Zcash Privacy Features: Can it Foster Faster Crypto Adoption

Project Reviews / 20.08.2020

The global crypto adoption was recently approximated to be 5% of the worldwide population. However, privacy has been hindering the even faster adoption of crypto into the world.

Individuals, companies, and governments fear blockchains’ transparency since it means full exposure of private information. Zcash, however, offers privacy to every individual and company by keeping details of all transactions anonymous. What is Zcash, and how does it enhance privacy?

Zcash Overview

Zcash is a crypto asset that has majored in providing privacy for its users. Privacy for users is crucial since it ensures individuals’ freedom on the internet and when conducting transactions.

The platform was launched in 2016. Zcash has its base on bitcoin’s codebase, and therefore, shares similarities such as 21 million tokens. Zcash uses an algorithm called Zk SNARKS, which enhances the privacy of users in the blockchain.

Zcash is built on rigorous science by scientists from MIT, Technion, and other universities. The asset can be used as a medium of exchange, just like fiat currency. 

Zk SNARKS

Zk SNARKs acronym stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge. Zk SNARKs is a proof protocol where one can prove certain information’s possession rights without revealing details.

Zk proofs give the prover can prove to the verifier that some piece of information presented is accurate. The prover will do this without necessarily revealing the source. The only thing necessary with the zero-knowledge proofs is the validity of news but not the data source. In zero-knowledge, therefore, an individual can prove a transaction without necessarily giving other details.

It’s effortless to verify the succinct zk proofs. It only takes a few milliseconds and proof lengths of just a few bytes even for broad statements. Earlier zk protocols had the prover and verifier communicate on a back and forth for several rounds. In the current non-interactive constructions, the proof is just a single message sent by the prover to the verifier.

Zk SNARKs in Zcash

In the crypto world, privacy is vital. However, many blockchains focus on transparency, thus do not honor traders’ privacy.

Zcash is solving the problems of privacy in the crypto world. The blockchain uses the zk SNARKs protocol to ensure the anonymity of transaction parties at all times. 

There are two different types of addresses applied in different blockchains:

  • Transparent Addresses – These addresses are parallel to the public addresses in bitcoin protocols, and they, therefore, function similarly. These open addresses interact with the transparent value pool during every transaction. The transparent value pool publicly reveals the transaction data allowing any node on the blockchain to see it. Zcash allows transparent transactions only to accommodate other cryptos, which focus on transparency than privacy.
  • Shielded Addresses – These addresses are protected or shielded from external viewers. The addresses encrypt transactions and verify transaction validity by using zk SNARKs.These kinds of addresses come with additional security and anonymity, unlike transparent addresses. 

Zcash entirely believes in privacy to ensure user freedom when completing their transactions. In cryptocurrencies with public blockchains, it is easy for anyone to get information transactions. In Zcash, however, getting such information is nearly impossible with the shielded addresses. 

Since Zcash uses two different addresses, it’s essential to know the different types of transactions in the Zcash blockchain and their anonymity degree. The following are the different types of Zcash transaction:

  • Transparent to transparent transactions that are entirely similar to bitcoins transactions. These transactions have zero privacy.
  • Transparent to shielded transactions are shielding operations breaking translation linkability. 
  • Shielded to transparent transactions are those that originate from a shielded address to the transparent addresses. 
  • Hybrid sales are those where both the sender address and recipient address are partially shielded.
  • Shielded to shielded transactions are entirely private and anonymous transactions.

Linkability in Zcash

Using shielded addresses allows users to break links between transactions, making them untraceable and anonymous. If, for example, 1 ZEC was sent every month between two transparent addresses, it would be easy for anyone to link the accounts. 

In Zcash, however, linking two transactions is made more difficult due to the shield transactions. Let’s imagine the same sale of 1 ZEC happens between two shielded addresses every month. Data on the deals is obfuscated, making it difficult to understand the relationship between the two shielded addresses. 

Notice, shielded transactions do not make linkability and traceability of the operations impossible. An excellent example of traceability issues in Zcash was evident in a Zcash community challenge where a user could trace a transaction. However, a report by the Zcash team gave insight into what happened. The time interval between each sale was so small that it could be easily identified. Therefore, the conclusion was that the traceability problem could be avoided if the user would increase the transaction time interval.

Benefits of Zcash Privacy Features

Zcash’s privacy features prove that more users will adopt crypto if privacy issues are addressed. Take, for example, attacks from criminals. The exposure of information to everyone in blockchains is a security threat to large crypto holders. Criminals can use the information on the blockchain to find their target and hack or attack them. Zk SNARKs, which do not give full details about transaction origin, will help curb the problem.

Untraceability is also core in crypto adoption. Although not entirely undetectable, the Zcash blockchain offers untraceable transactions for investors. A Cointelegraph report recently showed that 15% of Zcash sales are shielded in some way.

Privacy will be a benefit in crypto exchanges too. Currently, all information about a company’s exchange history is exposed in the blockchains. A seller is already in the know of the buyer’s financial position and can use it to their advantage. However, with Zcash privacy features, details about past transactions remain private. This means both the buyer and seller are on equal ground when completing the trade.

Blockchains act as big information databases that store information permanently. This kind of information may include government records on past dealings or plans. It may also include individual information on their history. Large companies can decide to use blockchains to store information about their past, present, and future dealings. Imagine all this information being available to anyone in public. Imagine stealing information about the next product from a company. This can be disastrous and will lead to losses, especially from small startups. However, with Zcash privacy features, only authorized personnel, e.g., the auditor and lawyers will access information about a company or government. 

That means the protection of the company’s future products and thus ensures the growth of the company. Also, high government clearance will only be released to authorized personnel, thus enhancing better service provision without external interference.  

Parting Shot

Zcash privacy algorithm Zk SNARKS are already enhancing privacy for individual holders. These algorithms give zero background information about individuals, government, and companies. 

There has been growth in the number of people using Zcash privacy protocols, showing how vital privacy is for individuals. Zcash has been able to grow because of the privacy advantages it offers. Privacy, therefore, essential for the general adoption of the crypto world. Zcash has proven that confidentiality is the future of crypto adoption. To foster faster adoption of cryptos, worldwide privacy features have to be boosted in the crypto world.

After realizing the setbacks of centralization in the financial industry, Carol has dedicated her career to apprise everyone on the benefits of blockchain technology. When she is not writing, she’s probably somewhere in the park reading a book.