By Eli Siems
A new digital currency was launched last Friday (28 Oct.) that threatens to give Bitcoin a run for its virtual money. It’s called Zcash. But there’s one major distinction between the two so-called cryptocurrencies that Zcash believes will give it an edge in the digital market. The currency’s official website puts it this way: “If Bitcoin is like http for money, Zcash is https.” In other words, this new cryptocurrency is designed to be secure, private, and virtually untraceable by anyone but the parties to a transaction.
Interest and speculation is high. On Monday, the New York Times reported that “investors were paying over $1000 for a single unit of Zcash.” The currency launched with a ton of buzz and with the support of computer scientists at Johns Hopkins and MIT, privacy activists, and electronic currency traders, speculators, and aficionados.
While it’s far too early to say if the currency will take off, its core principles and technology are already shaping conversations on the future of data privacy.
The difference between Zcash and other, less private cryptocurrencies is its handling of an essential component known as a blockchain, a permanent ledger that tracks coins. The blockchain is key to maintaining the integrity of the currency and proving no counterfeiting or interference has taken place. For Bitcoin, the blockchain is public and can be accessed to analyze the flow of currency, which has raised more than a few eyebrows across the spectrum of potential Bitcoin users. As The Economist reports, “This is a serious barrier for banks: blockchains could reveal their trading strategies and information about their customers”
But Zcash is fundamentally different. Using a “zero-knowledge proof construction called a zk-SNARK,” the Zcash team has managed to create a secure ledger that keeps the identities of parties to a transaction and the amounts transferred undisclosed. Beyond cryptocurrency, the encryption technology is making waves on all shores of digital privacy and cryptography.
Aside from potential benefits to large players like banks, Zcash markets itself on its privacy protection for every user. But such a currency, readily accessible and exchangeable, will bring with it huge and probably obvious law enforcement concerns. Back in 2013, when the idea that became Zcash was first proposed by Johns Hopkins researchers, Global Financial Integrity voiced strong opinions that a currency like Zcoin would do little more than facilitate a wide range of illicit transactions and cripple hard-won law enforcement tools. Monero, a similarly private but less anticipated cryptocurrency, has already shown up in countless illicit transactions.
On the other side, Zcash founder Zooko Wilcox insists that Zcoin has a different purpose: “All of the conversations I’ve had with businesses, banks, regulators and law enforcement have been about the need for data security for commercial applications.”
Matthew Green of Johns Hopkins, an originator of the Zcoin concept, frames it differently: “The basic story is that we have been gradually losing our privacy in a whole bunch of ways that people don’t appreciate,” Zcash being a way to take back that privacy in at least one area.
Whatever your opinion is on the utilities or dangers of an untraceable cryptocurrency, one thing is quite clear: Zcash is here and is bringing back longstanding debates about privacy and law enforcement in the digital age with renewed immediacy.