call.

I couldn’t for the life of me rule it out as I personally invest in it, but I don’t see it as a coin that would survive legal SEC-level scrutiny; they don’t like complete anonymity, and they’ll chip away at that with unrepentant regulation one day.

Invest today, dump when the time is right. Thoughts? Let me know in the comments.

Related

2 Comments

  • John
    Posted February 7, 2018 6:39 am 0Likes

    First, Thank You for your article. I just started learning about cryptocurrencies and this site has been helpful. As a beginner i understand i may sound silly but i have a question about something you stated in the article. You say It will difficult for the IRS or SEC to regulate ZCASH. My question is then why is JPMORGAN using it’s technology and what do you have to say about Zcash co-founder Zooko Wilcox statement:
    “What we have now done through our partnership with JPMorgan is use zcash technology previously pioneered in the open zcash cryptocurrency to create protected and auditable transfer of token ownership on the JPMorgan blockchain

    If you can audit JPMorgan’s blockchain, why can’t one audit Zcash??

    Thank You for your time

    • Jim
      Posted May 11, 2018 11:42 am 0Likes

      John, they can audit JPMorgan’s blockchain because they used Zcash TECHNOLOGY, most likely zk-SNARKS, and not the actual Zcash blockchain itself. There’s a difference.

      I hope this helps you and further readers.

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