This article is part one of a four-part Eden Labs series on about privacy tokens. 

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When analyzing a project, the Eden Labs team looks for projects that do something unique or do it much better than its competition. Quality projects should be able to explain complex ideas simplified to their audience. In addition, projects that rely heavily on a broad user base have to have an incentive for the first ten people to join the network before a million users is ever achievable. No project will succeed if it requires a million participants to bring any value to its users.

Summary

Zcash is one of many new digital currency projects intended to expand upon the original capabilities of Bitcoin. Forked from the Bitcoin protocol, the goal of Zcash is simple: to build a permissionless cryptocurrency that can adequately protect the privacy of transactions using zero-knowledge proof cryptography.

Tags: Privacy, Zero-Knowledge Proofs, Security 

Industry Need

Privacy should be a fundamental human rights. In our modern day and age, our standard of confidentiality has been deteriorating by the rapid onset of new digital technologies. Bitcoin has been a revolutionary force for our economic liberty as a worldwide platform for distributed trust. However, Bitcoin has its weaknesses and fallacies. Privacy is not guaranteed on the Bitcoin network as once an individual knows the address of a wallet, they can easily observe and track every movement in and out of that address on the Bitcoin network. So much so, that some companies have built their business models around snooping through the Bitcoin network to look for suspicious activity or tracking coins and wallets deemed to be held by malicious individuals. For example companies such as Chainalysis aims to build trust in blockchains between people, businesses and governments through their product suite which includes suspect identification, criminal revenues, activity monitoring, and cyber threat intelligence among other services. 

Solution

Zcash is a fork from the Bitcoin protocol launched in 2016. The Zcash protocol preserved many of the same attributes as Bitcoin but has significantly improved on its privacy features. By using a cryptographic technique called zk-SNARKs built on zero knowledge cryptography, Zcash allows transactions and balances on the network to be verified without requiring users to reveal any information about their transaction value or identity. Thus, Zcash provides users with the highest standard of privacy available with current cryptographic methods. 

Tech Analysis

As previously mentioned, Zcash is a fork of the Bitcoin protocol. This means that much of the properties of Zcash are similar to Bitcoin but include some crucial differences which make Zcash unique and private. Similarly to Bitcoin, Zcash uses a deflationary economic model with a finite token supply alongside a battle-tested PoW consensus mechanism for trustless transaction verification. Although, unlike Bitcoin, Zcash makes use of zk-SNARKs (“Zero-Knowledge Succinct Non-Interactive Argument of Knowledge”) which allows transactions to be fully encrypted but still fully verified under the PoW consensus mechanism.

Zero-knowledge proofs are the defining attribute which makes Zcash a privacy-centric coin.  These ZK proofs are defined as cryptographic proofs that convey no additional knowledge, other than the correctness of the proposition in question. This means that in a zero-knowledge proof the prover can convince the verifier not only that a number exists, but that they know such a number, without revealing any information about the number. This fact is advantageous as it provides the missing piece allowing Zcash to both facilitate private transactions and act as a unique store of value.

It is important to mention that Zcash not only enables private transactions, but it is also able to accommodate public transactions, as well as combinations of the two. This allows transactions in the Zcash network to follow four different forms:

1. Public Transactions: Public address → public address, where all balances and transaction amounts are revealed.
2. Shielded Transactions: Public address → private address, where the balance sent from the public address and the transaction amount is revealed at the beginning of the transaction but becomes shielded upon receipt. 
3. Deshielded Transactions: Private address → public address, where the transaction amount is revealed through the deshielded transaction, but the total balance in the private address remains shielded.
4. Private Transactions: Private address → private address, where the balance held in each address and the transaction amount is wholly shielded, ensuring full financial privacy. 

Sometimes, Zcash can be confused with total privacy, but there is a crucial piece of information that users need to be aware of. Zcash does not protect against correlations made with public transactions (e.g. when Zcash is traded to/from another cryptocurrency). This is not a big issue, but it slightly diminishes the privacy value provided by Zcash. It is evident that this issue can be side-stepped with the use of VPN’s, but a genuinely private transaction shouldn’t have additional steps involved. Additionally, although Zcash is secure at the moment, it was mentioned by the Zcash team that it is likely that zk-SNARKs could be compromised by a powerful enough quantum computer. This is not currently a concern, but it indeed poses a looming threat over the soundness of the technology and its future security. 

Verdict

Zcash is the first cryptocurrency project to integrate zero-knowledge proofs into its architecture in order to provide previously unavailable privacy features. Their use of zk-SNARKs has been essential to their success as it completes its intended task efficiently, safely, and securely. Zcash offers a plausible solution for the privacy issues facing distributed ledger technologies and could potentially develop into the ubiquitous private storage of value. Minor technical issues face Zcash, but most are inconsequential; the Zcash protocol would be wise to look into quantum resistant features for future development especially as the team has already highlighted this as a potential problem.

Roadmap

Overwinter: “Overwinter is the first network upgrade for Zcash. Its purpose is strengthening the protocol for future network upgrades. It includes versioning, replay protection for network upgrades, performance improvements for transparent transactions, a new feature of transaction expiry, and more.” (1)

Sapling: “Sapling is a network upgrade that introduces significant efficiency improvements for shielded transactions that will pave the way for broad mobile, exchange and vendor adoption of Zcash shielded addresses.” (2)

Source:

1. https://z.cash/upgrade/overwinter.html
2. https://z.cash/upgrade/sapling.html 

Verdict

The roadmap provided by Zcash is barebones and points to the facts. The two significant upgrades are listed, as v2.0 gears up for release in mid-August. This upgrade will introduce efficiency improvements which are always welcome. Not much is planned beyond January 2019.

Token Economics

Token Acronym: ZEC

Circulating Supply: 4,486,944 ZEC

Total Supply: 21,000,000 ZEC

Marketcap: $862,722,424 USD 

Marketcap at ICO: $1,383,592 USD

Distribution:  Zcash was not pre-mined or ICO-funded. Instead, it follows a different funding and distribution approach. Zcash started with a closed investor’s group who funded the company with $1 million to kick off its development and operations. In return, these investors were promised a 10% reward of the total supply incrementally over the first four year period. This 10% reward of investors is called a “Founders’ Reward” which means that whatever amount of Zcash is mined for the first four years, 10% of Zcash will be incrementally distributed among these investors. 

Intrinsic Token Value: The inherent token value of Zcash is self-evident; the privacy features of Zcash make it an attractive token for those seeking a higher degree of privacy when making transactions on a daily basis. The ZEC token is needed to make these types of transactions possible, and there is just no way of circumnavigating this fact. This makes the ZEC token intrinsically valuable to users. 

Verdict

Zcash’s current market cap is reasonable as it is one of the most popular methods of achieving private transactions and the distribution of the tokens are steadily flowing as they are mined to a total of 21 Million ZEC. The ZEC token is intrinsically valuable to the ecosystem as it is the means of value transfer which can be inherently private or public if chosen.

Team & Leadership

• Zooko Wilcox – Founder and Chief Executive Officer
  • 20+ years experience in decentralized systems, cryptography, information security, and startups
  • Worked on DigiCash, Mojo Nation, ZRTP, “Zooko’s Triangle”, Tahoe-LAFS, BLAKE2, and SPHINCS
  • Founder of Least Authority 
• Nathan Wilcox – Chief Technology Officer
  • 10+ years experience in software development, performance analysis, and security audits
  • Previously managed development at Least Authority, leading audits for Ethereum, SpiderOak, Cryptocat, GlobaLeaks, and more
• Daria Hopwood – Engineer and Protocol Designer
  • 20+ years of experience as a software engineer with a focus on security
  • Major contributor to the Tahoe-LAFS project
  • Participated in the standardization of the TLS protocol
• Jack Gavigan – Chief Operation Officer
  • Background in financial technology, cybersecurity, and trading systems
  • Worked at companies like Deutsche Bank, Credit Suisse, and Morgan Stanley
  • Previously advised the UK government on digital currencies and blockchain technology
• Plus an additional mix of 12 engineers, a community manager, user experience researcher, and business developer.

The project scientists include:

• Eli Ben-Sasson – Technion
  • Professor at the Computer Science Department at Technion – Israel Institute of Technology 
  • Research includes math theory, applications of proof systems, including Zero Knowledge and Probabilistically Checkable Proofs
  • Co-founded the Succinct Computational Integrity and Privacy Research Lab (SCIPR)
• Alessandro Chiesa – UC Berkeley 
  • Faculty member in Computer Science at UC Berkeley
  • Studied at MIT
  • Works in theoretical computer science and computer security 
  • Research includes theoretical foundations, practical implementations, and applications of succinct zero knowledge proofs
  • Co-founded SCIPR
• Christina Garman – Johns Hopkins University
  • Cryptography and Computer Science PhD student at Johns Hopkins University
  • Research interests are in cryptographic implementations and privacy
• Matthew Green – Johns Hopkins University 
  • Assistant Professor at Johns Hopkins Information Security Institute and award-winning researcher
  • Recognized for his work on privacy-enhanced information storage, anonymous payment systems, and cryptographic engineering 
  • Developed Charm, a Python framework for rapidly prototyping cryptosystems, and libzerocoin, an implementation of the cryptographic routines for Zerocoin
  • Served on committees such as the IEEE Security and Privacy Symposium 2015 and Bitcoin 2015 
  • Co-founded the TrueCrypt audit project
• Ian Miers – Johns Hopkins University 
  • Computer security PhD student at Johns Hopkins University
  • Focused on applied cryptography and privacy-preserving cryptographic protocols
  • Research interests include the relation between cryptography and identity and designing secure systems that are both developer and user friendly
  • Main developer on the Charm cryptographic library
• Eran Tromer – Tel Aviv University 
  • Faculty member at Tel Aviv University’s School of Computer Science
  • Head of the Lab for Experimental Information Security
  • Co-director of the Check Point Institute for Information Security
  • Research is in cryptography and information security, with an emphasis of security risks from physical attacks and untrusted platforms
  • Cofounded SCIPR
• Madras Virza – MIT
  • Computer science PhD candidate at MIT
  • Focuses on zero-knowledge cryptography
  • Has had numerous publications on zkSNARKs, a topic that is central to the Zerocash protocol

Advisors

• Gavin Andresen – Bitcoin Foundation
  • Chief Scientist at the Bitcoin Foundation
  • Former lead developer of Bitcoin
  • 25 Years of software experience 
  • Working as lead developer at TruCoin
• Vitalik Buterin – Ethereum
  • Founder and Chief Scientist of Ethereum
  • Founder and a writer for Bitcoin Magazine
• Arthur Breitman – Tezos
  • Specialises in algorithmic trading, financial cryptography, and machine learning
  • Currently working on Tezos
• Joseph Bonneau – Stanford University, EFF (Electronic Frontier Foundation)
  • Postdoctoral researcher at Stanford University
  • Technology Fellow at Electronic Frontier Foundation 
  • Research focuses on web security, cryptographic currencies, and applied cryptography
• Gordon Mohr – Thunkpedia
  • Creator of Thunkpedia and former technical lead for the Internet Archive’s web archive project
  • Founder of Bitzi
• Brian Warner – Agoric
  • Security Engineer and software Developer
  • Worked at Mozilla on Firefox Sync, an Add-On SDK, and Persona
  • Co-founder of the Tahoe-LAFS distributed encrypted file store

Verdict

The Zcash team and advisors are impressive. The core team consists of tech and cryptography veterans which have ample experience to build a secure and private platform such as Zcash. The core team is also filled with twice as many engineers who are all just as experienced and committed to the project. The scientists involved with the project are all heavy hitters from top ranked universities, each one of them researches and specialises in cryptographic proofs and privacy systems. The advisors for this project are equally as impressive as the core team, if not more. Including industry legends such as Gavin Andresen and Vitalik Buterin, every advisor for the Zcash project has the experience and capacity to understand, improve and advise this project. 

Partners/Investors

Announced Partnerships

• Starkware
  • A new company developing STARKs, a new cryptographic proof system which is scalable and post-quantum secure.
• JP Morgan
  • A large American multinational investment bank. They have announced a partnership with Zcash and are in the process of integrating a zero-knowledge security layer to settle transactions on the blockchain that were previously settled elsewhere.
• AirTM
  • A platform for providing financial freedom through donations or remittances.
• Potential Coinbase Listing

Seed Investors

Pantera Capital, Digital Currency Group, Fenbushi Capital, London Trust Media, Evolve VC, Naval Ravikant, Niraj Mehta, David Dacus, Roger Ver, Alan Fairless, Ben Davenport, Brian Cartmell, James Nicholas, Jonathan Perlow, Charlie Songhurst, Adam Ludwin, Devon Gundry, Ryan Smith, and Rop Gonggrijp

2016 Private Raise

Aaron Grieshaber, Branson Bollinger, Maple Ventures (Amir Chetrit and Steven Nerayoff), Brian Cartmell, Vlad Zamfir, Roger Ver, Digital Currency Group, Barry Silbert, Charles Songhurst, Fenbushi, Shapeshift, Erik Voorhees, David Lee Kuo Chuen, Fred Ehrsam, Sebastian Serrano, and Li Xiaolai

Verdict

The Zcash protocol has garnered interest from reputable funds and well-known investors. The relations with companies such as Shapeshift, JP Morgan, and Starkware show that they are open to improvement and potentially mutually beneficial collaboration. Their partnership with Starkware is a good sign as it shows foresight on behalf of the leadership team.

Marketing & Social

Twitter: 69.7K Followers

Facebook: 9,243 Followers

YouTube: 1,828 Subscribers, 11 Videos

Reddit: 14,098 Readers

LinkedIn: 17 Employees, 944 Followers

Github: 13 Repositories, 381 Contributors, 1,280 Forks

Verdict

Zcash’s presence in social media is average; the project has been around for long enough to accumulate a much stronger web presence than it currently has. However, this is not an issue since Zcash is a veteran project compared to most cryptocurrencies presently available on the market and is already relatively well known. That being said, the team is moderately active across all of their platforms.

Red Flags

1. Quantum resistance
   1. It has been stated by the Zcash team that a powerful enough quantum computer could break zk-SNARKs and fool the Zcash protocol. This is only slightly worrying since quantum computers do not pose a threat to our cryptography methods just yet. That day will be upon us within the next couple of decades. Until then, it is comforting to know that the Zcash team knows about this potential issue and will be working to mitigate it. 
2. Lack of privacy when exchanging Zcash to and from other currencies
   1. This issue is also minor, yet it still deserves a spot in this list due to the extra steps needed to secure a transaction from other cryptocurriencies to and from Zcash. To do so, one would have to use a combination of TOR and VPN’s to obfuscate their IP and achieve full privacy. This should not be needed for a cryptocurrency touting top of the line privacy features. 

Conclusion

Zcash has secured its position in the DLT ecosystem as the first provider of entirely private transactions on a distributed ledger. The project’s use of zero-knowledge proofs directly leads to the accomplishment of its goals by improving on the original Bitcoin infrastructure and building the framework for a truly private, trustless, efficient, and secure protocol. Zcash is the type of project which will survive for many years to come, primarily after they have solved the potential issue of quantum resistance.

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Disclaimer: This is not investment advice, merely our opinion and analysis on the project. Do your own research.