The Ultimate Guide to Credit Cards
Tuesday, July 7, 2020

Zcash: How the Science-Based Digital Currency Maintains Privacy While Providing the Full Benefits and Functionality of Other Cryptocurrencies

Zcash: How the Science-Based Digital Currency Maintains Privacy While Providing the Full Benefits and Functionality of Other Cryptocurrencies

credit card news

Matt Walker
By: Matt Walker
Posted: March 7, 2019

Our experts and industry insiders blog the latest news, studies and current events from inside the credit card industry. Our articles follow strict editorial guidelines.

In a Nutshell: Zcash is a privacy-protecting cryptocurrency that differs from its peers, in part, because of its application of zero-knowledge proof concepts to blockchain technology. We spoke with Vice President of Marketing and Business Development Josh Swihart as the Zcash Company was prepping to announce that it was changing its name to the Electric Coin Company to help distinguish it from the cryptocurrency itself. Swihart explained the digital currency’s origins, why privacy matters, and how Zcash solves privacy issues inherent in other cryptocurrencies.

In the world of digital currencies, Zcash stands out not only for its focus on privacy where Bitcoin falls short, but also because of its strong foundation steeped in cutting-edge technology.

The origin story of Zcash plays out almost like a Hollywood movie. The perfect mix of personalities, science, and technology fell into place over the span of several years to culminate in success — the launch of a new and innovative privacy-protecting cryptocurrency.

Josh Swihart and Zcash Logo

Josh Swihart is the Vice President of Marketing and Business Development for the Electric Coin Company.

But while the script was being written, it was subjected to numerous rewrites as unexpected plot twists worked their way into the story.

We recently spoke to the Electric Coin Company’s Vice President of Marketing and Business Development, Josh Swihart, about how the singular currency came to be, the advantages Zcash offers offers over its crypto peers, and what the future holds for the privacy-protecting coin.

“The emphasis on privacy combined with the application of zero-knowledge proof technology really differentiates Zcash in the world of cryptocurrency,” Swihart said. “And there’s this world-class team of scientists behind it all, giving it a very solid foundation.”

Zcash Prioritizes Privacy and Is Supported by a Science-Minded Community

In the early days of Bitcoin, cryptographer and Johns Hopkins University Professor Matthew Green was intrigued by the technology. He took the cryptocurrency to task, attempting to find flaws in it using his substantial computer science and cryptography expertise. Once he was satisfied that the technology was sound, he began to figure out how to add what he believed was the one component Bitcoin was missing — privacy.

“Bitcoin is the least private financial system ever invented,” Green told Fortune magazine. Green, along with two graduate students, applied the concept of zero-knowledge proof to Bitcoin technology and came up with the Zerocoin protocol.

Zcash Graphic

Zcash was founded with the intent to solve privacy issues inherent in Bitcoin.

Zero-knowledge proof enables Party A to let Party B know that it possesses knowledge without revealing the specific knowledge to Party B. Yes, it is confusing and complex.

“Zero-knowledge proofs are this kind of foggy, beautiful, magical thing invented in the 1980s by cryptographers at MIT,” Green said.

Green took his Zerocoin protocol to Bitcoin developers and was quickly rebuffed. Bitcoin was just getting off the ground and adding complex technology, like the Zerocoin protocol, would slow things down too much and be too costly.

Green regrouped and at a 2013 conference, he met an academic team from Israel that had developed zk-SNARKs, a technology that made zero-knowledge proofs more efficient. The two teams joined forces to create the Zerocash protocol, which was 98% more efficient than the original Zerocoin protocol.

The team — now a seven-person powerhouse of top cryptographers and scientists — once again approached Bitcoin and again were politely turned away. But this time, the Bitcoin developers suggested that maybe the team should consider creating a digital coin of its own.

The team joined forces with Bryce “Zooko” Wilcox, a computer scientist who had been involved with the concept of decentralized digital currencies since the mid-1990s. Wilcox had also followed Bitcoin since its inception.

That’s when the final script revision was made that would finally see the project put into production. Wilcox was able to work with the founding team to secure funding and get their new cryptocurrency — Zcash — off the ground.

Why Privacy is Important in the World of Cryptocurrencies

For some people, internet anonymity and transactional privacy are not priorities, Swihart said. Because they aren’t doing anything wrong or don’t have anything to hide, they say it’s no big deal. But he said it should be.

He said that, even if someone is not doing anything nefarious online, other parties on the internet are and will exploit innocent users for various means.

“Just one example — Cambridge Analytica took data it collected from Facebook users and sold it to Russia to manipulate our election cycle,” Swihart said.

He said the purest form of transactional privacy that exists today is the tried-and-true system of cash.

“I can pull out $50 in cash from my wallet and go on Craigslist and buy a bike for my kid,” Swihart said. “I give the other person the cash, and he gives me the bike. Money changes hands, and he doesn’t know anything about me and vice versa. And nobody else even knows about it.”

He said that, if a user does the same thing using Bitcoin, that transaction would be visible to anybody because it is recorded on the blockchain.

Data Security Graphic

Privacy should be a priority for individuals and businesses to keep their transactional information from external parties, Swihart said.

“If I’m transferring Bitcoin to an exchange, I can see that transaction, the exchange can see that transaction, the U.S. government can see that transaction, the NSA, the FBI,” he said. “Russia, North Korea, hackers or other bad actors who may want to exploit people or information can see that transaction because it’s all transparent.”

This transparency is a high barrier to adoption for cryptocurrencies, Swihart said. While some people associate private online transactions with illegal behavior, there are a plethora of reasons someone might not want a perfectly legal transaction viewable to others. Paycheck deposits, doctor visits, or purchasing surprise gifts for someone are just a few examples where privacy would be important.

Additionally, privacy laws associated with certain industries, such as the Health Insurance Portability and Accountability Act (HIPAA) make transactions using Bitcoin extremely difficult if not illegal in some cases.

For businesses and governments, conducting transactions involving proprietary information would make for bad business decisions, at the very least, and real security threats in a worst-case scenario.

Swihart said Zcash’s application of zero-proof knowledge technology helps to resolve these issues in many cases.

“With Zcash, those transactions still exist on the public blockchain, but they are kept private from external parties,” he said.

The Zcash Company is Now the Electric Coin Company

Shortly after our conversation, Swihart announced in mid-February that the company known to most as the Zcash Company was officially changing its name.

“The Zcash Company is now the Electric Coin Company. We’re changing the name for clarity. Our legal name has always been the Zerocoin Electric Coin Company, LLC, and we’ve been calling ourselves the Zcash Company. But, the company isn’t Zcash. Zcash is the cryptocurrency we build and support, with the help of others in the community,” Swihart wrote in the announcement.

He said the change is in name only and the company maintains the same team with the same mission of empowering everyone with economic freedom and opportunity.

“The Electric Coin Company is focused on building and supporting Zcash. That includes research and engineering that may, or may not, ever make it into Zcash software,” he wrote. “This has been our mission from the very beginning, and we will continue to drive innovation and adoption.”

Beginning immediately, the company will use the Electric Coin Company for all messaging and correspondence, according to the announcement. In the coming months, the company will roll out Electric Coin Company branding, a new domain and website, new email addresses to match the new domain, and social media pages that include the new branding.

Zcash Economic Freedom Graphic

Swihart also made the distinction between the Electric Coin Company, Zcash, and the Zcash Foundation. “The Foundation is a separate and independent 501(c)(3) nonprofit organization. It has its own mission, team, and board of directors,” he wrote.

“So, that’s it then — Electric Coin Company,” he wrote. “The company name has changed but our commitment has not. The path forward is filled with both opportunity and challenges, and we thank you for your support.”

The announcement comes on the heels of other big news for Zcash. Coinbase announced in mid-February the launch of Coinbase Earn in which Coinbase users can earn up to $3 in Zcash simply by learning about Zcash.

Reducing Friction to Make Way for More Cryptocurrency Use Cases in the Future

Although the Electric Coin Company’s goal is to facilitate economic freedom and opportunity, Swihart said cryptocurrencies, in general, have a way to go before they are more widely adopted.

Zcash and other cryptocurrencies today are primarily held as speculative investments and, in some cases, as a store of value, he said. He suggested that cryptos are going to have to go through a series of stages before they’re widely accepted as a medium of exchange.

This includes improving the usability of cryptocurrency across the board, he said.

“The friction of acquiring them has to improve,” Swihart said. “It’s too complicated to go through this process of registering with an exchange and transferring fiat currency over, then buying it at a certain market rate. Why would you go through that headache if you can just use your credit card?”