What is ZCash (ZEC)

Zcash is a proof-of-work blockchain designed for privacy. Network transactions can either be public or private/shielded, where senders, recipients, and other transaction details stay secret. This mix of public and private options makes Zcash flexible, as people who want privacy can use shielded transactions while others can use transparent addresses or share view-keys to meet auditing needs.

How Zcash works

Zcash was based on Bitcoin and was originally created to improve the latter’s privacy features. Both blockchains use a similar hashing algorithm (SHA-256), and anyone can run a node or mine new blocks. The main difference is privacy. Zcash includes the Zerocash protocol, which uses zk-SNARKs (zero-knowledge proofs).

zk-SNARKs are essentially cryptographic proofs that let you check if something is true without revealing what it is. To make zk-SNARKs work well, Zcash held a trusted setup ceremony to create public parameters. This step was needed to keep proofs small and fast to check. Later upgrades brought in a new proof system called Halo 2, which avoids the need for future trusted setups

When someone makes a shielded Zcash transaction, the network checks a zk-SNARK proof to confirm the coins exist and aren’t double-spent, but it never sees the complete transaction details. To anyone looking at the blockchain, a shielded transfer just looks like random data. If a crypto wallet or exchange doesn’t support shielded transactions, it can send funds through a transparent address, so everything still works.

Origin and development

Zcash started in 2013 when academics wanted to solve Bitcoin’s privacy problems. The first idea, called Zerocoin, was created by researchers from Johns Hopkins and MIT, including Matthew Green and Eli Ben-Sasson. In 2015, the team formed the Zerocoin Electric Coin Company (later renamed Electric Coin Company) with Zooko Wilcox-O’Hearn as CEO.

Zcash launched on October 28, 2016, and has kept improving through upgrades with code names. Updates like Sprout, Overwinter, and Sapling made the network faster and more secure. Sapling in 2018 especially made shielded transactions quicker and easier. In December 2019, the Blossom upgrade reduced block time to 75 seconds. In 2020, Zcash replaced the founders’ reward with a grants system and added more upgrades like Heartwood and Canopy. In 2022, the NU5 upgrade brought a new Orchard shielded protocol and Halo 2 proofs. In 2023, Zooko Wilcox-O’Hearn left ECC and was succeeded by Josh Swihart.

Zcash’s governance has also changed over time. The Zcash Foundation, a nonprofit started in 2017, works alongside the for-profit ECC to fund outreach and set standards. In 2020, ECC said it would become a public-benefit organization called the Bootstrap Project to better match the community’s interests. These changes show that Zcash, though it began as a private company, wants to be an open project focused on privacy technology.

Zcash development is shared by the for-profit ECC, the nonprofit Zcash Foundation, and the open-source community. Key decisions are made through the ZIP (Zcash Improvement Proposal) process, which both ECC and the Foundation follow. At conferences such as Zcon2, founders and community leaders openly discuss the direction of Zcash.

Zcash vs Bitcoin and privacy coins

Below is a quick comparison table that puts Zcash side by side with Bitcoin and other well-known privacy-focused coins.

ZEC tokenomics

Zcash’s native token is called ZEC. Like Bitcoin, there will only ever be 21 million ZEC. ZEC can be divided down to 8 decimal places, with the smallest unit called a zatoshi (0.00000001 ZEC). New ZECs are created by validating Zcash network transactions (also called mining).

Zcash also has a four-year halving schedule where the mining reward is reduced to slow down how many new coins are made. At launch, miners got 12.5 ZEC per block. After the first halving in November 2020, it dropped to 6.25 ZEC, and then to 3.125 ZEC. Future halvings will keep reducing rewards until all 21 million ZEC are mined.

After the 2020 Zcash halving, Zcash’s block reward is split between miners and development funds. Miners get 80% of each reward. The other 20% goes to support Zcash’s growth: 7% to the Electric Coin Company (ECC), 5% to the Zcash Foundation, and 8% to a grants fund. Before November 2020, this 20% was called the Founders’ Reward and went to early investors, ECC, and the Foundation.

Transaction fees in Zcash are very low (usually 0.0001 ZEC per transaction as of NU5), so they don’t have much impact on the token’s economics.

Zcash use cases

The main use of Zcash is for private payments, so you can send money without showing who sent it or how much was sent. Businesses might use Zcash for confidential transactions, like supply-chain payments with sensitive details, or for discreet payroll transactions.

Another use for Zcash is selective transparency. With view keys, users can share transaction details when needed. For example, a person could pay an online store in ZEC and give the store a view key to confirm the payment without revealing all other transactions.

Privacy coins like Zcash are also used in decentralized finance (DeFi) to add confidential layers to ledgers. Some projects want to use ZEC’s shielded transfers for lending or payments. Zcash can also be a store of value in places where financial data is monitored.

Buying Zcash on centralized exchanges

Most people buy Zcash (ZEC) on cryptocurrency exchanges. These platforms let you trade regular money (like USD or EUR) or other cryptocurrencies for ZEC. The process in Kraken, for example, is really simple:

• Create and verify an account: You provide an email and go through KYC (Know Your Customer) checks.
• Deposit funds. You can add money via bank transfer (wire), debit/credit card, or other methods Kraken supports. Each payment type has different fees and limits.
• Go to “Buy Crypto”: On the platform (web or app), choose the “Buy” option and pick the currency and payment method you added.
• Select ZEC. From the list of assets, find Zcash (ticker ZEC). Enter how much fiat or crypto you want to spend.
• Confirm purchase: The exchange will show how many ZEC you’ll receive (including fees). If it looks good, place the order. Kraken will fill it at market price or a set limit price, and then the ZEC appears in your Kraken wallet.
• Store ZEC: After buying, you can keep your ZEC in the exchange wallet for convenience or move it to your own Zcash wallet.

Over-the-counter (OTC) trading of ZEC

ZEC can also be bought through crypto OTC platforms, like Acquire.Fi. In a crypto OTC trade, the platform connects buyers with sellers who want to trade large amounts of Zcash. The main benefits are more liquidity, less effect on the market price, and better privacy as the transactions don’t show up on public exchanges.

The process when buying Zcash OTC works like this: the buyer contacts the OTC desk, says how much ZEC they want, signs an NDA, and negotiates a price. Once the buyer and seller agree, the buyer sends the funds and receives the ZEC, all without the trade appearing on a public exchange.