Since the first decentralized cryptocurrency was introduced in 2009 to now, numerous cryptocurrencies have been created. These are frequently called a
Since the first decentralized cryptocurrency was introduced in 2009 to now, numerous cryptocurrencies have been created. These are frequently called altcoins, because they are commonly thought as an alternative to the first digital currency created. With thousands of cryptocurrencies nowadays the competition between them is unbelievable and that makes many of the central bankers feel discomfortable. The newest digital currency was released on 28 October. It is called Zcash and it is believed to bring important innovations.
As many of the other altcoins Zcash is based on Bitcoin’s code but it is minted more quickly and the system can handle more transactions. This results in more liquidity and shorter transaction times.
There is one more important innovation in this new digital cash. Zcash’s code is open-source, just like Bitcoin’s, but its inventors created a company and accepted money from investors. In addition, 10% of the 21m coins to be issued are earmarked for founders, investors, employees and a putative Zcash foundation. All this allow the firm to hire a great team and enable quicker decisions. That’s why it is believed to resolve many problems existing for Bitcoin.
The most important solution Zcash adds is about confidentiality. Bitcoin’s security system, called “blockchain”, keeps track of all the coins and is open and can be analyzed to see the flows of funds. This makes banks nervous because blockchains could reveal their trading strategies and can find information about their customers. On the other hand Zcash solved that problem as it shields transactions from prying eyes with a scheme based on “zero-knowledge proofs” (here comes the “Z” in its name). These are cryptographic protocols proving that a statement (who owns coins, for instance) is true without revealing any other information (how many and where the money came from). This provides customers with more discretion. The technology is called “zk-SNARK” and by selling it to banks that Zcash, the company, wants to earn its keep.
As promising as it sounds, there is a huge possibility Zcash may not be able to give the holders a lot of run for their money. After a governance crisis, the Bitcoin community thinks it has found a way to increase the system’s capacity that has reached its limit by that time and many transactions are being delayed. In fact, many newcomer currencies that bravely offer solutions went terribly wrong. Example of that is Ethereum, whose claim to fame is to enable “smart contracts”, and its venture fund called the DAO, that erupted badly.
However cryptocurrencies are not only competitors, but they often find a way to cooperate. Since their software is open-source, developers can easily learn and copy code from each other. They often borrow ideas from one another or they observe one currency’s idea development and if the test is passed successfully then it might be taken. That way if Zcash’s zero-knowledge scheme works, it may one day become part of Bitcoin or another altcoin. So although cryptocurrencies are rivals they actually develop and become a stronger power together.