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What is Zcash?

Reading time: 8 minutes

This article will provide traders with an understanding of what Zcash is, price movement for Zcash, how to trade CFDs (contracts for difference) on Zcash, the pros and cons of privacy, an explanation of how Zcash differs from Bitcoin, and more!

With the development of new technologies, there has been an increased demand for cryptocurrencies. However, there are several interesting things that distinguish Zcash from other similar currencies, such as its partnership with JPMorgan, through the open-source project known as 'Quorum'. Zcash privacy technology could soon be applied to different crypto and blockchain networks, including Ethereum-based tokens. CoinMarketCap estimated that Zcash's global market cap was more than $960 million in 2018.


What is Zcash?

ZCash (ZEC) is a cryptocurrency project that originated from the Zerocoin/Zerocash idea, proposed back in 2013. Zcash was forked out of Bitcoin (BTC) and launched in October 2016, and was previously known as Zerocoin. It uses cryptography, which in theory should provide privacy to its users. Cryptography (aka cryptology) analyses different protocols that prevent third parties, or the public, from reading private messages.

How is Zcash Different from Bitcoin?

Zcash is a Bitcoin fork. Because of that simple fact, they have a lot in common. There are two types of Zcash transactions: private and public (similar to BTC). When you download the official Zcash wallet, you will notice it offers two types of addresses: t-addr (your public address) and z-addr (your private address).

You can choose which one to use. Bitcoin transactions are fully transparent. Everyone can use a BTC block explorer to check if a transaction has been sent from one BTC address to another. Zcash is private if the user chooses a z-address. There is a special key view that can provide selective transparency to users.

According to Crunchbase, "Zcash offers total payment confidentiality, while still maintaining a decentralised network using a public blockchain. Unlike Bitcoin, Zcash transactions automatically hide the sender, recipient, and value of all transactions on the blockchain".


How Does Zcash Defend Its Privacy?

Zcash is a decentralised and open-source cryptocurrency that offers privacy and selective transparency of transactions. Zcash payments are published on a public blockchain, but the sender, recipient, and amount of transactions remain private. Due to the encryption of the contents in the shielded transactions, the protocol uses a cryptographic method to prove transaction validity.

This method is called 'zk-SNARK'. These constructions allow the network to maintain a secure ledger of balances without disclosing the parties or amounts involved. Instead of publicly demonstrating spend-authority and transaction values, the transaction metadata is encrypted, and zk-SNARKs are used to prove that nobody is cheating or stealing.

What are the Pros and Cons of Privacy?

As already explained, ZEC uses zk-SNARKs' privacy protection technology.

Privacy Pros

  • The sender's address is hidden
  • The recipient's address is hidden
  • The amount sent is hidden

Strict privacy is beneficial for companies that want to protect supply chain information from competitors, and for all individuals who don't want any payment information publicly known, as well as wealthy people who don't want any of their activities publicly exposed.

Privacy Cons

Zcash uses a new form of cryptography. Nobody can guarantee that there are no bugs in the system that will make it possible to de-anonymize transactions, or to create coins out of thin air, unless it has been tested for years. So, if coins are being created, it will not even be detectable because unlike Monero, you can't verify the total amount of coins within the ZCash blockchain.

The blockchain and the network keep track of the amount of coins that are shielded, and they don't care who unshields a portion later. The coins go into a big pool and when you pull a little piece out, there's no way to correlate it with what went into the pool initially.


How are New Zcash Coins Created?

They are created through a process known as 'mining'. It will take up until 2032 for all 21m coins to be mined. It originally started with $US1m, pre-funded by investors. Zcash was not pre-mined or ICO-funded like many other cryptoprojects. Instead, it follows a unique funding and distribution approach.


ZEC Price Movement

The ZEC price movement in recent years has been highly volatile. Like with many other cryptocurrencies, Zcash surged higher throughout 2017 and then crashed lower for all of 2018. However, the price action in ZEC has been much choppier than other cryptocurrencies as the chart below shows:

ZECUSD Chart

Source: Admiral Markets MT5 Supreme Edition, ZECUSD, Daily - Data range: from January 15, 2017, to April 9, 2019, accessed on April 9, 2019, at 4:31 pm BST. - Please note: Past performance is not a reliable indicator of future results.


What's Next For Zcash in 2020?

Some investors of Zcash were excited for 2019, but were heavily disappointed.

The first half of 2019 has started off favourably for Zcash investors with prices pushing back above the psychologically relevant barrier at 100 USD. But over the second half of the year, the cryptocurrency gave back all of those gains and making new yearly lows.

Source: Admiral Markets MT5 Supreme Edition, ZECUSD, Daily - Data range: from November 19, 2018, to November 21, 2019, accessed on November 21, 2019, at 2:15 pm BST. - Please note: Past performance is not a reliable indicator of future results.

Looking at the price action of the last months with a sequence of lower highs and lows and Zcash making new yearly lows, Zcash bulls need some rising optimism among investors to regain control.

And even then, it is a long way to go before the all-important psychological level of $100 is a topic again. Having said that, Zcash traders will be watching any news in regards new developments similar to the latest release of its Android wallet.


Trading Zcash CFDs with Admiral Markets

You can trade Zcash and all other major cryptocurrency CFDs in one place with Admiral Markets. Make sure to explore the full product range to know exactly what is available to trade on, as new additions are added on a continual basis!

Aiming to test your trading skills first? Take as much time as you need, by opening a demo trading account and polishing your strategies and trading plans within a risk-free trading environment, before you transition to live market trading. Click the banner below to open a trading account and start trading CFDs on cryptocurrencies today!

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Disclaimer: The given data provides additional information regarding all analysis, estimates, prognosis, forecasts or other similar assessments or information (hereinafter "Analysis") published on the website of Admiral Markets. Before making any investment decisions please pay close attention to the following:

  1. This is a marketing communication. The analysis is published for informative purposes only and are in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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  3. Each of the Analysis is prepared by an independent analyst (Jens Klatt, Professional Trader and Analyst, hereinafter "Author") based on the Author's personal estimations.
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  5. Whilst every reasonable effort is taken to ensure that all sources of the Analysis are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admiral Markets does not guarantee the accuracy or completeness of any information contained within the Analysis. The presented figures refer that refer to any past performance is not a reliable indicator of future results.
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Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, you should make sure that you understand all the risks.

References

  1. Forbes
  2. CoinMarketCap
  3. ZCash
  4. Ibid
  5. Consensys

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.