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Zcash: A Cryptocurrency More Secure and Anonymous Than Bitcoin?

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When MT Gox, bitcoin’s biggest exchange at the time, suddenly announced during February 2014 that they had “lost” almost $1 billion worth of bitcoins, some took to the blockchain to see what had happened. Their analysis led, in just a few days, to the second biggest news of that year: MT Gox still held 200,000 bitcoins, then worth $200 million, they appeared to be hiding.

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Initially, there was some public debate with Gregory Maxwell, a bitcoin developer, disputing the findings, but all was confirmed when MT Gox publicly stated they had forgotten about $200 million.

The event revealed what is now widely accepted: Bitcoin provides very little privacy. All transactions are public and can be seen by everyone as bitcoin’s public blockchain operates in effect similar to a bank statement which does not show names or addresses, but does show bank account numbers and all transactions from and to that specific bank account.

It can, therefore, be very easy, if ownership of a bitcoin address is known, to see what exactly happened, at what time and between who. To provide an added level of privacy, mixers and tumblers were invented which shuffle transactions between different bitcoin addresses to obfuscate origin and amount. However, Kathryn Haun, Assistant Attorney for the U.S. Department of Justice in San Francisco and lecturer on digital currencies at Stanford Law School, recently stated that tumblers and mixers do not work as “some of the time,” it is possible to “unscramble” transactions.

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Monero, a new digital currency that incorporates mixing at the protocol level, tried to improve public blockchain privacy, but like bitcoin, it too shows what address is transacting with who and in what amount. Although it obfuscates such information, complex analysis can, potentially, “unscramble” transactions. Monero, therefore, while providing added privacy in comparison to bitcoin, does not have strong privacy guarantees.

Does Zcash?

Zcash is a new digital currency created by an impeccable team of developers. Many of them, such as Matthew Green and Zooko Wilcox, are worldwide recognized cryptographic experts, joined by numerous other scientists holding positions at John Hopkins University, MIT and Tel Aviv University.

In the past four years, they have invented a new cryptographic scheme, zero-knowledge Succinct Non-interactive Arguments of Knowledge (zk-SNARKs) or zero knowledge proofs. According to the peer reviewed whitepaper, this allows “users to directly pay each other privately: the corresponding transaction hides the payment’s origin, destination, and transferred amount.”

However, due to a bug in Zcash, private transactions, called z-addr transactions, are currently not possible, but, in theory, a zcash private transaction should look as in the image below:

A Theoretical Private Zcash Transaction

A Theoretical Private Zcash Transaction. Image courtesy: BlockchainHub

Rather than a public address, a hash is shown on the left side which is comparable to, say, a reddit nickname being turned into random number and letters, preventing us, therefore, from knowing the pseudonym. The same applies to the right side. That is all we can see. No amount is shown, no public address, therefore there is no way to gain any information whatever from this transaction. An incredibly strong privacy guarantee as it allows no tracking, making Zcash, arguably, more private than paper money.

Does Zcash Really Provide Anonymity?

However, Zcash’s technology is very new and unproven. The cryptography behind Zcash, zk-SNARKs, was invented only a few years ago. It has not yet been battle tested, leaving open the possibility that clever methods to de-anonymize zcash transactions can be discovered, but, the caliber of Zcash developers instills confidence. Many of them have contributed to bitcoin development for years with Zooko Wilcox participating in the now famous thread where Nakamoto announced the Bitcoin whitepaper. As such, if full privacy for digital currency transactions is possible, it seems unlikely there is any better team to make it a reality.

On the security front, there have been a number of audits, but, fundamentally, the entire network has just been born. As such, it is difficult to say Zcash is more secure than bitcoin. Bugs, set-backs and other battle testing events should be expected as Bitcoin itself had a number of them in its early days, including transaction malleability which slightly contributed towards MT Gox’s downfall.

On the other hand, Zcash is built on top of Bitcoin. It is likely, therefore, to have around the same level of security, but unlike bitcoin, the new currency continues the quest for one of the holy grails in the blockchain space: full privacy, promised by Bitcoin, Monero, as well as tumblers and mixers, without much success.

Zcash, perhaps, can deliver where others have failed. If it manages to do so, it uniquely promises full privacy from the public while at the same time allowing regulators, employees, customers, or anyone else, to see transparently any transaction, solving a very serious problem with much market demand.

But, whether it actually succeeds in its aim remains to be seen as the new cryptographic method and the overall network, which has already faced a bug delaying the practical launch of private zec transactions, is audited and pen tested by the brightest minds across the world keen to hack the most valued digital currency which currently trades at more than $1,000 per coin.

Images from Shutterstock and Zcash.

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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Analysis

Crypto Update: Litecoin and Bitcoin Hit New Rally Highs

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Another day, another round of bullish developments in the cryptocurrency segment, even in the face of a risk-off shift in traditional markets. Following the lead of Ethereum Classic, just like in the previous leg higher, Litecoin also pushed to new rally highs today in early trading following the LCC hard fork.

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BTC/USD, 4-Hour Chart Analysis

This time around, Bitcoin also joined the two undoubted leaders of the market, despite the still slightly overbought short-term momentum readings, while the also relatively strong Monero is still in its short-term correction. Boosted by positive news out of South Korea, the major coins reached the $515 billion mark in market capitalization, although several currencies, most notably Ethereum and Ripple are still underperforming.

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LTC/USD, 4-Hour Chart Analysis

We expect trading activity to pick up today, as US markets return to action, and that could cause more volatile moves than in the last few days. As correlations between the majors continue to decline, the individual charts are more and more important, and we expect rotation to continue between the coins.

Ethereum Classic Hits another Target, Up 200% off the Low

ETC/USD, 4-Hour Chart Analysis

ETC broke-out of its short-term correction yesterday, staying ahead of the rest of the market in this cycle, and it rallied up to the next major resistance zone near $43, with only the all-time high remaining ahead as an obstacle before a new record high.

As we noted yesterday, the coin now is now not in the optimal long-term buy range, and it got downgraded to neutral in our trend model as well after turning bullish on the 2nd of February. That said, further gains are likely, and traders should still play the trend, but long-term investors could already cash in on some of the gains.

Apart from ETH and XRP, Bitcoin Cash, Cardano, IOTA, and EOS are also lagging the leaders today, while NEO also failed to substantially move above its short-term correction, despite yesterday’s strength.

Given the positive signs, we expect the rally to continue in the segment, even if several altcoins continue the current correction in the coming days.

Stay tuned for our detailed technical analysis later on today.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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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4.7 stars on average, based on 99 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Analysis

Technical Analysis: Bitcoin Tests Weekend High as Consolidation Continues

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The major cryptocurrencies entered a shallow correction during the weekend, and most of the coins are still trading below their prior rally highs, with only Ethereum Classic registering new highs. BTC is also very close to its Saturday high, as it is still leading the market higher, outperforming both Ethereum and Ripple.

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Bitcoin is still slightly overbought form a short-term perspective and the correction could still continue in the coming days, with key support zones found near $10,000 and between the $9000 and $9200 levels. That said, the price action in the most valuable coin and the broader segment is still in line with the bullish scenario, and we expect the trend to continue after the correction. Above the $11,300 level further resistance is ahead at $13,000 and $14,250.

BTC/USD, 4-Hour Chart Analysis

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Among the other relatively strong coins, Litecoin and Monero are also holding up well, while NEO is also showing short-term strength, diverging slightly from Ethereum which it has been correlating with in recent weeks.

Monero is also trading close to the weekend highs, as is working its way through the overbought short-term momentum readings. The coin is well above the previously dominant trendline, in clear short-term uptrend. Traders and investors could be looking for entry points during the correction, with strong support at $300, $280, and $240.

XMR/USD, 4-Hour Chart Analysis

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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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4.7 stars on average, based on 99 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Bitcoin

Bitcoin Tops $11,000 for the First Time in Three Weeks as Rally Continues

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The price of bitcoin rose more than $1,000 on Monday, reaching its highest level in nearly three weeks as the crypto market extended its recovery from recent lows.

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BTC/USD Price Levels

Bitcoin surged to a session high of $11,274.74 before paring some of those gains in afternoon trade. At the time of writing, the BTC/USD exchange rate was worth $11,140 for a gain of $1,057 or 10.5%. With the gain, bitcoin has recovered nearly 90% from is Feb. 6 low.

At current prices, bitcoin has a total market capitalization of $189 billion, easily tops among cryptocurrencies. More than $7.6 billion worth of BTC was traded over the past 24 hours. The most active exchanges were Bitfinex, OKEx and Binance, according to latest available data from CoinMarketCap.

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The Battle of Sentiment

Bitcoin has added 26% over the past five days as bottom pickers and speculators returned to the market. The gains have been associated with a broader uptick in the cryptocurrency market, which is now worth more than $500 billion. Although the technical indicators suggest that a long-term revival is still in jeopardy, speculators are betting that bitcoin will return to its glory days where record highs were the norm.

That’s exactly what an anonymous trader did earlier this month when bitcoin was in free-fall. As Hacked reported this weekend, an anonymous “bitcoin whale” sunk $400 million on long positions involving BTC. According to Fortune, the majority of the 41,000 tokens were purchased on Feb. 9, with an additional 9,000 purchases made three days later.

Bitcoin has had a long and volatile history of ups and downs, making the recent swings not entirely unusual. However, an analysis of the Relative Strength Index (RSI) suggests that bitcoin prices dipped below key support zones during the most recent selloff, which could signal the presence of bear market conditions. Although the RSI has since recovered, some analysts have indicated that the recent bout of volatility could be a sign of more adverse trading conditions moving forward.

That was the general idea behind an interesting forecast put forward by DataTrek’s Nick Colas, who last December predicted bitcoin’s trading range to be $6,500 to $22,000 this year. He mentioned the likelihood of multiple “crashes,” which he described as large drops of 40% or more. It took less than two months for Colas’ prediction to come to fruition.

The author generally agrees with Colas’ assessment and expects further price volatility in the near future as dramatic falls give rise to even bigger gains. An understanding of investor sentiment explains why this is the case.

Bitcoin, like other digital currencies, is heavily exposed to FUD and FOMO – two acronyms that tell the story of its recent price movements. “Fear, uncertainty and doubt” regarding cryptocurrency regulation was largely responsible for bitcoin’s fall from grace in January and February. As prices bottomed, “fear of missing out” led more traders back into the market. It remains to be seen how this mentality will drive bets in the derivatives market, which offers an other venue for direct exposure to bitcoin.

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 152 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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