Zcash is coming, and very rarely does a cryptocurrency appear that has such impressive a line up, so libertarian a vision and such institutional support.
(EDIT: Original tittle was based on a miss calculation of market cap. )
Zcash Generation Report.
The consequences of of Zcash on the cryptocurrency market, particularly on copies of its chain and on altcoins that focus on anonymity, will likely be felt for months to come, specially this Q4 of 2016.
The purpose of this report is to harness critical information and empower investors to position their investments accordingly.
In this report, Zcash and its Zero Knowledge proofs (Znarks) technology will be analysed in comparison to the most visible competitors, specifically those that are either already using earlier versions of it or plan to use its technology post launch.
Among these are Zcoin, Shadocash and Komodo.
Keep in mind however that we are not licensed financial advisors or accredited investors and so this is simply our opinion, which we are sharing. We are not liable for decisions made based on this information.
Also, if you prefer audio or video, check out our full conversation on the Zcash generation and The Great Bitcoin fork.
Without further adue . . .
Generation Zcash, a new kind of anonymous blockchain.
Zcash is an anonymous cryptocurrency that uses ‘Zero knowledge proofs’ or Znarks to build and protect user privacy. Znarks are a cryptographic technology that allows the creation and destruction of digital tokens in a way that can be used for financial transactions reliably, while leaving no historical trace, or chain of custody. (Oversimplification)
The type of Znark used has a significant effect on the benefits and risks of the cryptocurrency, below we will compare some of the arguments for and against the available projects. A conversation that we can expect to hear a lot more as Zcash enters the market.
Zcash
This technology has been under development in Academic circles since at-least 2013. The authors of the original cryptographic concepts include high profile academics in the United States including Matthew Green generally considered one of the best cryptographers alive.
To add to the high profile of Zcash, its original funding sponsors as per their original website, include institutions such as Amazon.com, Tel Aviv, sraeli Center of Research Excellence and Darpa. Yes, you heard it Darpa.
This kind of institutional support is not uncommon in the funding and development of cryptographic standards, most of them which are open source, but it does suggest the kinds of connections and political and economic interests associated with this cryptocurrency.
This kind of support paints a strange and very interesting picture of Zcash, making it as libertarian a coin as Satoshi himself would have wanted, with cash like anonymity, while having as traditional a funding model and institutional connections as you could get.
This is relevant for one critical reason, one that is unlikely to be forgotten about Zcash and which will likely be a point of skepticism and distrust for months if not years to come.
That is the “Trusted Setup” problem, also known as the “Toxic Waste” problem, or as I like to call it, the Genesis Secret.
Zcash and the Genesis Secret
The Genesis secret is a characteristic of the type of cryptography used on Zcash, which presents a trade off between the size of the transactions on it’s chain, and the type of trust required to bootstrap the platform and its advanced anonymity.
To put it bluntly, Zcash users must trust that at least one founding member is honest during the genesis of the chain. This is because for the cryptography to work, a secret must be created and a set of parameters must be generated from it.
With this parameters, the anonymity of Zcash can work. But if anyone can discover or compromise the computers of every one of these founders, and get their piece of this secret, then that attacker could generate Zcash at will and given the strong anonymity of the chain, it would be very difficult to know it is even happening.
That’s right, if you can get Zcash’s genesis secret, you can create as many Zcash as you want and no one will be the wiser, unless of course you flood the market with inflation and the price nosedives in its full epicness.
The good news is that, if only one of these cryptographers and engineers is honest and generates the secret, uses it for his part in the creation of the parameters and destroys the secret and any trace of it, then Zcash will be fine.
Here is how the Zcash team aims to generate the Genesis Secret.
Nevertheless, there’s no way to verify that such a thing happened. And this, I expect will play a significant role in the perception towards Zcash and the value of its unit, somewhat discouraging its use as a store of value. And rather as just one excellent way to anonymize value ownership and its chain of custody.
To be extra clear, even if the genesis secret is compromised, according to everyone I’ve read on the topic, including the Zcash website, the anonymity will remain unharmed, it is just a problem of potential inflation.
Zcoin VS Zcash
One of Zcash’s critics is Gary Lee, Thiel Fellowship recipient founder or Monetas (now rebranded as Zcoin).
In an article titled ‘Zcoin VS Zcash’ Gary argues the benefits of using a different type of Znark which avoids the trusted setup, but increases the size of transactions and limits the anonymity.
Unlike Zcash which anonymizes both the amount being sent and who sent it, Zcoin can only hide who the sender is. This open Zcoin to various blockchain analytics surveillence attacks, but does away with the Genesis Secret problem. He writes:
“Zcash conceals the amount of money sent in each transaction, whereas Zcoin does not. So Zcash is less prone to privacy timing attacks than Zcoin. On the other hand, this comes with a big tradeoff for Zcash, in the form of potentially undetected hyper-inflation in Zerocash’s money supply.”
Le continues his critique by suggesting that the type of Znark used in Zcash is relatively untested new cryptography, compared to the RSA based Znark in Zcoin which is based on technology known for decades.
“Essentially, for Zcash, there is no “certain scarcity” that even a fairly intelligent person can verify on a mathematics/ cryptographic first principles basis. ZK-Snarks uses some very sophisticated cryptography. Only a handful of cryptography academics in the world can understand the steps in ZK-Snarks on a first principle basis. The cryptography principles behind Zerocoin have been around for a lot longer, and the Zerocoin paper was one of the most often cited cryptography papers in the past few years, with about 200 citations. Any fairly intelligent cryptography academic would be able to understand the foundations underlying Zerocoin.”
James Lee, lead developer of Komodo and the Supernet, a cryptocurrency set to launch weeks after Zcash with a variation of the Zcash code base, criticized both this points harshly in the Bitcointalk forum, during the ICO ramp up of Komodo. He writes:
“why would we choose an obsolete 3 year old libzerocoin implementation that has significant bloat issues? It would be like choosing an Intel 8080 CPU over Xeon”
Adding that:
“If you would rather trust parameters generated by a single entity that has been caught putting backdoors into encryption , then that is your choice. Keep in mind that if anybody in the 25 years has gotten a hold of the RSA factoring parameters, it is compromised. What assurance is there that it hasn't been compromised?
There is a lot of FUD against Zcash parameters, but nobody has described to me how all the Zcash parameter creation participants will be fooled into running the mystery laptop gift that just arrived in the mail. Or that they can all be bought. Or all their systems can be compromised.”
Indeed RSA was caught up in a scandal in 2013 over NSA leaks by Edward Snowden, casting significant distrust over the integrity of the RSA company. His argument that RSA also had a genesis secret that is 25 years old, effectively renders the argument against Zcash obsolete, as it simply shifts trust to an older, somewhat discredited organization.
Shadowcash, another of the prominent Znarks competitors seems to be using cryptography similar to that of Zcoin, which fails to anonymize the amounts being sent. In a public slack chat , Code, Developer and Software architect of SDC wrote.
“When you see a transaction with X SDT and then a listing with that exact amount, you can link them. Not a very good situation”
Zcash, already the second largest altcoin, before it even hits the market.
Sitting at 2.2 Billion dollar market cap, based on the price of its current future contracts on Bitmex, Zcash is already the second biggest altcoin in the world. Even before its chain is released.
Granted, this is multiplying price by total supply, which won't be on the market for 10 years. Current supply is much lower. However, even at 3 million units which would not take long to enter the market, at current prices it could stand at around 50 million market cap. Certainly a high number which would currently leave it in the top ten.
For details of Zcash chart analysis and how to take advantage of the Zcash wave, see Aaron’s market analysis.
https://steemit.com/blockchain/@fiatluxx/a-look-at-zcash-futures-before-the-big-launch
https://www.bitmex.com/app/contract/ZECZ16
Here's some metrics on the the projects in question's social media influence.
The Zcash chain will go public on this October 28th, of 2016. I expect the waves echoed by this new type of blockchain to make it into the history books. Buckle on.
(This is the first of a series of reports on Altcoin Markets by CoinOlympics. This is also a test format and the equivalent of a free trial, more on our altcoin research and trading analysis coming soon.)
Authors: Juan S. Galt Researcher and Blockchain Analyst, Aaron Casillas - Price chart and market analyst.