August 15, 2020

Market News

Zcash Hardfork enables private mining

Mining cryptocurrencies is a rapidly growing industry and enables residual income by helping to secure the network. With the last update in the network, Zcash manages to send the mining rewards directly to a private address. The hard fork took place on July 16, 2020 at 10:58 UTC at block 903,000 as planned.

What is Zcash?

Zcash (ZEC) is a cryptocurrency that can be used completely anonymously. The principle is based on "zero knowledge" cryptography, which allows the user to decide whether a transaction should take place anonymously or publicly. The project has been in existence since 2016 and is primarily being promoted by the Zcash Foundation and the Electric Coin Company (ECC).

As with Bitcoin, the maximum circulation supply is 21 million pieces, which limits the supply of the currency. Since I am a very popular currency, it is also tradable on most reputable exchanges .

The Equihash algorithm is used for mining, which ensures an asymmetrical blockchain. Mining can be done with an ordinary PC with 2 GB or more of RAM, but you get maximum profitability with an ASIC miner or an Nvidia graphics card.

Private mining through "Heartwood" hard fork

The hard fork contains two major changes to the Zcash protocol (Zcash Improvement Proposals / ZIP). First, the long-awaited private mining called Shielded Coinbase (ZIP 213) and second, the possibility of lightweight clients called Flyclient (ZIP221) .

From now on, Shielded Coinbase enables a Coinbase transaction to be sent to a private address without transparent output. Coinbase transactions contain the rewards, which are paid out by the mining and therefore have no previous owner. With private addresses (shielded addresses), information such as the number of coins, senders and receivers and memos cannot be viewed publicly.

This distinguishes Zcash from most other cryptocurrencies and creates complete anonymity when mining the coins. In the case of Bitcoin, this concealment does not exist and the recipients of the mining rewards can be easily identified under certain circumstances.

The second innovation in the Zcash protocol called Flyclient enables users to verify a transaction with a minimal amount of information. Similar to Bitcoin Simplified Payment Verification (SPV), you don't need the information from the entire block to verify a transaction. Only the metadata from the header area is sufficient to confirm a transaction.

Since it is a hard fork, the implementations are not backwards compatible. Accordingly, all nodes have to synchronize with the new software in order to continue participating in the network. However, this hard fork does not create a new coin, as was the case with Bitcoin Cash, for example.

Zcash as a driving force for private transactions

Heartwood is the fourth hard fork since it was created in 2016. The last one took place in 2019 under the name Blossom. The opportunity to send mining rewards directly to a private address has been on the roadmap since the project was created and has now finally been implemented.

Zcash developers and users are very much in favor of this step, as anonymity in the network has increased again. According to the Zcash Foundation, however, Zcash is by no means a currency that wants to promote and support illegal activities on the Internet. Alongside Monero, Zcash is one of the leading cryptocurrencies in terms of user anonymity. This is not least due to the technology used zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge). For example, these allow you to prove possession of private keys without having to disclose them yourself.

According to forecasts by many experts in the field of internet security, the popularity and necessity of privacy coins will continue to increase strongly in the coming years. In the context of digitization and the switch from cash to digital money, there would still be a certain amount of privacy for users. This can be the case, for example, with donations or other sensitive transfers.

Conclusion: Zcash could continue to grow in the coming years

The latest innovation in the Zcash protocol represents an important step in mining cryptocurrencies. By sending rewards to private addresses, numerous new users could become aware of Zcash. Other projects could also take this as an example and integrate similar innovations into their own network.

The constant emergence of new and successful private cryptocurrencies is also a positive indicator. Privacy coins could become increasingly important in the coming years, which will continue to generate innovations in this sector.

Other promising cryptocurrencies with a focus on anonymity and privacy include Monero (XMR), Dash (DASH), Verge (XVG), Loki (LOKI), Zcoin (XZC), Bytecoin (BCN) and Daps (DAPS). Similarly, the little-researched technology behind Mimble Wimble, such as Grin (GRIN) and Mimble Wimble Coin (MWC), offers a new approach to implementing private transactions.