Anonymity v Bitcoin: A Delve Into The World Of Privacy Coins


The Ceremony aka creation day for 'Zcash', an alternative cryptocurrency, was an elaborate affair. It involved six participants in six separate locations around the world setting up highly secure stations from which to create a part of the secret key that generated the currency Zcash. Apparently Zooko Wilcox, the master of the Ceremony and leader of Zcash, also wore a Gandalf hat to mark the wizardry of it all.

The problem with Bitcoin

Zcash offers a solution to the issue of privacy that continues to plague Bitcoin. Bitcoin transactions are open for all users to see and verify before they are added to the blockchain, which serves as public ledger. Users have pseudonyms that in theory are meant to hide their identities. This is why the currency was initially famous for being a money-laundering mechanism for fraudsters, drug dealers and the like.

However, it turns out that this pseudonym can be matched to its human user more easily than one would expect and once it is, that person's entire transaction history can be traced on the public ledger. This would be akin to the whole world seeing your bank statement.

So whilst this is good news in terms of tracking down criminals who hold Bitcoins it is likely to still make most regular Joes feel uneasy. It also allows fraudsters to look at the public ledger and target wealthy individuals.

Zcash runs on similar blockchain technology except the transactions on it are completely anonymous. A mathematical invention called a 'zero knowledge proof' proves that a Zcash transaction is true, without revealing any details about it. This allows the currency to be legitimate whilst the hiding the value of the transaction as well as the identities of the sender and recipient.

A crypto Ceremony

The Ceremony was a necessary way to start Zcash because the maths used to create it was vulnerable to attack. In order to create the currency, Wilcox had to produce a very large alphanumerical key, which formed the basis of the mathematical wizardry that generated Zcash. The problem was if someone got hold of this key they could counterfeit the currency and users would not be able to tell since all Zcash transactions are anonymous.

To overcome this, Wilcox split the task of creating the key with five other people. On 22 October 2016 (creation day), they took pains to ensure they were not being tracked by hackers. They dumped their smartphones in favour of good old-fashioned paper road maps and bought a new computer to...

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