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The twilight of public security is coming. Big Brother not only looks, but also sat down for good, stretched and began to act actively to implement his plan.

When public opinion is debating more and more new and urgent matters, dozens of countries are eager to purchase social control technologies, Made in China.

The tens of billions of dollars that the Chinese government has so far allocated for this purpose do not seem to go down the drain.

Citizen control technology has become a reality and has been tested in over a dozen countries around the world for over a dozen months. Even if you are not interested in a million Chinese citizens[1]from births being Muslims, held in camps straight from the darkest nightmares of World War II, your attention should at least be caught by the finished system of social ranking, reminiscent of the images known from the Netflix series Black Mirror.

Figure 1: Chinese President - Xi Jinping - appealing to the nation

The report will touch on two main issues:

By combining knowledge of currently emerging alternative methods of payment, characterized by lack of control and anonymity - cryptocurrency, as well as knowing the basis of the problem of growing social control on the example of China and Ecuador, I will try to answer the question whether cryptocurrencies are an effective tool in the fight against the lack of social privacy. An example that I will consider will be the cryptocurrency Zcash and how it is compared to the currently largest cryptocurrency - Bitcoin.

The document is also a standard report on Zcash cryptocurrencies. This time, however, contrary to previous reports, the key conclusions and evaluation of the project will be divided into two sections - each of them will touch one of the two main themes. First, the general assessment and key applications for Zcash, after a detailed analysis of the technology of this cryptocurrency, team, project finance, market, etc. The form is the same as in the case of the rest of my analysis.

The second part will focus on the possibility of using Zcash in the fight against the above-described problem of lack of privacy and control of citizens - because Zcash is intended to be a cryptocurrency offering security and financial privacy. In my opinion, Zcash has been created for such situations.

I cordially invite you.

stokarz

Zcash (ZEC) - REPORT in pdf for download here

I invite you to familiarize yourself with my previous reports:

Lisk (LSK) - discovering the potential of Sidechain technology in decentralized applications

Stellar (XLM) - A critical state of network centralization

Neo - Smart Economy

About the author

I deal with the analysis and market research and cryptocurrency technology. My reports are private opinions, they do not constitute investment advice. Performs analyzes of any cryptocurrencies on request. For cooperation purposes, please contact:

E-mail: stokarzlol@gmail.com

Telegram: @start

Section I - standard Zcash analysis (ZEC)

Key conclusions

  • Cryptocurrencies are not private by definition. In public blockchains, users are exposed to the loss of anonymity, as demonstrated by numerous scientific studies.
  • New analytics services from Google and companies such as Chainlysys effectively deanonymize cryptocurrencies and their users.
  • Central centers collecting hundreds of thousands of incoming and outgoing transactions made via cryptocurrency - the stock exchange - are a sensitive point when it comes to privacy.
  • 95% of addresses in Zcash are public.
  • Such high use of public ZEC addresses means that also private addresses - such as "z" - may lose privacy functions.
  • The largest exchange pairs of ZEC / BTC and ZEC / FIAT currency pairs - eg Gemini and Coinbase, do not accept private ZEC addresses.
  • For Zcash to become truly private, shielded - private addresses would have to be mandatory.
  • Zcash is in an eternal downward trend, due to low adoption, dumping of Coins from Funding Reward and lack of crypto-currency mining by miners.
  • Electric Coin Company, the creator of Zcash - Zooko Wilcox, an organization with all of Zcash technology - has secured funding until the end of 2020. In recent months, he has been operating on budget deficit. The company's funds are, at the moment, around 5 million USD.
  • Zcash is not suitable for use as a truly private cryptocurrency, thus it is impossible to use it (in its current form) to combat the threat of civil privacy from authoritarian governments, e.g. in China or Ecuador.
  • The Zcash team consists of world-class developers and scientists - Zcash therefore has excellent facilities for further technological development and perhaps researchers will be able to make Zcash ultimately become fully private.

Overall project evaluation:

5/10

Section II - Zcash as a tool to counteract the problem of controlling society

Project evaluation

2.5/10

Cryptocurrencies - privacy and anonymity

Contrary to popular opinion, using cryptocurrencies does not guarantee privacy[2]. Blockchain, being a public register of all transactions made with a given cryptocurrency, is possible to be reviewed by everyone. This is an extremely important thing - every person, organization, government in the world is able to view cryptocurrency transactions. For example, take the largest and oldest of the cryptocurrencies - Bitcoin. Bitcoin is anonymous, not private. This means that addresses and transactions are public, but you do not usually know who is the owner of the coins. Satoshi creating Bitcoin[3]he initially hoped to make it private. However, when the Genesis block was excavated and the cryptocurrency started functioning, it turned out to be impossible, as for the technology of those times - more than a decade ago. Bitcoin remained so anonymous. However, this anonymity can be broken. This is most often caused by the human unconsciousness of the threat. We list our addresses on public discussion forums, use one address repeatedly and do not use mixers to increase the security of our Bitcoins (such tool is offered by Wasabi Wallet or the mobile portfolio of Samourai).

Many[4] survey[5] research shows that there are ways such as cluster analysis[6]or tracking of entries and exits of even private cryptocurrencies, flowing through stock exchange addresses[7]that destroy privacy, and who performs such an analysis is able to associate specific addresses with physical persons. It can be stated with high certainty that effective methods of breaking the privacy of cryptocurrencies have long been held by numerous intelligence agencies and research centers around the world. That is why it is so important that we use each address only once. Such a practice causes us to remain anonymous and we are practically untraceable. I will not exaggerate if I say that there is a war going on - between those who want to protect us and those who try to break this privacy. For centuries such a situation has taken place in cryptography. Detailed analysis of the cryptocurrency register of transactions is becoming easier and easier for everyone in the comfort of his own home. Known to all technology giant - Google[8], master when it comes to navigating the web - for months he has been working on tools for blockchain analysis of popular cryptocurrencies. The service is now available on Google Cloud[9]. Even the use of the TOR network may not be a solution to Bitcoin's lack of privacy[10].

Figure 2: Stock exchanges, for blockchain analysts, are like shining lighthouses that all sailors sailed to.

All this shows that if the address is assigned, through our carelessness or an ordinary human error, to a physical person, the entire history of our payments with the help of cryptocurrencies can be discovered. Tracking cryptocurrency transactions is becoming easier, and numerous tools and companies offer help in carrying out blockchain analysis.

One of the practical ways of assigning cryptocurrency transactions to real people has been described in a scientific study by scientists from the University of California[11]:

To accomplish this task, we have developed a new clustering heuristic based on change addresses, which allows us to group addresses belonging to the same user. Then, using a small number of transactions marked by our own empirical interactions with various services, we identify the main institutions and interactions between them. Even our relatively small experiment shows that this approach can shed significant light on the structure of Bitcoin's economy.

Figure 3: Google - visualization of the digital book Ripple (XRP)

Actual privacy while using cryptocurrencies is therefore a difficult task. Hopefully, privacy improvements such as Schnorr signatures will be implemented in the near future in the main Bitcoin protocol. As proven by Bitmex Research[12], this would significantly increase the BTC's privacy in the long term, making transactions and addresses more difficult.

For now, however, common sense remains the best tool in the fight for privacy while using cryptocurrencies. But what if we wanted to go a step further? Today, there are cryptocurrencies that focus on user privacy. These include: Monero (XMR), Dash (DASH) and Zcash (ZEC). The rest of the report will focus on the latter.

Zcash - private cryptocurrency

Wprowadzenie

Zcash (ZEC) is a cryptocurrency intended for private digital payments. It uses state-of-the-art cryptographic technology to provide advanced privacy features to its users. Although the technology is really impressive, the low rates of private transactions show that the coin is far behind in terms of using it as truly private.

In addition, Zcash faces a number of threats related to growing competition, government regulations, potential future problems with financing and management of the Electric Coin Company dealing with Zcash, which may adversely affect its market share and user base.

Continuing technological improvements, the team must focus on introducing mandatory privacy through the use of private addresses - type "z". The coin must do its job. Otherwise, there may never be a widespread adoption and Zcash will remain in competition with many non-private rivals who are much more advanced, even with Bitcoin. Especially if it implements functions that increase privacy, such as Schnorr signatures.

Zcash is based on the cryptography of the elliptical construct function (after the Sapling softball) BLS12 - 318 and uses the Equihash algorithm in its POW (Proof of Work) protocol. Zcash is not private by default, and its addresses are divided into "t" and "z" - transparent and private. The daily inflation of Zcash supply is 0.151%, also much higher than the inflation of market rivals, like Monero or Dash.

Zcash uses Zero Proof Knowledge technology (in Zcash: zk-SNARKs) to hide transaction history and user addresses. Zcash was created from the Zerocoin protocol, developed in 2013 year.

In May, 2018 managed to introduce Equihash parameters into ASICs circuits[13]. This resulted in a decrease in active addresses from 119 thousand. to 17 thousand

Important Zcash stats

Figure 4: Source - Bithub.pl

Figure 5: Historical mining of the ZEC from the first block to now - Flypool is the largest mine

The development of Zcash is carried out by two organs: Electric Coin Company, founded by Zooko Wilcox, creator of Zcash (ZEC), and having all rights to Zcash technology, and Zcash Foundation, a recently founded non-profit foundation, which in the future is to focus on development Zcash. Both of these institutions are financed by Funding Reward. This is due to the fact that 20% of all prizes from blocks mined by miners is intended for ECC and Zcash Foundation, as well as founders and early partners. Funding Reward will be discussed in detail in the further part of the report.

What is Zcash

In today's world, we are able to make payments through various types of "media": credit cards, cash, or just cryptocurrencies. How does Zcash fall out in this spectrum?

Figure 6: Zcash, and cash and credit cards

Zcash, being a cryptocurrency based on a global and public transaction register - blockchain, is efficient, fast in transmission and anonymous. As I will show in the further part of the report, the high use of public addresses in ZEC makes it not actually private.

I would also like to completely deny the conclusions drawn from the Grayscale report[14]that Zcash was able to become a medium in which international capital from tax havens will be located - thus, the price of Zcash will grow to sky-high sizes (Grayscale predicts 60 thousand USD for one coin ZEC). Making transactions with ZEC is not private at the moment. In addition, there are no "gates" allowing us to liquefy our ZEC and sell coins for traditional FIAT currencies, because the stock exchanges do not accept private Zcash addresses.

However, if Zcash, through technological development, became entirely private, the potential traditional ways of transferring capital with which it can compete are:

Figure 7: WU, MC and PAYPAL

In the further part of the report we will focus on determining the real application of Zcash, network activity, number of users and we will answer the question - are transactions made with Zcash really private? Enough to be able to apply them to the fight against authoritarian government bodies (I presented this problem at the beginning of the report).

Part II Analysis of Zcash cryptocurrencies

Zcash is based on an unusual mathematical breakthrough made at 1989[15] the year - the invention of Zero Knowledge Proof. How significant this discovery confirms is the receipt, by a group of researchers involved in the research, of the Godel award - called the mathematical Nobel.

Figure 8: Simplified ZeroNP operation scheme

Zero Knowledge Proof (ZKP) allows you to prove that you know something without passing on and discovering this information. If we think about it deeper, it is an amazing discovery. We are able to physically confirm that we have information without disclosing it. The number of applications of such a system that comes to mind is alarming.

ZKP could, for example, be introduced into the traditional credit system - a person applying for a loan would not have to disclose a specific sum of his income. Instead, the bank would check whether the applicant's income is in a certain range required to grant the loan. The person interested, with the help of ZKP, would then create a secure and reliable cryptographically proof that his income is in the required range (or not) and finally the bank would be able to grant credit. Why does it matter? As the increasingly stronger regulations in the US and Europe (on behalf of the European Union) regarding stored customer data mean that in the future, it may be more profitable for the bank to collect the least amount of sensitive data - including accurate clients' finances - to avoid legal regulations. This particularly applies to institutions that develop technology in the field of FinTech. So far, companies have collected as much data as possible. Soon, it may turn out that the model in which a private company collects the least sensitive data is more economically viable to avoid unnecessary regulation.

The creator of Zcash, Zooko Wilcox, already in the years 90, shortly after the invention of the PNA, worked on applying them to the digital monetary system. However, each time, a certain barrier proved insurmountable - decentralization. There was no way to create a digital currency that would not be subject to the control of the central body, and thus would not be exposed to potential attacks, for example from government regulations. It was not until Satoshi Nakamoto presented to the world how to create a real digital money that would not be under anybody's control. Wilcox, finally having the key to creating a private digital money and applying the PNA to them, knew what way to go.

In Zcash it has a specific application - we are able to pay cryptocurrency without disclosing how much we actually have on our address. We also do not disclose your transaction history. Thus, payments take place entirely privately and anonymously. At least that's what it looks like in theory. Unfortunately, it would probably be too beautiful if reality would always imitate the theory. We will return to this argument. The Zero Knowledge Proof used by Zcash is called zk-SNARKs[16].

Definition of zk-SNARKs: Proof that you have made calculations on some inputs, without revealing the input data.

Anatomy of Zcash transaction

Zcash has two types of addresses. According to the founders, believers in freedom of choice in financial matters, a man using cryptocurrencies should have a choice - does he want the history of his transactions to be publicly available to everyone (eg because he runs a foundation and would like its finances to be transparent) or he values ​​his privacy and intends to hide the amount of cryptocurrences he owns.

Two types of addresses in Zcash crypto account[17]:

  • "T" addresses - transparent, with a publicly visible transaction history.
  • 'From' addresses - private, so-called with shielded (secured). The transaction history is not visible to the public.

Figure 9: Types of transactions in Zcash

In Zcash cryptographic we can distinguish four types of transactions. The first one is a "t" à "t" transaction. It takes place when the Zcash message is made between two public addresses. In this case, the coins are not private, but they retain their anonymity. It is therefore the same situation as for transactions made with Bitcoin.

The second category is "t" à "z" transactions, also called shielding. It is a transaction from a public address to a private address.

Then we have the opportunity to make the so-called deshielding, meaning sending funds from a private address to a public address. This is the third transaction category, symbolically marked as "z" à "t".

The last of the "z" z "z" transaction types is the only one that gives us privacy. It is a transaction made between two private addresses, without revealing any transaction history. In order to use the privacy functionality offered by Zcash, this is the only type of transaction that we should use. Only such a transaction provides real privacy.

Figure 10: Application of ZKP to Zcash transaction structure

Privacy threats for transactions using Zcash

Knowing exactly what the transactions look like, let's think about what may threaten the security and real privacy of Zcash crypto accounts.

Zcash bases its network on elliptic cryptography, as well as Bitcoin. Cryptography of the elliptical function is currently not possible to break. Additionally, in the recent Sapling softball[18] Zcash, this aspect of the protocol has been improved, creating a construct of the Barret-Naehrig elliptical function, replacing BLS12 - 381. quoting:

Sapling also allowed the hardware that constructs zk-SNARK to be independent of the signing equipment, providing users with greater flexibility in sending transactions. Improved keys also allow address owners on hardware devices to view details of incoming and outgoing transactions without compromising their private key. Finally, Sapling also integrated the BLS12-381 elliptic curve, which improves the existing structure of the Barreto-Naehrig elliptic curve. The new implementation of the elliptical curve is more efficient than the previous one, improving the efficiency and time of verification of the zk-SNARK evidence.

Figure 11: Public transaction - a. Transaction using a private address -b.

Cryptography used by Zcash is safe. However, the loss of privacy can occur at the transaction level. When a cryptocurrency passes from public addresses ("t") to private ("from") and back to public ("t") addresses, they may lose some of the anonymity they have. We are talking about a simple transaction scheme "t" à "z" à "t". Public address, private address and back to public address.

Figure 12: Transaction "t" - "z" - "t"

Such behavior, despite the use of a private address in our transaction chain, causes that an outside observer doing a blockchain analysis, knows perfectly how much ZEC was on the private address - in the above case it is 5 ZEC. Zcash developers are fully aware of the threat. They addressed them even in one of their publications on the blog[19]:

To explain why this is dangerous, first select the transaction property that contains both types of addresses: when public addresses are scrutinizing their ZEC information (t → z) or when private addresses send back ZEC (z → t), values ​​sent to or received from public addresses are transparent, even if these values ​​are masked in the private part of the transaction address. We can observe this property in a series of transactions above, where Bob uses a private address, but public addresses used by Alice and Carol continue they reveal the sent and received value.

Therefore, in order to maintain anonymity, ZEC's cryptocurrency transactions should always be transferred from a private address to another private address. It is also important that the total number of all transactions within the Zcash blockchain be private in min. 90%. Otherwise, it is possible to create links between public and private addresses, which ultimately leads to knowledge about how many units of cryptocurrencies store or store individual private addresses. The fewer private addresses on the network and the more public ones, the more Zcash privacy features are weaker. This is illustrated by two diagrams:

Figure 13: The predominant number of ZEC addresses is private - linking transactions is extremely difficult

Figure 14: Public addresses represent the overwhelming majority - exploring the connections between private and public addresses is relatively easy

If Zcash were to be private, blockchain analysis should show that private addresses are favored by users, and the total amount is over 90%. So let's look at what the data tells us.

The actual privacy of Zcash cryptocurrencies

When I was preparing to write this report, I liked this libertarian approach. It seems to be logical and meaningful. The user has a choice - transparency or total privacy. Very soon, however, I was forced to set aside my beliefs about the usefulness and validity of this solution in Zcash.

Blockchain analysis[20] showed that 95% of all Zcash addresses is of type "t". So they are public, as in the case of Bitcoin.

Figure 15: Source - Zchash blockchain.

In the first column we see the amount of ZEC on public addresses. Columns number two and three show the total percentage of ZEC coins with a privacy feature. The results are slightly shocking, because they mean that in practice Zcash is not a private cryptocurrency, and almost all ZEC are on public addresses. The only question that arises at that moment - why dozens of articles read by me as an introduction to Zcash agrees that it is fully private and secure? The answer is a bit shocking - for now, in terms of ZEC privacy, it is not different from Bitcoin.

The use of private Zcash addresses should be mandatory. Such a large number of public addresses means that even private addresses are at risk, as it is possible to create a map of links and, consequently, to accurately determine the history of private address transactions. This is proved by another statistic:

Figure 16: Transaction statistics in the ZEC network

As I said above, only transactions between two private wallets provide privacy (which can be violated if the coins concerned ever leave private addresses). During 30 days, "z" z "z" transactions were just less than 1% of all transactions in the network. The number of transactions from a private address to public or from public to private was 10 934 transactions, i.e. around 8%. Transactions between public addresses accounted for almost 91% of all transactions, effectively depriving the entire privacy network.

Figure 17: Distribution of the overall value of ZEC cryptocurrencies into specific types of addresses

Despite improvements in the creation of private transactions, historical data illustrates that once users created more private transactions[21]. In 2017, 19.6% of transactions contained 'z' addresses, of which 98% of these transactions were in the form 'tz' or 'zt'. Z-z transactions are rare. If we add statistics showing how the number of active Zcash addresses changes and the total number of blockchain transactions, the decrease in private transactions is even higher.

Figure 18: Number of active Zcash addresses - source: Coin Metrics

The overall average transaction volume of ZEC also dropped:

Figure 19: Average volume of ZEC transactions (in USD)

The last of the graphs shows how the overall supply of Zcash and hashrate has changed since the very beginning, and how this translates into ZEC transaction types.

Figure 20: The number of private transactions in ZEC decreases (red lines at the bottom of the chart). Blue is marked with hashrate, green public transactions, and the purple line is the supply of cryptocurrencies.

Proposal: Privacy should not be an option - a choice. It should be obligatory. Simplifying the Zcash system and eliminating public addresses would make the cryptocurrency really private. So why is not this happening?

Two main reasons:

  • Constructing private transactions using zk-SNARKs was extremely resource-consuming. The amount of memory and time needed for such a process, far outweighed its profitability resulting from the privacy function. Private transactions could not be created using mobile and hardware portfolios. The Sapling upgrade has reduced the amount of RAM needed to build zk-SNARK to 40 MB (91% less than before), so there is a chance that private addresses will become standard in some time. Nevertheless, further development in this direction is needed, the amount of RAM is still too high for any wider adoption.
  • The largest exchanges on which ZEC / BTC and ZEC / FIAT pairs are located do not accept private addresses. I am talking about Gemini, Coinbase and Binance. Therefore, we are not able to liquefy and exchange their ZEC using exchanges. Mainly for this reason, especially miners selling extracted ZEC, use only public addresses. Therefore, they do not use any of the privacy features offered by Zcash. If the exchange policy does not change, and there are no premises, Zcash users will continue to use the public addresses for the most part. Knowing the importance of economics in cryptocurrencies, we can assume that Zcash will not introduce mandatory private addresses and thus will not actually become private cryptocurrencies, until liquid decentralized exchanges or current leaders in the stock markets are created, they will not change their rights. In my opinion, the regulations will be tightening, so Zcash will have to make a choice at some point - whether we follow the original vision in which the ZEC cryptocurrency remains private or subordinate to stock exchanges and regulations so as not to lose funds for development (paying for Zcash developers depends on cryptocurrency course, because the money for it, are obtained from Funding Reward).

Developer activity and Zcash code audits

A good indicator of the development of a project with open source code is the activity of developers on the Github platform. It can not be denied that there are a lot of outstanding scientists and researchers working on Zcash, who have a great knowledge of distributed systems and cryptography[22]. That is why I am inclined to better evaluate the whole project than it would be from the analysis. Perhaps this is a wrong approach, but having read dozens of technical documents created by the team working on Zcash, I come to the conclusion that the project has potential. However, if there is no breakthrough in basic research or there is no other form of financing for developers, Zcash, colloquially speaking, will not attract you for a long time. The most outstanding developer will not be able to survive without payment!

Let's take a look at how funds from Funding Reward are used.

Figure 21: ZEC activity on the Github platform

Zcash is located on the 87 site in the cryptocurrency activity ranking. Of course, it should be noted that usually the code is made available in full repositories, and the actual work on it continues uninterrupted. Even so, I would expect more activity from Zcash.

For funds obtained from Funding Reward, Electric Coin Company - the private company of the founder of Zcash, controlling in practice all the technology of ZEC, commissioned[23] many[24] code audits. The most important of them, from Kudelski Security[25]who carried out the Sapling soft code audit and the one carried out by the NCC group[26] they did not show any critical errors. Only the proposed minor amendments have been pointed out. Therefore in terms of code quality, ZEC is great.

Eternal price drop due to Funding Reward

It is not to be seen that Funding Reward - 20% of all prizes from miners extracted by miners, lasting up to 2020 - contributes significantly to the eternal drop of the ZEC price. Few liquid cryptocurrency markets and small interest of ZEC in comparison to Bitcoin or ETH cause both miners and ZEC developers to dump their coins on the market. This means that from the beginning of its existence, ZEC is in one big downward trend. This is a unique situation, not seen on any of the other cryptocurrencies.

Figure 22: Even during the bullish 2017 market of the year, ZEC was unable to break its ATH on ZEC / BTC pair

The current allocation of prizes from the extracted blocks is presented in the chart below[27]:

Figure 23: Allocation of prizes from blocks mined by miners

Funding Reward translates into a defined inflow of capital, which is shown in the table (USD):

Figure 24: Monthly income from miners mined by miners, including 20% deployment of Funding Reward

The most important of the statistics is the amount of capital flowing into the Electric Coin Company and the Zcash Foundation. The first of these organizations is a for-profit company and has been responsible for the entire development of Zcash since 3. ZEC employees are employed in it. Her CEO is Zooko Wilcox, creator of ZEC. They also have all rights to Zcash technology. However, the capital situation does not look good. The company operates on a major deficit, Funding Reward ends in 2020 year, and so far, ECC has not found another financing model. The current capital reserve is less than 5 million.

According to a report prepared by the ECC on the situation in the company (at the current price of Zcash - in the report priced at 60 $), they have funds for action until November 2020 of the year. It is not known how the company will operate after this time.

Figure 25: Key findings from the ECC report

The Electric Coin Company currently controls almost all of Zcash's development. However, leading ECC employees are taking steps to change things - funds, code and technology are passed on to the Zcash Foundation - a non-profit organization that will be responsible for the development of the Zcash project in the future.

To sum up: ECC dealing with the development of Zcash has funds, ensuring its ability to act only until the end of 2020 year (if the price of Zcash will not change). Zcash technology is in the hands of a private company, but the process of transferring power to non-profit organizations has begun (although in my opinion it is too slow). What's more, the need to finance the development of the project, shallow market and dumping of coins by miners - who apparently do not intend to breed Zcash, affect the eternal devaluation of the Zcash price in a pair of ZEC / BTC. Funding Reward is awarded until the 2020 year.

Figure 26: Interesting opinion of Edward Snowden about Funding Reward - he concludes that it is a good solution, because ECC employees with deadly speed resolve any errors they encounter in cryptographic. Yes, but the ZEC price suffers.

Sales of Zcash technologies for commercial purposes

In 2018, Electric Coin Company sold a commercial license to Zcash technology to an American investment bank - JPMorgan[28]. Cooperating, JPMorgan went astonishingly straight way. Along with the Stanford researchers, he developed an open source privacy extension to the Ethereum cryptocurrency called Zether[29]. This technology allows the creation of private smart-contracts, so it is a huge step forward in the privacy of cryptocurrencies. Ultimately, the Zether protocol is also to be built into the Quorum private blockchain developed by JPMorgan.

The sale of Zcash technologies for commercial use is one of the ways that ECC can raise funds, but this approach is largely contrary to what Zcash was supposed to be - an open cryptocurrency that ensures privacy - this technology should not be for sale. For now, no negative effects of this approach are visible - what's more, Zether created by JPMorgan and Stanford scientists, can bring privacy to Ethereum for a long time. After all, it would be preferable for Zcash not to sell its code and technology for commercial purposes.

Summation

Analysis of Zcash cryptocurrencies has shown that it is not private enough to the extent that it is perceived by the majority of the community. Although the technology used by Zcash is extremely advanced and in the long-term perhaps even revolutionary for finances and money transfer, especially in the context of privacy playing a leading role, 95% of Zcash addresses does not use it. This makes the remaining 5% also vulnerable. Zcash's expanding team should focus on introducing the mandatory use of "z" addresses, so that Zcash could become a truly private cryptocurrency. However, constructing zk-SNARKs involves a large amount of RAM, so you need to refine the protocol before you can use private addresses on a large scale. At the same time, at present, Zcash should not be used by individuals whose privacy is at risk, for example through increased control and civic surveillance by governments. If ECC does not solve the problem of financing by the end of 2020 year or we do not experience a powerful bull market that will cause the price of ZEC to increase, the development of Zcash may be at risk. Funding Reward and dumping coins by the founders and ECC, in order to finance the work on ZEC, means that from the beginning of the existence of cryptocurrencies, it is in a downward trend in relation to BTC. Despite all the problems, after learning thoroughly the scientific background that people working on Zcash have, I believe that the cryptocurrency has a chance to overcome the difficulties facing it and, as a result, to be used on a large scale. However, the competition is not sleeping, and Monero and Dash crypts deputize Zcash on the heels. In my opinion, the current market for private cryptocurrencies is so small that the cryptocurrency, which turns out to be most useful in an environment in which privacy is at stake, will drastically overtake the rest - in terms of adoption and capitalization.

The use of Zcash as a tool in the fight against control obsession

As I argue in the article: "I will convince you to Bitcoin"[30]one of the first things that governments take with an obsession of control is power over money. The situation described by me, though in the form of a story, has its roots in the real history of the population inhabiting the southern coast of Africa in the nineteenth century and the inhabitants of India in the 1808 year. In both cases, the British Empire consolidated its rule over the region, through, inter alia, the withdrawal of monetary freedom and the statutory introduction of the British pound, instead of kauri shells, used for centuries to exchange goods.

Figure 27: Visualization of the Chinese recognition system - the picture comes from the annual "surveillance" fair in China, where such systems are presented to the public

In the citizens' control plan implemented by the Communist Party of China, we can see a blatantly similar pattern. In addition to creating spy systems for their own society, China is completely divesting cash payments[31]. Instead, citizenry are ruled by deadly simple payment methods using phones and QR codes from Tencent (WeChat) and Alibaba (Alipay). In each of these cases, the privacy of transactions is kept to zero, and all financial records are held by the aforementioned companies, closely cooperating with the Chinese government.[32]

My analysis of Zcash (ZEC) cryptocurrencies showed that for the moment, should not be used to combat control from government organizationsbecause her privacy is extremely fragile and dubious. Thus, it can be broken by knowledgeable analysts and, as a result, reduced to an individual using its immediate threat.

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[1]New York Times. How China Uses High-Tech Surveillance to Subdue Minorities https://www.nytimes.com/2019/05/22/world/asia/china-surveillance-xinjiang.html

[2] Coin Center. How anonymous is Bitcoin https://coincenter.org/entry/how-anonymous-is-bitcoin

[3] Bitcoin: A Peer-to-Peer Electronic Cash System https://bitcoin.org/bitcoin.pdf

[4] An Analysis of Anonymity in the Bitcoin System https://arxiv.org/abs/1107.4524

[5] Privacy risks of web payments via cryptocurrencies https://arxiv.org/abs/1708.04748

[6] Automatic Bitcoin Address Clustering https://bitfury.com/content/downloads/clustering_whitepaper.pdf

[7] Tracing Transactions Across Cryptocurrency Ledgers https://arxiv.org/pdf/1810.12786.pdf

[8] Navigating Bitcoin, Ethereum, XRP: How Google Is Quietly Making Blockchains Searchable https://www.forbes.com/sites/michaeldelcastillo/2019/02/04/navigating-bitcoin-ethereum-xrp-how-google-is-quietly-making-blockchains-searchable/#1d4fd2cc4248

[9] Google Cloud: Introducing new cryptocurrencies in BigQuery Public Datasets https://cloud.google.com/blog/products/data-analytics/introducing-six-new-cryptocurrencies-in-bigquery-public-datasets-and-how-to-analyze-them

[10] Bitcoin over Tor is not a good idea https://arxiv.org/pdf/1410.6079.pdf

[11] A Fistful of Bitcoins: Characterizing Payments with Men with No Names https://cseweb.ucsd.edu/~smeiklejohn/files/imc13.pdf

[12] The Schnorr Signature & Taproot Softfork Proposal https://blog.bitmex.com/the-schnorr-signature-taproot-softfork-proposal/

[13] Zcash - ASICs https://z.cash/blog/zcash-company-statement-on-asics/

[14] Grayscale. Zcash Investment Thesis https://grayscale.co/wp-content/uploads/2018/01/Grayscale-Zcash-Investment-Thesis-protected.pdf

[15] Wikipedia. Zero Knowledge Proof. https://en.wikipedia.org/wiki/Zero-knowledge_proof

[16] zk-SNARKs Zcash https://z.cash/technology/zksnarks/

[17] Transaction anatomy of Zcash. https://z.cash/blog/anatomy-of-zcash

[18] Sapling Softfork Zcash https://blockonomi.com/zcash-sapling-upgrade/

[19] Zcash transaction linkability https://z.cash/blog/transaction-linkability/

[20] Blockchain data sets for Zcash cryptocurrencies https://explorer.zcha.in/statistics/network

[21] He Zcash transaction linkability. http://jeffq.com/blog/on-the-linkability-of-zcash-transactions/

[22] ECC Team https://z.cash/team/

[23] Zcash code audit https://leastauthority.com/blog/zcash-security-audit-reports/

[24] Sapling code audit https://medium.com/qed-it/sapling-audit-9b531be9d30

[25] Kudelski Security https://research.kudelskisecurity.com/2019/01/31/audit-of-zcashs-sapling-update/

[26] NCC Group https://www.nccgroup.trust/us/our-research/zcash-overwinter-consensus-and-sapling-cryptography-review/?research=Public+Reports

[27] ECC Zcash Transparency report https://z.cash/blog/electric-coin-company-q2-2019-transparency-report/

[28] JPMorgan Quorum blockchain https://www.coindesk.com/jpmorgan-adds-new-privacy-features-to-its-ethereum-based-quorum-blockchain

[29] Zether: Towards Privacy in a Smart Contract World

[30] CyberKrypto. I'll convince you to Bitcoin.

[31] Nikkei, Asian Review. In China, cash is no longer king.

[32] Japan Times. Worried about Huawei? Take a look at Tencent.

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