- Forget bitcoin and ethereum, there's a new cryptocurrency in town: zcash.
- The Winklevoss twin's cryptocurrency exchange Gemini announced on Monday that it would start trading zcash on May 22.
- This sent the price spiking up more than 40%.
- Here's everything you need to know about zcash.
On Tuesday, the Winklevoss twin's bitcoin exchange Gemini announced the addition of trading and custody for a coin called zcash, starting May 22. The price of zcash quickly shot up more than 40% on the news, from around $250 a coin to over $360.
The US-based Gemini is small compared to other cryptocurrency exchanges, but it is also fairly selective. The exchange presently only lets users trade the two most popular cryptocurrencies, bitcoin and ethereum, so the addition of a new coin is a sign that it sees a future for zcash.
Zcash is a lot like bitcoin in that it lives on blockchain technology and is designed to be used as digital money. But it has one key thing that bitcoin doesn't: privacy.
Gemini's VP of engineering Eric Winer called it "a truly innovative privacy coin that offers confidentiality for peer-to-peer transactions similar to those afforded" by normal money.
This is because unlike bitcoin, which keeps a permanent record of every single transaction in meticulous detail, zcash lets users choose when to hide their identity or the amount of currency being moved around.
Here's what you need to know about zcash:
Zcash is run by a venture-backed startup, but it's open source
Zcash (ZEC) is a decentralized cryptocurrency designed and maintained by the Zerocoin Electric Coin Company, or Zcash Company, a venture-backed startup founded by Zooko Wilcox (that's his real name, though the Z in Zcash apparently stands for zero, not Zooko).
Zcash Company built the platform and pays a team of engineers to maintain it, while the Foundation supports education and community efforts, like grants to grow the space. Down the line, the Foundation will take on a more active role, the company said.
Because zcash is open source, anyone with the technical know-how can make changes to the code and create what's known in the space as a "hard fork" — an update which splits the cryptocurrency into two different coins. But at the moment, it is Zcash Company which issues official updates to the network.
Today, there are around 3.9 million zcash coins in the world. Like bitcoin, zcash transactions are processed by miners who volunteer their computer power in exchange for newly generated coins.
But unlike on bitcoin, when a miner mines zcash, some of the newly generated coins go to the Zcash Company and Foundation. The company treats these coins as revenue, and use them to pay its engineers and leadership team, as well as investors.
Zcash is like bitcoin but transactions can be made privately
"It's similar to bitcoin in most respects," said Jack Gavigan, chief operating officer at Zcash Company. "The key difference is that with bitcoin, all details are transparently visible on the bitcoin blockchain, and with zcash you have the option of shielding the coin."
Shielding the coin means that in any given transaction, the sender and receiver can hide their identities as well as the amount of currency being moved. The blockchain will record that a shielded transaction occurred, but it won't say what specifically happened.
Gavigan believes this makes zcash more friendly to both consumers and privacy-focused regulations like Europe's GDPR — two factors which could increase the chance of the cryptocurrency being used by businesses or by average people in their day-to-day lives.
"Privacy is a common requirement that people want and it's mandated by law in certain jurisdictions," Gavigan said. "Would you like it if your credit card statements and bank statement were published on the internet?"
But zcash also lets people leave their transactions public, which may be useful in some case, such as auditing "how foreign aid is distributed or paid." It means a single cryptocurrency can be used to privately pay rent or receive a salary, as well as publicly move money across borders.
It also costs less money to make transactions on the blockchain
One concern that has emerged with bitcoin is that its price-per-transaction can get so expensive at times that it is impractical to make small purchases using the cryptocurrency. In December, for example, when bitcoin was at its peak price, it cost up to $55 in mining fees to make a single transaction. So if you bought a $1 item using bitcoin at that time, you paid $55 in fees on that purchase.
But this isn't an issue with zcash since it has larger block sizes and blocks are created more frequently on zcash than they are on bitcoin, according to Gavigan. Zcash blocks are mined every 2.5 minutes, compared to every 10 minutes on bitcoin.
But like bitcoin, it could also fork at any time. The code is open source, and it's possible that there will be disagreements in the zcash community which are so disruptive that two separate coins are created.
You can read more about forks here.
This has happened with bitcoin numerous times, which is how we ended up with both bitcoin and bitcoin cash. And while it could happen with zcash eventually, Gavigan doesn't foresee any major forks in the future.
However, there are still upgrades coming. The zcash crew is preparing a new edition of zcash called Sapling, which it will release in September.
Currently, transactions on zcash take 30 to 40 seconds to process since the cryptography associated with the coin is so intense. But Gavigan said the update with drastically reduce this processing time, "bring more efficient transactions and open up the usability of zcash a bit more."
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