Most people assume that Bitcoin transactions are private and anonymous. That, when you use a crypto-currency to make a purchase, your identity, wallet info and personal details are kept safe, secret, secure.
This is not the case.
“People assume Bitcoin is private … the reality is, it’s not,” explains Josh Swihart, the vice president of marketing for Zcash, a privacy-focused, wizard-approved crypto-currency that was designed by a charismatic Colorado-based cyberphunk named Zooko.
“Bitcoin is like Twitter for your wallet,” Swihart compares.
Tracking spending patterns to a person’s Bitcoin address and connecting that address to the person, is not as complicated as one might imagine, he continues. “It's very similar to like Venmo, where all of that information is disclosed, and it's disclosed and out there and available forever. It's undeletable.”
When a user buys something using Bitcoin, that transaction is linked to an “out-address,” in the block chain, which, supposedly protects your information like a privacy screen. But if that address is linked to you (which is not hard, since every Bitcoin transaction requires a third party to make sure the “sender” has enough coins in their wallet to pay the “receiver”) your online purchases can all, also be linked to your name.
It offers about as much privacy as a pen name does for an author. Sure, there’s some level of privacy, but once your real name is attached to it, there’s no going back, no undoing the damage. Once you’re found out, you’re found out.
Which was exactly what inspired the creation of Zcash.
“At the time when Bitcoin was released, there were some scientists working on something called ‘zero knowledge proofs,’” Swihart explains.
These cryptographic “methods” are one of the most abstract and complicated facets of modern cryptography and I will not even attempt to unpack them here. Suffice it to say, these “proofs” add an extra level of anonymity to crypto-transactions.
However, this tech was too techy — even for computer geeks like those at Bitcoin.
“The Bitcoin team said it's too novel, it's very complicated math and it's too risky for Bitcoin,” Swihart says. Instead, Bitcoin suggested that they try and make their own coin using their newly developed zero knowledge proofs.
That was when these crypto-scientists approached the Colorado-based cyberphunk guru, techno-mastermind and entrepreneur extraordinaire, Zooko Wilcox-O’Hearn.
Zooko is an interesting cat. Best known for creating Tahoe Least-Authority File Store (Tahoe-LAFS), a secure, decentralized, fault-tolerant file system, Zooko has a lot of experience in the realm of crypto-privacy. He is the founder and CEO of the Boulder-based company, Least Authority Enterprises; he was a developer at MojoNation P2P system; lead developer for the follow-on Mnet Network; a developer at SimpleGeo; and the creator of Zooko’s triangle.
Dude’s a wizard, to put it simply. No one really knows what Zooko enjoys doing in his spare time, but it’s not hard to imagine him playing with Palentirs, sorcerer’s stones and magic wands when no one’s looking.
One strange night in 2016, Zooko, along with a handful of the sharpest and most talented computer scientists in the nation, convened in an undisclosed hotel room in Boulder to undergo a secritive and highly cryptic ceremony: the creation of a hyper-secure crypto-currency.
It took a full week of processing, computing, monitoring, of fending off hackers, defending algorithms and eating take-out. But when they were finally done, when Zooko and his team finally walked out of that hotel room, groggy, tired and unshaven, they had synthesized gold out of lead.
Zcash was officially born.
“They applied this crazy interesting, complicated science, of zero knowledge proofs on top of Bitcoin,” Swihart explains. That added the extra layer of security and anonymity that was always missing from Bitcoin and suddenly an even-more private form of crypto-currency exploded onto the market.
“Zcash follows the same kind of monetary policy where there's only … twenty-one million that will ever get created,” Swihart says, calling it a deflationary currency. Initially, lots and lots of Zcash coins were created, and as time goes on that number will dwindle. Until one day, there’s no more left and all the Zcash will have been mined and put into circulation.
From there it’s a simple matter of getting people to use it. As with any crypto-currency, value is derived from how large the userbase is. If just two people are using Zcash to make transactions, the currency is worthless — they may as well be trading rocks. If, however, millions of people are vying to claim their fair share of those 21 million Zcash-coins, the currency starts to look and feel like something valuable.
It’s a strange thing that’s happening to money. Once upon a time our capitol had weight — it was actually pegged to something, usually a pre-determined mass of precious metal, like gold or silver. The pound, for instance, when it was created, equated to a “troy pound of sterling silver.”
This is not the case anymore. Not even with the US dollar. These days, the value of our money is decided by central bankers, who can choose to print more or less cash on any given day of the week. This is the centralized system.
Alternatively, cryptocurrency is decentralized and relies almost entirely on demand for the currency. It’s a deceivingly simple correlation: the more people that use a crypto currency, the more that currency is worth, and vice versa.
“There's no government entity that can dictate [crypto-currency’s] use,” Swihart says. “Whether you're struggling under an oppressive regime like that in Venezuela, or whether you're here in the U.S. in Colorado, or China or wherever, you have personal power, personal sovereignty over your own money and wealth.”
That sounds good. Especially when you consider how much money is absorbed by things like bank transfers and currency exchanges.
But is it working? Are people using Zcash instead of regular cash?
“Largely, what people use it for today, is as a ‘speculative asset.’ That's true of any cryptocurrency,” Swihart says. “It's very early in the adoption cycle.”
The way he describes it, most crypto-currencies currently on the market right now, represent a modern form of gold mining. People who believe in the movement are buying into it, rushing to collect as much “gold” as possible, so that when these currencies are normalized, they’ll have a healthy stash already piled up.
As of today, Tuesday March 12th, 2019, a single Zcash coin is worth $52.33 — compared to the Bitcoin unit worth of $3,861.99 … so there’s still a long way to go before this currency is cemented in the crypto-sphere.
“The user experience is still bad,” Swihart admits, talking about crypto-currencies in general. “It takes too long to confirm a transaction … there's lack of regulatory clarity, globally.”
In other words, there are still a lot of kinks to be worked out. For now, there aren’t a whole lot of real-world uses for currencies like Zcash, outside of hoarding it and hoping for the best (although Swihart did divulge that he had used Zcash to buy a Radiohead vinyl).
“We’re in this kind of in-between, where we're seeing a lot of movement, where people are looking for a form of digital gold,” Swihart says. The hope is, Zcash is it.
But only time will tell.
“The goal with all of this is to provide everybody with economic freedom,” he says. “So that they are empowered to manage their own money in a way that they want to.”
It’s all about putting money back into the hands of The People, redistributing power and empowering privacy and anonymity in the capitol sphere.