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Zcash Launches Amid Controversy

Last Updated March 4, 2021 4:51 PM
Andrew Quentson
Last Updated March 4, 2021 4:51 PM

Zcash, the much anticipated anonymous coin launched today after years in development with the genesis block mined around 17:10 GMT . The currency has a slow start, with only a few coins mined at the beginning to see that everything is operating as intended. Thereafter, block reward reaches 12.5 Zec every 2.5 minutes, halving every four years until a limit of 21 million coins is reached of which 10%, amounting to 2.1 million zcash, will be given to the currency founders.

Although the currency is based on Bitcoin Core, it uses zk-SNARKs, which allows the system to prove a computation over some input has been performed without revealing the input. Unlike in bitcoin, Zcash blockchain explorers only show a random hash transacting with another random hash. The address, therefore, is not revealed, nor the amount, making the currency fully private and anonymous.

This level of anonymity was achieved through a trusted set-up. Six blockchain experts, including Andrew Miller, Zooko Wilcox and Peter Todd took part in the ceremony on October 22nd to 23rd. The ceremony has been filmed by several witnesses, and observed by an unnamed journalist according to a public statement . The recordings have not yet been released.

The set-up is based on the assumption that at least one of the six participants will not keep his part of the “toxic waste” as, otherwise, they can create coins out of thin air. This has been criticized for obvious reasons. Namely, there is no way to be absolutely certain that they have not kept the toxic waste and, even if they haven’t, their machinery could have been hacked, therefore a third party might have access to all six parts that make up what is called a master private key which allows for printing of Zcash at will.

Nonetheless, the currency is trading at above bitcoin’s value in BitMex’s futures indicating a strong market demand, at least initially.

Zcash trading above btc in BitMEX futures prior to launch
Zcash trading above btc in BitMEX futures prior to launch

Calls for a Ban

Stefano Quintarelli, a member of Italian Parliament and “a leading IT expert in Italy” recognized by the country’s most read newspaper, Corriere della Sera, as “one of the thirty most innovative Italian entrepreneurs,” according to Wikipedia, publicly stated yesterday that 14 MPs have proposed a bill in Italy to ban “fully anonymous cryptocurrencies #zcash.”

In his personal blogpost, Quintarelli argues that fully anonymous currencies facilitate money laundering and financing of terrorism. We asked him whether he thinks a ban would be effective, but have not received a response in time for publishing.

A Zcash representative stated that technically, Zcash isn’t only anonymous as a user can send “transparent transactions or shielded transactions”. That is, Zcash allows for two types of transactions: z-addr, which are fully anonymous and t-addr, which are similar to bitcoin. Users therefore can choose whether to be fully anonymous or otherwise.

However, with the currency already attracting negative publicity, its future is not clear, but we can be certain this new currency will attract much attention, now forming a trio of key players in the public blockchain space: Bitcoin, Ethereum and Zcash, all with their potential niches.

Image from Shutterstock. Chart from Cryptowat.ch.