What is Zcash?
You have probably by now heard about Zcash which is a new cryptocurrency that is currently in development. It is expected to launch on October 28th, 2016.
Zcash will use the Equihash (white paper) algorithm, which is a new, memory-hard, proof-of-work mining algorithm that is based on the generalized Birthday Problem and Wagner’s algorithm for it.
Zcash was influenced in large part upon the Bitcoin protocol and what separates it from most other cryptocurrencies is its goal from the start to provide users with more privacy in their transactions. With Bitcoin, although there is a disconnect from the user and their BTC address, every transaction can be linked from its origin and a lot of information can be gleaned by studying the block-chain.
Zcash gets around this problem by having two kinds of address. The first is called a z-addr which is a fully private address that uses the zero-knowledge proving system to shield a transaction and provide privacy. It also utilizes a t-addr (transparent address) which is similar to a Bitcoin address, in that it is publicly view-able and traceable.
According to the website:
Zcash offers total payment confidentiality, while still maintaining a decentralized network using a public blockchain. Unlike Bitcoin, Zcash transactions automatically hide the sender, recipient, and value of all transactions on the blockchain. Only those with the correct view key can see the contents. Users have complete control and can opt-in to provide others with their view key at their discretion.
Zcash is a decentralized and open-source cryptocurrency that offers privacy and selective transparency of transactions using advanced cryptography. Zcash payments are published on a public blockchain, but the sender, recipient, and amount of a transaction remain private.
Zcash launched on Friday, October 28th and mining began soon after. The launch included a “slow-start” mechanism, meaning the block rewards would scale from 0 to the full block reward of 12.5 ZEC over a period of 20,000 blocks, or roughly 34 days.
Ten days after the launch, the number of mined block stands at just under 6,000, so the mining is progressing on schedule. The current block reward is around 3.6 ZEC, which ~2.9 of that is rewarded to the miners and the other 20%, or 0.73 ZEC, is set aside for the founders reward. You can read more about the slow-start and the founders reward later on in the article.
- Algorithm: Equihash (whitepaper)
- Block Time: 2.5 minutes
- Block Reward: 12.5 Zcash* (10 miner – 2.5 founder reward**)
- Difficulty adjustment: Every block, Digishield V3
- Reward halving period: Every 4 years (same as Bitcoin)
- Total coin supply: 21,000,000 (same as Bitcoin)
*Subject to slow start during the initial 20,000 blocks that will gradually increase the block reward from 0 to 12.5
** Division of each PoW block reward between miners and Zcash team:
– 80% (10 ZEC) to miners, 20% (2.5 ZEC) to Zcash team, from genesis block to first halving of the block reward (approximately four years later)
– 100% to miners thereafter
– transaction fees paid 100% to miners throughout
ZCash has managed to generate significant community enthusiasm and a strong following even during its Beta, so there is a very strong interest in the upcoming launch on October 28th in ways to obtain Zcash as early (and cheaply) as possible. Since ZCash has no pre-mine, the two main ways to acquire Zcash will be via mining and eventually trading. Obviously the latter option will require some amount of Zcash to have been mined first, and I expect the readers of this forum will also be looking at mining as their first source of acquiring some of this new and exciting currency.
There are some developers who are selling their software to mining pools or other large private mining farms, so there seems to be enough expectation that Zcash will be successful. Some of these pools are offering mining contracts for various terms, with 3-month, 6-month and 12 month contracts being the most common. Even with this there is some development in the publicly available software circles in which CPU and/or GPU miners may be available at launch.
Changes to Zcash and its supporting infrastructure are happening at a pretty rapid pace. I will be updating this article and well as providing additional guides on mining Zcash as the launch approaches.
More information on Zcash Mining is available here. (broke out into its own post due to length of content)
Zcash is launching with what it calls a “slow start”. The official specifications call for an eventual supply of 21 million Zcash coins, the same as bitcoin. However, instead of 50 coins being rewarded every 10 minutes as was the case when BTC first launched, Zcash will instead reward only 12.5 coins every 2.5 minutes, this increasing block generation speed while maintaining the same supply curve over time.
The slow start comes into play on the initial 20,000 blocks mined, in that Zcash will ramp-up the block reward from 0 to 12.5 over these first 20,000 blocks. This means the initial rewards will be trivial and allow for everyone time to get their wallet address, miners and pools setup before the real block rewards start coming in. It is expected to take anywhere from 21 to 30 days to hash through these initial 20,000 blocks. While the Zcash block specifications would indicate it should take 34 days to mine 20,000 blocks, with the expected hash-rate present at launch and faster than normal mining, the realistic expectation is anywhere from 3-4 weeks.
The first 4 weeks of expected miner rewards is shown in the following table.
|Day||Daily Coins Mined*||Total Coins in Existence*|
*Note: These figures are reduced by the 20% “tax” or founders reward imposed on every block mined until the first halving. So while in reality 20% more Zcash will exist, this chart represents what is available to miners.
The Distribution of Zcash
Related to the above section is the final distribution of Zcash. While BTC funded its founders and early adopters through its obscurity, (no one but them knew about it to mine early on) later cryptocurrencies, such as Ethereum, have relied on pre-mined coins or other means to set aside some number of the total coin supply to fund development, promotion and administrative activities. Ethereum was launched with 60 million or so coins already generated and set aside for the foundation and pool efforts. Some of this was sold early on to investors as to raise capital for the continued development of the coin.
Zcash has this same approach but only in reverse. While it has pledged some amount of future Zcash to “investors”, instead of pre-mining it upfront, they have instead chosen to tax the initial blocks at a rate of 20% until the first block halving, after which the full reward will go to the miners. This initial 20% tax will result in a total of 10% of the eventual Zcash supply being in the hands of the founders.