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Monero vs. ZCash: Privacy Coins Compared

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Monero vs. ZCash

When it comes to privacy coins currently on the market, the two biggest contenders are ZCash (ZEC) and Monero (XMR).

Both of these cryptocurrencies have protocols that are at the cutting edge of blockchain technology. They have both proven themselves over an extended period of time and are relatively well known in the crypto ecosystem.

However, can they really be compared? And, if so, which coin affords you the most privacy?

In this post, I will try to compare the two blockchains and their supposed privacy benefits. I will also look into their mining protocols and the impact that could have on said security.

However, before we jump into a comparison, we have to take a look at the key technology driving each coin.

ZCash Overview

ZCash (ZEC) was released as a Fork of Bitcoin in 2016. Hence, it shares some commonality with Bitcoin in that it is also a Proof-of-Work coin and has the same total mineable supply of 21m coins.

However, that is where the similarities end.

ZCash was specifically forked by the main developer, Zooko Wilcox, in order to be a private alternative to Bitcoin. As such, there is some pretty advanced technology that has been included in the Zcash protocol in order to facilitate this.

ZCash Privacy Protocol

One of the most important privacy features on ZCash has to be it’s use of zero-knowledge proofs and its implementation in their zk-SNARKs.

A full explanation of these are is beyond the scope of this text. Yet, the basic principle of a zero-knowledge proof is being able to prove something is true without conveying anything other than it being true.

This can be particularly useful for occasions when you want to prove that you know a password or have access to a cryptocurrency’s private key without actually sending them.

Example of “Proofing” Secret Data. Image Source: Medium.

Through the use of zk-SNARKs, ZCash allows the user to hide their transaction from the rest of the network. These are called “shielded” transactions and they use addresses that begin with a “z” (z-addrs). These shielded transactions are not mandatory and users must elect to use them.

Users will ordinarily make use of their t-addrs which is the unshielded and transparent transaction. These are no different from normal Bitcoin transactions in that they are broadcast to the network and are fully public.

Below is a helpful image that takes a look at the dynamics of shielded and unshielded transactions.

Example of Different ZCash Transactions. Image Source: ZCash Website.

As you can see, only when users send funds from one z-addr to another are the transactions completely private.

The “Trusted” Setup

Another unique quirk of ZCash was its reliance on what they call the “trusted setup”.

Essentially, this was a public ceremony that the ZCash creators embarked on to rid the future network of potentially deadly “toxic waste”.

In this case, the toxic waste is meant figuratively to refer to the unique private “master” key that could be used to create counterfeit ZEC. This private key was a by-product to the initial creation of the zero-knowledge protocol.

This was no doubt a concern for all users in the ecosystem.

Hence, the developers created the elaborate ceremony where a group of participants would intricately destroy the unique private key pieces (called shards) to ensure that they would never combine and create the dreaded toxic waste.

The Founder’s Fund

The founder’s fund was one of the more controversial aspects of the ZCash ecosystem.

This was hardcoded into the ZCash protocol such that the founders would get 10% of the total mineable coins (2.1m ZEC) which would be distributed incrementally over the first 4 years of the project. Many people considered this as a “tax on mining” and at current rates, it is 20% of all block rewards.

The ZCash Founder’s Fund Split. Image Source: Medium.

It is also by no means insignificant. At today’s rates, the founder’s fund will receive about 1,425 ZEC per day which in today’s dollars is about $179,000 per day. While some see this as an example of “skin in the game”, others think it is enrichment off of the miners.

To be fair to the ZCash developers, not all of the money is heading to the founders as about 2.5% of the rewards will head into R&D and reserves.

Monero Overview

Monero is also a fork of another cryptocurrency called Bytecoin. It forked in April of 2014 and is based on the CryptoNote protocol.

Monero is like ZCash in that it uses a proof-of-work protocol but uses a different hashing algorithm called CryptoNight which is slightly more ASIC resistant than ZCash’s equihash.

However, the real innovations of Monero are when it comes to their privacy enhancing features.

Monero Protocol

Monero relies on some pretty advanced cryptographic technology in order to hide a user’s transactions. These include the following concepts:

  • Stealth Addresses: These are used in order to hide the receiver’s address from the blockchain. They are one-time addresses that are created by the sender and are based on the address given to them by the receiver. Only these two parties will know where the Monero was sent.
  • Ring Signatures: While Stealth addresses help the receiver, we still need to hide the sender’s address. This is done through the use of Ring signatures which mask the address of the person who is sending the funds. It makes use of the signatures of multiple parties to sign the transaction. This “mixin” creates a certain level of plausible deniability for the sender.
  • Ring Confidential Transactions: Ring CT is a relatively new update to the Monero protocol that was implemented in 2017. This used cryptographic functions in order to hide the amount that has been sent thereby making the transaction completely anonymous
Monero Privacy Technology. Image Source: Freedom Node.

Technical explanations of how this technology functions are quite involved and we won’t cover it here. However, the most important thing to note is that Monero requires all transactions to be private transactions and the only choice that the user has in it is the amount of “Mixins” to use in the transaction.

Anti ASIC Stance

ASICs have the cryptocurrency community divided.

Some see them as an great way to give hashing power to a chain and mine coins in a more energy efficient way. Other’s view them as a toxic tool that helps to centralise a network, drive out GPU miners and hence make the chain less trustworthy.

The Monero community is in the latter camp. The developers and ecosystem is well known for their aversion to ASIC mining chips. Hence, not only have they used a hashing algorithm which was quite ASIC resistant but they also hard forked the Monero code in April in order to ward off the risk posed by the Bitmain Antminer X3.

What this shows is that the Monero community is actively working against the threat of these ASICs and is happier to fork their code in the face of any threats from ASICs. This is also a deterrent against any other ASIC manufacturers who want to follow suit.

Protocol Improvements

There are two more really important updates that are being made on the Monero protocol that are set to make the network that much more secure and private. These are the launch of the Kovri I2P Protocol and Bullet proofs.

Kovri will allow Monero to route transactions through the I2P network whereas bullet proofs will make the Monero transactions more efficient and hence cheaper to initiate. If you wanted more information I recently completed a more in-depth piece on Kovri and Bulletproofs.

Monero or ZCash?

What the above overview shows is that both of these cryptocurrnecies use pretty advanced technology. They both have been around for some time, have demonstrated their use cases and have their own selection of backers.

However, what should be your premier privacy coin of choice?

Let’s take a deeper look at the technology and potential concerns that some may have.

Transaction Privacy

Both the Monero ring signature / stealth address technology as well as the zk-SNARKs on ZCash work as intended. They are able to hide transaction data and make them completely private. However, they are implemented in a different way.

Whereas the Monero transactions are all private by default, ZCash only has them as mandatory. This means that most people (out of laziness or indifference) will not use their z-addres. In fact, currently only about 13% of all ZCash transactions use their shielded addresses. The figure is even less when you look at the volume percentage.

Private Transaction Percentages of ZCash. Image Source: ZCash Explorer.

This means that those users who make use of their shielded addresses could immediately raise suspicion of “having something to hide” even if they do not. Therefore, the actions of the users that do not make their addresses shielded is decreasing the privacy of those who do.

Monero on the other hand, decided that this negative externality was not conducive to a cohesive ecosystem. They decided to make all of their transactions private. This means that all transactions on the Monero network look identical and the ecosystem is generally stronger for it.

While there have been concerns about the risk of Monero forks and the impact that they have on the ring signature technology, these are more “edge cases” and unlikely to threaten the network.

Moreover, in the recent Monero hardfork they increased the minimum Mixin level to 6 from the previous minimum of 4. These additional layers of plausible deniability help obscure things that much more.

Centralisaiton Concerns

Centralisation is something that would concern any distributed system let alone one that was focused on privacy.

In the case of Monero vs. ZCash decentralisation, it appears as if Monero is actively fighting against any sort of centralisation. We have seen this with their actions in hard-forking the code recently in order to ward off the risk of the CryptoNight ASICs.

The developers have made it known that they would always take the Anti-ASIC route. Without the ASICs, it means that average users can still contribute hashing power to the network from their home GPU rigs. This takes the power out of the hands of a few large mining farms and places it back into the hands of the community.

Not so much can be said about the ZCash miners. The recent introduction of the Equihash Antminer Z9 had many of the miners in the community angry about the lack of action from the developers and founders.

Then there is the question about the founders and that Founder’s fund.

This has been a contentious issue for the community and the notion that a group of individuals will control 10% of all mined ZEC is quite unsettling.

While some may argue that this aligns their incentives, it only does so until they have received all of their rewards. What happens if after the 4 years they have their 10% and decide to sell out and take a step back from the project? There is no “vesting” as there is with shares. Once they have the ZEC they can easily sell them and walk away from the project.

Trusted Setup

While the trusted setup and the elaborate ceremony were done in order to maximise trust in the ZCash protocol, there are many security hawks who still have a problem with it.

This is because it is based on the community believing with 100% certainty that the master private key is completely destroyed and can never be reconstructed.

This is incredibly hard to do as no one can actually “verify” this is the case. Sure, you have videos, pictures and testimony from the ceremony but you can still not say, without a shadow of doubt, that a private key copy does not exist somewhere. Indeed, one of the most important maxims of crypto is:

“Don’t trust, verify”

While it is more than likely that the ZCash developers were able to effectively destroy the private key shards, this is not something that you can independently verify. I would not really be comfortable putting large amounts of funds into a cryptocurrency asset that lacks independent verification properties.

Monero Has the Edge

While I do not doubt that ZCash is an advanced cryptocurrency with strong privacy protocols, the points above make it clear for me that Monero is still the premier privacy coin.

The community driving the Monero development are some of the most security conscious and privacy centric programmers in the cryptocurrency community. They are mostly driven by ideology and not so much by monetary gain.

Moreover, Monero has proven itself.

For example, when the FBI brought down the founder of the Alphabay darknet market, they were able to identify how much cryptocurrency he had. There was only one coin that they were not able to obtain more information on.

Extract from Asset Forfeiture. Image Source.

While this may be an isolated case, it adds weight behind the case for Monero.

Conclusion

As more and more people become aware of the need for a privacy on the blockchain, they will make the transition away from fully transparent blockchains.

While there are a number of competing privacy coins occupying the space, Monero and ZCash are still viewed as the cream of the crop. Both have proven themselves to be effective and scalable and are both being adopted at record pace.

However, based on the information above, I would be more likely to trust the privacy and security of Monero than I would of ZCash.

Featured Image via Fotolia

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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5 stars on average, based on 9 rated postsNic is an ex Investment Banker and current crypto enthusiast. When he is not sitting behind six screens trading Bitcoin, he is maintaining his numerous mining rigs.




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Coinbase Pro Adds ETH-Based Quartet; Golem (GNT), Dai (DAI), Maker (MKR) and Zilliqa (ZIL)

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Coinbase Pro extended its run of listing Ethereum-based tokens on Tuesday, when it announced the addition of Golem (GNT), Dai (DAI), Maker (MKR) and Zilliqa (ZIL).

The exchange recently released a list of more than thirty coins and tokens that it had signalled for immediate attention. After the listing of four ERC-20 tokens last week, and the four mentioned above, the list has now has twenty-three coins remaining.

Coinbase Lists ERC-20 Tokens

According to Tuesday’s tweet from the Coinbase Pro team:

Inbound transfers for DAI, GNT, MKR, and ZIL are now available in the regions where trading is supported. Traders cannot yet place orders and no orders will be filled. Order books will be in transfer-only mode for a minimum of 12 hours.

Depending on where you’re based, you may not have full access to the complete range of services. The four tokens have been split into two different jurisdictions, as per the Coinbase Pro blog post:

Support for GNT and DAI will initially be available for Coinbase Pro users in the US (excluding NY), the UK, EU, Canada, Singapore and Australia. MKR and ZIL will not be available to customers in the US, but will be tradable in the UK, EU, Canada, Singapore and Australia on Coinbase Pro.

Dai is a dollar-pegged stablecoin which is backed by the funds of Maker token holders. The fact that Coinbase has found reason to separate two tokens which are part of the same ecosystem suggests the legal hoops they’re being forced to jump through are complex.

Utility or Coinbase Roulette?

Coinbase reminded everyone that the utility and functions of these assets would be lost if left on the Coinbase cold wallet:

Each of these tokens has associated functionality, some of which may be in beta. Moreover, each token’s associated functionality is not currently directly accessible via the Coinbase Pro platform.”

Some social media users questioned the function of these tokens, however, and one also questioned Coinbase’s motivations in listing them:

“@CoinbasePro lists 4 more random ERC20 coins. – Because it’s easy to add more ERC20 coins – Because in 2017 consumers wanted more coins – NOT because there’s huge demand for these particular coins Do you ever recall seeing a community coin poll at Coinbase? Binance runs them…”

Just another disgruntled bag-holder, or does he have a point?

Price Movement

All tokens mentioned were on the rise along with the rest of the market before the Coinbase announcement dropped, but news of the listings kicked the surge into second gear.

Zilliqa was the strongest performer out of the four, climbing 14% from a token price of $0.013988 up to $0.015963.

Maker gained just over 12% on its value, moving from $367 up to the $414 range. Golem climbed 11.9%, only days after hitting an all-time low following a 95.5% decline. Dai remained somewhat stable, although has been above its dollar peg for the last few days, falling from $1.07 to $1.02 in the last twenty-four hours.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 106 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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EOS Price Analysis: EOS is Set Up for Bigger Gains, Following Recent Technical Development

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  • EOS has jumped around 45% between the sessions of 15th – 17th December. 
  • Bulls shrug off all negative related news flow that has surrounded EOS in recent weeks.

The EOS/USD bulls are on a serious mission to recovery. Unlike several of its peers, a slowdown in momentum has not been seen with the EOS price. More importantly, a breakout has been observed from a range-block, of which EOS/USD was confine within. This had been the case since the 7th December, managing to escape however on 17th and capitalize further on that.

EOS Shakes off Negative Commentary

Over the past few weeks, there have been several negative bits of news flow. Recently, as covered by Hacked in a prior article, the Cardano founder, Charles Hoskinson, had a fair few words to say about EOS. He had noted that action from regulators was potentially right around the corner for EOS. Hoskinson had specifically raised concerns about the EOS token sale.

Elsewhere, it was recently covered by Chinese press that EOS decentralized apps (DApps) have been victim to hacks totaling around $1 million since July. The report cited data which was collected by PeckShield, who are a blockchain security organization. This suggests that the DApps on EOS have been hit by at least 27 breaches from July up to late November. This is an amount of 400,000 EOS, equivalent to 8 million yuan, at the time of the published report.

Lastly, at the back-end of last month, there was some FUD surrounding the CTO of Block.one, Daniel Larimer. The community and social media space were concerned about Larimer working on new projects. This prompted worries that he may be leaving EOS, keeping in mind the EOS mainnet hadn’t even reached a year.

EOS has pretty much shrugged much of this FUD off, as seen with this latest rally. It has far outperformed its peers with the big gains collected over the past two sessions.

Technical Review EOS/USD

EOS/USD daily chart

EOS/USD had a decent extension to the upside after breaching the confinements of the detailed range-block.  The bulls initially jumped a chunky 45% over the period of 15th to the 17th December. However, into the session on Tuesday, the price has run into some minor resistance, seen at the 4th December high area. This can be noted within $2.60 territory.

The pullback being observed at the time of writing isn’t too much of a surprise, given the burst higher in such a short time frame. Profit-taking is only natural in this case. It is a minor retreat ahead of further potential moves north. Eyes will be on the breached range-block for support, the top of that seen at $2.18.

Should the bulls gather enough momentum for a push above the minor near-term resistance seen, then a fast 60% move could be seen. This would take EOS/USD back towards $4.40, where another minor supply zone is observed. Further north, a reclaim of the pre-November fall levels, i.e., $6 territory, is the next major target.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 88 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Cryptocurrencies Still Recovering Strong After Monday Rally; BitMEX Sees 24/7 Trading as the Future

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Cryptocurrency prices maintained their firm uptrend on Tuesday, a sign that the latest rally attempt has further room to grow. Rising volumes and steady gains in the last hour of trading point to further momentum up ahead.

Market Update

The cryptocurrency market capitalization is currently valued at $115.4 billion, according to latest available data. In doing so, it surpassed Monday’s peak and put crypto values on track for a bigger short-term recovery. Asset values bottomed near $100 billion on Saturday, the lowest in 16 months.

Trading volumes have skyrocketed in the last 24 hours, as waves of buying flooded the market. Turnover is up 47% since Monday, with the top-ten exchanges reporting a volume increase of 43% to 102%. The top-four exchanges – Binance, OKEx, Huobi and DigiFinex – each processed more than $500 million in trades.

In terms of individual currency, bitcoin was up 1.4% in the last hour to trade at $3,567. The leading digital currency rose double-digits on Monday, the anniversary of its last record high, which served as a catalyst for the broader market.

XRP gained 1.7% to $0.3346. In doing so, it extended its 24-hour advance to 10.4%.

Ethereum is up 1.5% on the hour to trade at $95.45. EOS rose another 2.9% to $2.52 and has now gained 17.4% over the past 24 hours.

With the exception of Tether (USDT), a dollar-backed stablecoin, all cryptocurrencies in the top-25 by market cap had reported gains Tuesday. USDT was stable around $1.01.

The latest recovery attempt looks convincing relative to price action in recent weeks. However, the bulls aren’t out of the woods yet. Depressed market sentiment could trigger fresh waves of profit-taking before the week is over.

BitMEX and the Future of Trading

Crypto derivatives platform BitMEX believes cryptocurrencies have set a precedent for how other markets will behave in the future. In a recent episode of the Unchained podcast with Laura Shin, BitMEX CEO and co-founder Arthur Hayes said he expects 24/7 markets will become the new norm in the future.

At the same time, Hayes indicated that the “jury is still out” on whether cryptocurrencies are a new asset class or just a “blend” of financial instruments. At the very least, bitcoin and cryptocurrencies could become a “new way of raising capital and sending value around the world.”

BitMEX has been at the center of the bitcoin selling spree of the last six weeks. As bitcoin printed successive lows, volumes on the exchange skyrocketed. At its highest point, BitMEX was processing more than a third of bitcoin’s daily trade volumes on virtual currency exchanges. Clearly traders were shorting BTC.

According to CCN, BitMEX processed nearly $1 trillion in volume over the past year.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 704 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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