Zcash outlook after halving

Zcash outlook after halving

By paragism | paragism | 27 Nov 2020


Zcash, a fork of Bitcoin, shares many similarities with Bitcoin. Total supply of Zcash is 21 million and it is the same as the supply of Bitcoin. The initial development work on the project started in 2013 and the first Zcash was mined in 2016. Zcash's objective is to provide enhanced privacy through cryptographic techniques. Zero-knowledge proofs of Zcash allow transactions to be verified without revealing any details about the sender, receiver or transaction amount. It's important to note that privacy isn’t the default feature for Zcash. It also allows transparent transactions to oblige the rules of various exchanges or wallets. Just like the halving mechanism of Bitcoin, Zcash is programmed to reduce the miners’ reward by half every four years. This helps to control the inflation of the cryptocurrency and preserves store-of-value. Zcash went through its first halving a few days ago. Halving had been a bullish event for Bitcoin historically. What happens to Bitcoin’s cryptographic cousin after the first halving?

Activation of Canopy

Zcash first halving coincides with the implementation of ‘canopy’ upgrade. Zcash had 20% miner tax earlier i.e. 20% of the mining rewards were split between Electric Coin Company and the founders and the early investors. This miner tax was always a bit controversial. Canopy, the fifth-largest upgrade of Zcash, changes the miner tax pattern. The miner tax still remains 20% but 8% goes to Major Grants Fund. The new distribution pattern is Major Grants Fund (8%), ECC (7%) and the Zcash Foundation (5%). According to the Zcash proposal, Major Grants Fund will support various long and short term developmental projects which will add value to Zcash. The change approved by the community basically establishes a defined fund for the next four years’ development.

The Pasta curves for Halo 2

Electric Coin Company (ECC) informed about the release of Halo 2 code in this blog post of Sept’20. The post said about Halo 2 - “an updated, more efficient version of ECC’s recursive proof composition that eliminates the need for a trusted setup in Zcash. It may also advance a promising scalability solution for Zcash and other blockchains.” Halo 2 improvements were done in coordination with Ethereum Foundation (EF). EF also supported it by grants. The trusted setup elimination should happen by 2021 and Halo 2 is supposed to be fully productized after that. Halo 2 is extremely important for Zcash as it’ll set the stage for future support of recursive proofs in support of layer 1 scalability. It’s always difficult to achieve scalability in a blockchain which is based on the codebase of Bitcoin. Once Halo 2 is functional, the Zcash community will decide whether it’ll be part of the blockchain or not.

“Recursive proof composition holds the potential for compressing unlimited amounts of computation, creating auditable distributed systems, building highly scalable blockchains and protecting privacy for all of humanity. The concept is a proof that verifies the correctness of another instance of itself, allowing any amount of computational effort and data to produce a short proof that can be checked quickly.” – Halo announcement in 2019

For the Halo 2 project, ECC has designed a new cycle of elliptic curves, Pallas and Vesta. These two are collectively called the Pasta curves. ZCC also invites projects that plan to deploy protocols using ideas from Halo to employ the same curve cycle for getting collective benefit from shared analysis and engineering effort.

Future roadmap - full privacy

The reality is that Zcash isn’t being used as a globally accepted privacy coin. The reason is very simple. Zcash isn’t totally private like Monero. Advanced cryptographic options are provided to obscure transactions but those aren’t widely used. A Chainanalysis report of June’20 said that only 0.9% of transactions processed on the Zcash (ZEC) network were truly obscure. This recent blog post by Zcash Foundation expresses the desire to make Zcash completely private. Shielded transaction is the reason for the existence of Zcash and it is most important to prioritize the functionality. Zcash didn’t fully adopt privacy because of the exchanges. The exchanges are the market makers for Zcash and many need to abide by the local laws. It is really difficult to make shielded transactions compliant with local regulations.

”The truth is that Zcash could work as private digital cash for millions of people today if everyone focused on making the existing protocol better, by reducing the barriers for shielded adoption.” – Zcash Foundation blog post

 

 

Image Source - Zcash shielded transactions and transparent transaction month-wise

Network hash rate

Zcash uses a type of mining algorithm called Equihash. Equihash is a memory-oriented Proof-of-Work, where mining capability is mostly determined by how much RAM you have. Zcash is a very popular cryptocurrency for mining. The network hash rate is highest for Zcash now and it has increased continuously since its launch.

 

Image Source - Network Hashrate since inception

Take me to the chart

Zcash, ranked 33 as per market capitalization, often has a correlation with high marketcap USD cryptocurrency markets. This year Zcash price crossed $97 on August 6, 2020, but couldn’t sustain at that level. $60 seems to be good support and rejection from that level will be really bearish. ZEC/BTC chart shows that ZEC has been fluctuating against BTC this year. All-time low of ZEC was ₿0.00335851 on Mar 13, 2020. A stable Bitcoin can allow a recovery rally of the cryptocurrency.

 

Zcash community is very active and the partnership with Ethereum Foundation is a win-win for both. The developers are working on enhancing privacy but the community needs to be very transparent about the obstacles which are preventing them from achieving the goals of widespread trust and user adoption. Even if they can’t achieve complete privacy, a larger anonymity set will fulfil the reason for the existence of Zcash. If you ignore the slight crypto market crash before Black Friday, technical indicators in the daily frame are bullish for Zcash. The project has great potential and development is happening with sheer speed. Transaction shielding can be a hot use case of cryptocurrency and nine-year-old Litecoin is also joining the race to achieve privacy. If shielded usage becomes legitimate in the future, it’ll be a boon for Zcash. Financial privacy can’t be denied for a long time.

Note: This post was first published here for Cryptowriter in association with voice.com.

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paragism
paragism

Cypherpunk. Writing content which I love. Creeping on the blockchain. Founder - www.thecoinbuzz.com Twitter - @paragism


paragism
paragism

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