Bitcoin has often been touted as an untraceable and anonymous digital currency, even though it is neither at its core. Strangely enough, mainstream media has forgotten all about the headlines they wrote until a few weeks ago, as an untraceable Bitcoin alternative has launched. ZCash looks to bring anonymity to the digital currency ecosystem, making it perfect for those who wish to use it on underground online marketplaces.
ZCash Offers Things Bitcoin Never Has [To]
When explaining the difference of ZCash and Bitcoin regarding anonymity, novice users might get confused easily. For those people who have been reading up on Bitcoin through mainstream media articles, they will see it as an anonymous digital currency. However, ZCash is an anonymous alternative version of Bitcoin. The explanation for this is simple: Bitcoin never was, is, or will be, fully anonymous, unless the end user takes the necessary steps to make it so.
ZCash, on the other hand, makes no bones about what this alternative digital currency is trying to achieve. Even though the project has only seen a very early alpha release so far, the plan is to make transactions completely anonymous. Unlike the Bitcoin blockchain, where every transaction can be publicly traced in real-time, ZCash wants to make their project carry the same level of anonymity as cash.
Financial privacy is a double-edged sword, as both consumers and businesses do not want just everybody snooping their transactions. But at the same time, more privacy and anonymity opens up possibilities for money laundering, as is clearly visible in a cash-dominated world. ZCash aims to keep transaction details safe by giving users the chance to disclose as much – or little – information as they want with other parties.
It is important to note that the currency transacted on the ZCash network right now does not represent actual money. Similar to how other digital currencies all have a “test version” of their technology – also known as a testnet – ZCash is currently testing its ecosystem to iron out any remaining bugs. This is an important step to take before people start investing in the digital currency. The final release of this project will not happen anytime soon, as developer Zooko Wilcox told WIRED the launch is still roughly six months away.
There are some similarities between Bitcoin and ZCash though, as both digital currencies are generated through a process known as “mining”. However, it is important to note ZCash will be launching as a for-profit company, by distributing small portions of every block to a non-profit overseeing the source code and community. When all’s said and done, one percent of the ZCash supply will be going to this non-profit, whereas 10 percent will be paid to the for- profit startup run by Wilcox himself.
Repaying Investors With A Semi-Pre-Mine
Alternative digital currency developers always find a way to keep a certain portion of the generated coins for themselves, and ZCash is no different in that regard. However, Wilcox indicated the funds flowing to his for-profit startup will be used to repay investors. With over US$715,000 in funding, the project will have to pay dividends from day one.
Some digital currency experts might see this is an alternative form of pre-mining part of the ZCash supply. By shaving off a cut from every mined transaction, miners are not receiving the full incentive and reward for dedicating computational power to this digital currency’s network. Whether or not that decision will go over well with the community, remains to be seen.
Focus on Privacy Can Backfire
This is not the first Bitcoin clone to offer features the popular digital currency is lacking, in the mind of some. None of those projects have come even close to seeing adoption on the same level as Bitcoin, which remains a niche market for now. ZCash is another attempt to steal part of the spotlight from Bitcoin, although the project’s heavy focus could negatively impact adoption rate in the future.
While there are certain benefits to privacy in the financial world, the feature is often associated with black market dealings and illegal activity. To many people, Bitcoin has been a preferred way to pay for goods and services on the Darkweb, but the digital currency’s transparency showed the world it is far from anonymous. In fact, Bitcoin is even less suited for illegal activities than cash, or ZCash in this regard.
ZCash wants to bring features to digital currency that will prevent law enforcement surveillance. While Bitcoin companies are doing everything they can to comply with anti-money laundering regulation, ZCash goes a completely different direction. Even though Wilcox claims his startup is not aimed at making illegal activities easier for criminals, he is quick to note how his company will not be liable for ZCash applications in a criminal environment.