Bitcoin was once (and, to some extent, still is) tainted by its association with illicit activity. But as a number of criminals have found out, transactions in Bitcoin can be tracked.
So when Zcash, a so-called privacy coin, launched last October, it raised questions about who would want to use such a currency that had the option to function as a true digital equivalent of cash, leaving no fingerprints behind.
It turns out banks just might want that feature.
Monday, the company behind Zcash, the Zerocoin Electric Coin Company (ZECC) announces a partnership with JPMorgan Chase to add Zcash’s privacy technology to Quorum, an enterprise blockchain platform JPMorgan built on Ethereum, a network similar to bitcoin's but focused on smart contracts.
Quorum, which already features private smart contracts, will now be able to ensure private settlement of digitized assets on a distributed ledger.
Zooko Wilcox, ZECC chief executive, expressed his enthusiasm for the deal: “I'm excited that our first enterprise customer is the most valuable bank in the world." ZECC also announced last night that it has joined the Enterprise Ethereum Alliance, of which JPMorgan Chase is already a member.
“By adding the Zero-knowledge Security Layer into Quorum, we are able to explore how state of the art cryptographic privacy technology will enhance the next generation of financial services applications,” said JPMorgan executive director and blockchain center of excellence lead architect Suresh Shetty in a statement.
"Quorum is designed for the institutional financial markets, and commercial confidentiality is a key requirement for companies that trade in those markets because they don't want their competitors to be able to see what they're trading, what positions they're taking, or who their counterparties are," said Zcash chief operating officer Jack Gavigan via email. "Until now, blockchain technology's lack of privacy and confidentiality has been a major obstacle to adoption. By combining the the zero-knowledge security layer (ZSL) with Quorum's private smart contracts, that obstacle is removed for many use cases, ranging from simple equity trades to complex derivatives."
Lack of privacy and confidentiality in blockchain technology has caused hesitation among banks. But enabling privacy in smart contracts could help facilitate the use of blockchains in transactions such as simple equity trades and complex derivatives.
So far, only 18% of transactions in Zcash appear to have chosen the privacy option, but Wilcox maintains that banks feel privacy is necessary so as not to expose the details of their transactions to competitors on the distributed ledgers that underly the technology that makes cryptocurrencies possible.
Zcash isn't the only privacy coin. Monero offers less perfect privacy technology but greater speeds, which could be relevant for transactions, say, on a mobile device.
As of press time, Zcash is the 20th-most valuable cryptocurrency by market capitalization, at $173 million, and a price of $128 per coin. Its investors include Naval Ravikant, the CEO and cofounder of AngelList, blockchain venture firms Digital Currency Group, Pantera Capital and Fenbushi Capital, as well as top entrepreneurs in the space such as Adam Ludwin of enterprise blockchain firm Chain and Fred Ehrsam, the cofounder of Coinbase.