The emergence of cryptocurrency market with the introduction of Bitcoin has laid solid foundation for further development in Blockchain technology, cryptography and virtual currencies or altcoins. With more privacy, confidentiality, anonymity and other technological concerns in the cryptocurrency market, altcoins are gradually gaining more interest among users of virtual or digital currencies. The following post will discuss the issues concerning cryptocurrencies, Bitcoin and altcoins. It will also touch on the advanced security features of the Monero and Zcash digital currencies, comparing and contrasting them both.
Bitcoins, altcoins and other cryptocurrencies:
Bitcoin (BTC) is the first digital cryptocurrency which emerged in 2009 as ‘virtual money’, used for making payment transactions worldwide, controlled by decentralized authority utilizing blockchain technology. As a virtual currency, Bitcoin ensure user-privacy, anonymity, protection, transparency, etc. By using what are known as ‘public ledgers’, without sharing personal information. However, any shrewd investigator can easily determine the source through the IP addresses behind the transactions, pattern of transaction and from service providers. Further, there are problems of value fluctuation, in-built unexploited technical flaws, and enforced limitations of Bitcoin mining, as well as other issues. This led to origin or development of more than 700 different types of cryptocurrencies, referred to as ‘altcoins’. These coins are considered to be better substitutes for Bitcoins with the intent for providing comparative advantages like better anonymity, privacy, protected transaction, better liquidity, and value retention. The most widely used altcoins are Litecoin (LTC), Ethereum (ETH), Monero (XMR), Ripple (XRP), and Zcash (ZEC). There are questions regarding their associated risks like liquidity, volatility, acceptance, and marketability.
Let’s take a look at an interesting analogy comparing Zcash and Bitcoin, “if you relate http to Bitcoin, then you should relate https to Zcash”. Zcash stands for ‘zero-knowledge’ cryptography of financial transactions. It publishes every transaction in public-block chain but keeps the originator, recipient, and transaction details private. Zcash was conceived by a team of peer reviewed developers from Zcoin’s cryptography company. Carrying the goal of providing advanced privacy, security, anonymity, and encryption algorithms. It uses zk-SNARK cryptogenic algorithm technology by encrypting the transaction information like the sender, receiver, and amount exchanged in the Blockchains cloud storage location. The algorithm ensures the validity of every transaction and proper ledger management using zk-SNARK proofs with no duplication of financial transactions, fraud, or forgery.
Zcash, also referred as the ‘Bitcoin killer’, also now termed as a mysterious cryptocurrency, due to a complete lack of its underlying functionality. It is also more flexible with improved customizable features, allowing for a greater degree of anonymity and selective transparency. For example, payments sent from protected address to transparent addresses disclose the received amount, while payment sent from transparent address to protected address completely anonymizes the amount. Currently, one unit of Zcash goes for about $240 USD.
Monero is different from other altcoins due to using the Cryptonight protocol and implementing Blockchain encryption. It is fully developed by a group of enthusiasts assisted by community donations. It uses a ‘ring signature’ system and stealth addresses for ensuring anonymity and privacy. Compared to ordinary digital signatures, ring signatures are more sophisticated systems, utilizing multiple private and public keys. A transaction will be signed by a sender with a private key, at the same time it will be verified by multiple public key holders. So, it is very difficult to trace anything back to the sender, as the number of public keys help to hide the individual private key.
Earlier in 2017, the ring signature algorithm was further reinforced with a ‘confidential transaction’ algorithm based on Bitcoin, which helped to hide the amounts associated with transactions. Recently, Monero has become more frequently used in altcoin transactions and especially in Darknet markets. Currently, Monero is being traded at around $92 USD per unit.
Comparison of the Zcash and Monero coins:
A comparative analysis of Monero and Zcash will be pertinent in terms of protected transactions, reliability, privacy, anonymity, liquidity, availability and etc. Zcash is close-coded and validity verification is complex. For instance, if there is a programmatic bug or error, then only its authors can identify it and prove it. However, Monero is an open-source code and a large number of developers understand its algorithm or ‘ring signature’ and ‘confidential transaction build.’
Zcash is backed by the company Zcash, which produces a reliable and trustworthy business model. With business and profit interests, Zcash can perform better in terms of marketability and availability. However, Monero with its decentralized ownership and multiple developers creates trust, marketability, and accountability issues.
If we compare these two coins in terms of privacy, Monero provides better safeguards for personal information. Additionally, both of these cryptocurrencies as well as others can be conveniently mined through the MinerGate mining pool. Monero uses a CryptoNight PoW algorithm for mining, while Zcash utilizes Equihash as its PoW. Both of these coins are trying to aim for ASIC resistance. However, Monero’s CryptoNight algorithm is more vetted than Zcash’s Equihash. It is crucial to note that almost twenty percent of mining rewards from Zcash go to the Zcash Electric Coin Company. When comparing supply curves for both of the coins, it should be understood that Zcash uses the exact same supply curve as Bitcoin, while Monero utilizes a faster supply curve
A comparative analysis of the Monero and Zcash helps to weigh the benefits between the two. Zcash provides benefits in terms of flexibility, customer support, and trustworthy business models. While Monero provides higher privacy, greater reliability of cryptographic algorithms, and decentralization for fiat and crypto exchange transactions.