Zcash:  Why It Could Be A Better Bet Than Bitcoin

The price action in Zcash over the last four or so months is another example of just how sophisticated investors truly are and why all theories in crypto investment bubbles need to be permanently discarded.

Before getting into the secret sauce about Zcash, please take a moment to consider the following.  The price ZEC reached its peak of $755 back in early January just as the crypto collapse was underway. April 9th was the day of maximum pain when the price fell to $177 for a drop of 77%. That is about what happened to the unweighted average of all cryptocurrencies.

Since then, the April market recovery has been kind to holders of Zcash, as prices bounced to slightly less the $290 for a gain of 62% in just about three weeks.  

Rational Market Behavior

Most crypto watchers would place Zcash in the Gen II.  The fact is Zcash performed about twice that of bitcoin, the Gen I king, which gained 31%. Gen II companies get their name from having more advanced, yet less proven technology. Hence, they have greater risk. Therefore they should provide greater returns.  

The April price performance of Zcash compares with the 90%+ we calculated for 15 of the top 2017 ICOs.  What I am desperately trying to illustrate is how investors are wisely defining such things as value, risk and reward.  Tell that to Jamie Dimon and Warren Buffett. Crypto investors are rocking and rational. Who would have thought?

Is Zcash More Innovative Than Bitcoin?

Zcash is a fork of the bitcoin protocol. This means it maintains its own blockchain and currency token. Zcash builds on the existing work from the bitcoin core team to enable privacy preserving transaction data using zero-knowledge proofs.

Zcash describes itself as the first open, permissionless cryptocurrency that can fully protect the privacy of transactions using zero-knowledge.  This is the element that helps explain what makes Zcash different. Rather, here is how the experts at Zcash explain it.

Zero knowledge proofs are a scientific breakthrough in the field of cryptography: they allow you to prove knowledge of some facts about hidden information without revealing that information. The property of allowing both verifiability and privacy of data makes for a strong use case in all kinds of transactions far beyond simple P2P payments.

Zcash founders identify over a half dozen changes or improvements over the basic bitcoin model.  The three that struck most interesting:

  1. Zcash developers reduced the block interval target by 80% to 2.5 minutes.
  2. The block size limit has been increased to 2MB, twice that of bitcoin (before The Lightning Network).
  3. Zcash developers are avoiding the need for hard forks that result in frequent upgrades of the software.

In pedestrian English, these changes more than double Zcash transactions speeds over bitcoin (before Lightning Network).  This may not be a ticket to the promised land but it at least gets you in line.

History of Development

In most young companies, you get accustomed to seeing a list one or twi key contributors. Zcash seems to more than their share.  In addition to founder Zooko Wilcox, who brings more than 20 years experience in cryptography, security and startups, contributors include six scientists: three PHD scientists from Johns Hopkins and one young PHD dude from MIT who focuses on zero-knowledge cryptography.  In addition, Zcash employees more than 20 full time workers. This is a real organization, not just a whitepaper with a lot of promises.

What You Are Betting On

When you first look at Zcash, the impression is just another bitcoin wannabe.  After spending a little time digging into the technology, it is a bit more like maybe bitcoin on a 16 oz. can of Red Bull.  In the final analysis the real value of Zcash, in my view, are the future applications that go beyond concealing transactions from government agencies. Rather, the entire spectrum of privacy issues starting with social media that over time will become more severe with AI related issues.  Zcash could be positioned to help us all maintain a level of privacy that we all had back in the old days of 2004. Zcash is worth a spot on your focus list.

Featured image courtesy of Shutterstock.

James Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.