Think privacy coins are just for criminals? Think again.
What is Zcoin?
Zcoin is a privacy-focused cryptocurrency that uses zero-knowledge proofs and a coin burn mechanism to ensure the anonymity of transactions.
Why is there a need for privacy coins in a more and more transparent world?
“Arguing that you don’t care about the right to privacy because you have nothing to hide is no different than saying you don’t care about free speech because you have nothing to say. “ (Edward Snowden)
Privacy is often described as the last true luxury in our world. It is very common for us to give up on privacy to gain convenience or on social media networks. After all, we quite enjoy sharing a lot about ourselves on social media in our quest for attention. However, we’re slowly starting to see the dark side of trading in our privacy, from the Cambridge analytica to extreme forms such as the social scoring system in China, keeping certain things private should be a fundamental right.
When using public blockchains such as bitcoin, all transactions from your address will be publicly available for all times. The default re-use of the same address for transactions allows chain analysis companies to track down all your spending and eventually they can even identify you. Even if you don’t have anything to hide, would you publicly share all you’ve spent money on?
That’s what privacy coins like Zcoin are for.
Imagine a society in which the government or any other technologically capable individual can get a full record of all your transactions. This could negatively impact your whole life from having to pay higher fees for your insurance, not getting a loan or as seen in China: a negative social score.
In fact, private transactions also increase the fungibility of money, which is one of it’s most important characteristics. Fungibility means that every coin has the same value. If you could see the full transaction history of a coin, this could negatively affect fungibility. Coins that have been used for illicit activities could be devalued and merchants could refuse to accept them. Therefore introducing privacy keeps the value of all coins equal.
So how does Zcoin keep transactions private?
When users transact with Zcoin the process differs from transacting with for example bitcoin. Spending bitcoin is pretty straight-forward. Simply defining an amount and an address to send to. With Zcoin the first step is burning a denominated amount of Zcoins (currently, 1,10,25,50,100). Instead of “burning” Zcoin calls this process “minting” because it involves creating a new token: Zerocoins. So now you have the denominated amount in Zerocoin, but you can’t really spend that. That’s why in the next step you will redeem your Zerocoin for Zcoin again. In this step, the Zero-Knowledge-Proof confirms that you’ve previously burnt the selected denomination without revealing anything else. Now you’ve totally erased any connection between the Zcoins you used to have in your wallet and your transactions. For a detailed guide on the process, check this article out.
To increase users’ anonymity on the platform even further, Zcoin has recently integrated the Dandelion Protocol that allows anyone to obscure their IP.
Is Zcoin related to Zcash?
Both share the same initial letter and their focus on privacy. And that’s about it. Zcash is based on the Zerocash paper while Zcoin was initially developed based on the principles outlined in the Zerocoin paper. In July 2019 Zcoim replaced Zerocoin by implementing the sigma protocol, which removed the need for a trusted set-up.
For a full comparison of Zcoin, Zcash and many other privacy coins, read more here.
What else is special about Zcoin?
There are many interesting features of Zcoin, but one worth highlighting is the MTP consensus algorithm.
Despite the promise of being decentralized, many major cryptocurrencies experience a centralization of mining powers among just a few big players. This means that the network is maintained by a few mining pools making these currencies more susceptible for 51% attacks.
Zcoin has implemented a Merkle-Tree-Proof algorithm that makes ASICS development expensive and unprofitable which in return promotes fair and democratic mining.
Privacy is great, but won’t Zcoin be used by criminals?
As with everything, malicious actors will always find their way. We can all agree that cash has been amazingly beneficial for the development of modern times society. If we had continued using our barter system, we wouldn’t have the sophisticated financial system we have nowadays. Yet cash has also been the go-to way for illicit activities from drug purchases to money laundering.
Is that a good enough reason to get rid of cash?
The same applies to privacy coins like Zcoin. Anyone who has an interest in keeping his private life private will have a tool to do so with Zcoin. If you think about it, every time you paid at a garage sale with cash or tipped a waiter, you were transacting secretly.
Financial privacy is not designed for criminals but to cater to a more liberal society, where you can freely choose who to transact with and what to buy, without having to fear a negative impact on future employment, loan applications and the like. (Please don’t take that as an invitation to buy nuclear weapons with a privacy coin).
Imagine you have a small business, would you want your competitors to know how much you earn and what you pay your suppliers? Probably not.
Looking at the bigger picture, there will be a lot more non-criminal citizens interested in keeping their privacy than criminals looking to obscure their crimes using Zcoin.
“This is what privacy coins set out to do, not to enable criminals or terrorists which are doing just fine with banks and regular fiat (and will continue to do so), but to protect some of our most private data from being exploited: how much we have and what we do with our money.” (Reuben Yap, Zcoin Project Steward)
Currently, bitcoin remains king when it comes to cryptocurrencies used in the dark web (Source). One of the main reasons for that is its high liquidity. You can buy bitcoin nearly everywhere. The picture for privacy coins looks very different. Many exchanges don’t list privacy coins due to regulatory concerns. Especially with the FATF travel rule, the number of exchanges willing to support privacy coins might shrink even further.
Criminals already have an array of tools on their hand to commit crimes. Law enforcement has a lot of tools to fight them. Like any technology, Zcoin can be used for good and less good. Nevertheless, fighting for the right of privacy in an increasingly transparent society is certainly a good cause.
It is worth mentioning that not only transacting value can be achieved with Zcoin. One of the most interesting uses of Zcoins technology was actually during an election. In 2018 the Thai Democratic Party held their election on the Zcoin blockchain which ensured a fair voting process and can be seen as a huge success with 127,000 casted votes on-chain nationwide.
How many Zcoin will ever be in circulation?
The total supply of Zcoins will be 21.4 million. Zcoin is following the same halving circle as bitcoin (approximately halving every 4 years).
How can I buy Zcoin (XZC) on Bitcoin.com Exchange?
Zcoin is available on Bitcoin.com Exchange with BCH, BTC, ETH and USDT base-pairs, so you can buy Zcoin with any of these. If you stay below our withdrawal limits, you will just have to verify your mail-address and set-up 2-FA to get started. (In case you were worried about your privacy 😉
Zcoin (XZC) is an open-source, decentralized privacy coin that focuses on achieving privacy and anonymity for its users while transacting on the blockchain. It is the first to develop and implement the Sigma Protocol, which allows users to have complete privacy over their transactions via zero-knowledge cryptographic proofs without the need for trusted setup. Its research labs also created the Lelantus privacy protocol which has gained academic acclaim and set to go live on Zcoin in 2020.
Zcoin was also the first coin to implement Merkle Tree Proofs on its network for egalitarian mining, as well as the Dandelion++ protocol which protects user identities by preventing their IP addresses from being tied to a transaction
In 2018, Zcoin made history by having the Thai Democrat Party’s elections held on its blockchain with over 127,000 votes casted nationwide.