In this Zcoin review we will be taking a look at another interesting anonymity coin that has been rolling out developments recently.
ZCoin is one of the major privacy coins that attempts to establish anonymous transactions, fungibility and decentralization of mining in a unique and scalable way.
Originally the Zerocoin protocol was developed to be an extension of Bitcoin, but when it wasn’t adopted by the community it was released as a coin and blockchain of its own.
With ZCoin you can spend without any transaction history or link to your identity. This is a dramatic improvement on privacy versus Bitcoin, where addresses are made transparent to combat the double spending problem.
ZCoin lets users take back their privacy.
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ZCoin and the Zerocoin Protocol
Image via Wikipedia
The idea for the Zerocoin protocol came from Johns Hopkins professor Matthew D Green and two of his graduate students – Ian Miers and Christina Garman. While it was proposed as an improvement for Bitcoin, it never gained consensus, and so in September 2016 Poramin Insom released a blockchain and cryptocurrency using the idea of the Zerocoin protocol.
Because it was developed as a Bitcoin improvement, sending ZCoins works exactly like Bitcoin and the transactions are recorded in a public ledger. However the Zerocoin protocol uses minting to make these transactions anonymous. Basically, ZCoin requires that you mint Zerocoin before you are able to spend.
These new Zerocoins have no transaction history, and because there are so many users minting coins at the same time it becomes impossible to trace the newly minted coins to any particular user. It has been likened to a type of money laundering, where the old coins are destroyed, and the newly minted coins are untraceable.
Minting and Spending ZCoin
Once you have the newly minted and untraceable Zerocoins you can spend them, and during the spending they are translated back to Zcoins. Additional anonymity is created by the use of limited denominations when minting. So, it is only possible to mint Zerocoins in blocks of 1, 10, 25, 50 and 100.
Minting ZeroCoin in Wallet. Image via ZCoin
This prevents people from minting say 523 Zerocoins, which could then be traced based on the number of coins minted. With standard mint sizes there are too many minting transactions of the same size to trace any one back to a particular user.
Minting Zerocoins also comes with a transaction fee of 0.01 ZCoins, and you must wait for 70 minutes until you are able to transact with the newly minted Zerocoins. This makes it important to mint ahead of time if you need to send ZCoins. Once you do send the ZCoins, the address you’ve sent to will receive them without any transaction history, thus maintaining your anonymity.
Zerocoins uses something known as Zero-Knowledge Proofs to help maintain anonymity. Cryptography defines a zero knowledge proof as a method for one party to prove to another party that they know what the value of x is without having to share any additional information aside from the fact that they know what the value of x is.
One simple way of demonstrating this definition is to prove to a friend that you know your Gmail password without telling them what it is by logging into your Gmail account. This would prove you know what the Gmail password is, without giving any additional information.
Image Source: Zcoin Blog
Zero knowledge proofs work for ZCoin in showing proof you own the Zcoin you are sending, without letting anyone know the source of those ZCoins.
How Zerocoin Achieves Anonymity
When a Zerocoin is minted it destroys a ZCoin in the process. When this occurs the Zerocoin protocol generates a random serial number “R” and a secret number “s”. These randomly generated R and s are then used in a cryptographic function to generate a value “V”, which you become committed to.
The V value is posted to the blockchain to prevent it from being changed in the future. This value V is publically viewable, as are all the other V values being created by people who are minting.
Now to spend the Zerocoin R a zero knowledge proof is given showing your R value corresponds to the public value of V. This zero knowledge proof only shows that there is some V corresponding to your R, but it doesn’t reveal which one. This allows Zerocoins to be spent without anyone being able to determine their origin.
To avoid double spending of Zerocoins, Znodes verify that the zero-knowledge proof was valid and that Zerocoin R was not previously spent.
Zcoin began using the Lyra2z algorithm for proof of work, but recently moved to the Merkle Tree Proof of Work algorithm (MTP) to address several problems.
MTP Compared to Other Algorithms. Image Source: YouTube
MTP is known as a memory hard algorithm and it has several benefits, one of which is the prevention of the development of ASIC chips which could lead to centralization of mining. It also helps prevent infecting computers and making them part of mining botnets. The founder of ZCoin has the following to say:
The basic concept is that it should establish the same price/cost for a single computation unit on all platforms meaning that there is no single device that should gain a significant advantage over another for the same price hence promoting egalitarian computing
So, the goal is to keep ZCoin feasible for CPU mining as a way to decentralize the security of the network. The MTP being used by ZCoin has also been made less memory intensive than previous versions, and it is less vulnerable to DOS attacks. ZCoin has released guides to setting up mining of ZCoin here and here.
The Founder’s Reward was implemented to fund the development of ZCoin, and it specifies that for the first four years 14% of mined ZCoins will go to the Founder’s Reward pool. That 14% will be split as follows:
- ZCoin Team received 6%
- Seed Investors receive 6%
- ZCoin Founder Poramin Insom receives 2%
Once the first four years have passed (in September 2020) the block rewards will revert to going entirely to miners and Znodes.
Znodes. Image via Zcoin
Znodes are similar to master nodes in that they are computers on the ZCoin network that are running a full copy of the blockchain, and are working to process transactions. The Znodes are incentivized by receiving 30% of newly minted ZCoins, currently 15 per block.
Those running Znodes are required to stake 1,000 ZCoins however, as a way to prove that they are highly invested in the ZCoin network. The stake is an incentive to keep the network running honestly and with consistent uptime.
Coin Supply and Sustainability
Because ZCoin was based on Bitcoin, there were 21 million coins originally meant to be created, however a bug in the code led to the creation of an additional 388,450 coins. That bug has been fixed and the maximum supply of ZCoin is now set at roughly 21.4 million. As of June 2018 the circulating supply of ZCoin is 5,008,246 XZC.
Like Bitcoin, ZCoin has a block reward time of 10 minutes, and currently there are 50 coins awarded per block. This award with halve roughly every 4 years until all of the ZCoins have been minted. Once all coins have been minted miners will continue to be rewarded through transaction fees.
While Matthew Green originally came up with the idea for ZCoin, the implementation was the work of Poramin Insom. At the time he was working under Matthew Green at Johns Hopkins, which made for a perfect mentor relationship.
From Left: Poramin Insom (Founder), Peter Shugalev (Lead Dev), Tadhg Riordan (Solidity Dev), Snguyen (Dev)
Prior to developing ZCoin, Poramin developed Vertcoin, but he moved to work on ZCoin as he saw a need for anonymous transactions in the ryptocurrency space. He plans to eventually return to the development of Vertcoin, but is fully focused on ZCoin for the time being. In addition to Insom, there is Peter Shugalev, head developer, as well as several other developers and contributors to the Zcoin team.
ZCoin Trading History
As is the case with most cryptocurrencies, ZCoin saw a huge run-up in price during December 2017, hitting a high of $141.19 on December 26, 2017. Since then price has retraced quite a bit, and with the exception of a bounce in April 2018 has been steadily moving lower.
As of mid-June 2018 one ZCoin is worth $20.10, with price moving steadily lower since the beginning of May 2018 as the broader cryptocurrency markets have remained under selling pressure.
Where can you buy Zcoin?
The largest trading volume for ZCoin (XZC) can be found on the Binance exchange, although there is nearly as much volume on the fairly new Hong Kong based FexPro exchange. No doubt this is primarily Chinese traders looking for anonymity since the Chinese government has been so intrusive when it comes to cryptocurrency markets.
ZCoin is also available on Bittex and a handful of other smaller exchanges. Most notably, the Poland based Coinroom allows for the purchase of XZC with fiat currencies. Other exchanges only allow for the purchase of XZC using Bitcoin or Ethereum.
You’re fairly limited in storage choices for ZCoin. The project does have an official desktop GUI wallet, which is probably the best choice since it has built-in mint and spend functions. There are also official mobile wallets for Android and iOS.
You can also use Coinomi to store your XZC coins. Currently there are no browser wallets that support XZC.
ZCoin sees some advantage from having code that is based on Bitcoin’s core code. It makes it easier for the project to implement changes that Bitcon makes. And the anonymity factor is certainly a big deal, especially in countries such as China, where privacy is difficult to come by.
As Western nations begin to regulate cryptocurrencies there is a good chance that privacy will become increasingly important across Europe and in the U.S.
While some have complained about the Founder’s Reward being included in ZCoin, there are other cryptocurrencies out there who have implemented similar features.
After all, the development team needs funds if they are to continue working on ZCoin, and Insom himself admitted that the reason he had to halt work on Vertcoin was from lack of funds. A dedicated founder and lead developer, combined with funding for development, and a solid roadmap makes ZCoin’s future look bright.
Featured Image via Zcoin & Fotolia