Zcash: Privacy and security for users’ financial history

By Andy Wang | Crescent City Capital Market Analyst Intern

What is Zcash [ZEC]

With the success of Bitcoin, the gates opened for hundreds of alternative cryptocurrencies, including Zcash. Zcash was founded in Oct 2016 by a team of scientists led by Zooko Wilcox-O’Hearn in response to demands from the blockchain community for an open financial system with additional privacy features. 

Zcash was created as a decentralized and open-source cryptocurrency that offers privacy and security for users’ financial history. Transactions can be confirmed quickly and efficiently on the Zcash network as ZEC is built on Bitcoin’s original codebase. While Bitcoin and other cryptocurrencies expose user’s financial history and current holdings when making transactions, Zcash has shielded transactions that obfuscate a user’s personal information. 

While Zcash has been criticized for potentially providing a haven for illegal transactions, the goal of the Zcash Foundation is to protect users’ privacy for legitimate, non-nefarious reasons. Hence Zcash is also called a privacy coin. The focus of this cryptocurrency is to protect users being tracked while providing Bitcoin-like functionality. Zcash was added to Coinbase through their pro platform in 2018, with the expectation of being added to the retail site soon afterwards.

Optional Anonymity Makes ZEC Unique

Unlike the pseudonymity of Bitcoin and most other cryptocurrencies, Zcash offers privacy and true anonymity for users and their transactions. 

Most digital cryptocurrencies that provide anonymity rely on private keys which can make it easier to identify a user after enough transactions have been made. Since ZEC uses Zk-SNARKs instead, that means that users never need to reveal their addresses to each other, greatly reducing the amount of information that can be exposed.

ZCash uses the ZK-SNARK security protocol to ensure the parties involved in a transaction are verified without revealing any information to each other or the network

Zk-Snark allows for fully shielded transactions in which the sender, recipient, and amount are encrypted. This feature is a large deviation from other cryptocurrencies, where transaction transparency is an underlying concept aside from securing user information.

What is zk-SNARKs ?

zk-SNARKs, which stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge,” is a proof architecture that allows one to prove ownership of specific knowledge without disclosing that knowledge or interacting with other parties. Many cryptocurrencies use network checks to validate transactions, requiring verification of funds availability and the correct private key.

zk-SNARKs enable this verification without revealing addresses or transaction amounts. They transform the necessary information into equations during the transaction process, allowing assessment and solving of these equations without disclosing the actual data.

Zcash was the first cryptocurrency to implement zk-SNARKs, demonstrating that transaction requirements can be met without revealing significant details about addresses or values. While zk-SNARKs themselves do not have apparent flaws, it is crucial for zk-SNARK-based privacy coins to ensure that no single party has access to the private key used to set up the protocol.

The Block Spam Problem

ZEC has underperformed its peers like Monero (XMR) and Dash (DASH).

From the chart above, we can sense that ZEC and XMR specifically held a very tight correlation up until last summer. In July there was a clear divergence between the return of ZEC and the return of XMR. In my view, the most logical explanation for that divergence was a block spam attack that started in June 2022. You can see the impact that spam attack had pretty clearly through the median block size trend:

Before the spam attack started, the median block size was generally very low. Sometimes between 2-5 kb. At the height of the attack, the median block size would often reach 1,500 to 1,800 kb. While it didn’t directly damage the security of the network per se, the spam attack made running a full node very annoying because of the data download required to keep up with the blockchain size.

Over the course of the spam attack, the block size of the chain actually tripled:

The Zcash fee mechanism had a flaw that didn’t protect block space through a proportional fee structure. Transactions with multiple output receivers required more block space, but Zcash charged a flat rate regardless of the data size. This allowed a spammer to exploit unused block space at a low cost, leading to a prolonged spam attack lasting about 10 months. This attack is believed to be the main reason behind Zcash’s underperformance. However, in April, the Zcash development community addressed the issue and fixed the vulnerability.


Here, I use NVT ratio (Network Value to Transaction Ratio ), which is a solid valuation metric for more payment-focused crypto coins like BTC, ZEC, DASH, Dogecoin. NVT ratio is PE(Price Earning) ratio in cryptocurrency evaluating its value by transaction volume.

If the value is too high, it means the network is overvalued compared to the low ability to transact coins in terms of volume, implying the possible removal of the price bubble coming.

Then, let’s take a look at a 90 day adjusted NVT ratio, the ratio was 41, and ZEC is the only coin in the table above that is actually cheaper than it was during the crypto crash that immediately followed the FTX collapse. Everything else has gone much higher. And now the main catalyst that hurt ZEC compared to the rest of the market is over. 

Recent Updates

The Zcash price on June 12th  is $28.71 USD with a 24-hour trading volume of $17,720,713 USD. Zcash is down 1.86% in the last 24 hours. The current CoinMarketCap ranking is #82, with a live market cap of $468,854,840 USD. It has a circulating supply of 16,328,269 ZEC coins and a max. supply of 21,000,000 ZEC coins.


ZEC has faced criticism for its approach to privacy, as it branded itself as a privacy-focused cryptocurrency but made privacy optional. Additionally, the large founder rewards have drawn negative attention. Another threat to ZEC is the potential misuse of the “seed” or secret code that initializes the network, which could allow someone to spend funds from the Zcash blockchain freely. Moreover, US regulators are generally not enthusiastic about privacy coins and crypto protocols that emphasize privacy. 

However, the recent spam attack on the Zcash network, while annoying, showcased the resilience of the community. Despite the inconvenience of downloading junk data, the community remained steadfast. Social mentions of Zcash increased by 39% in April according to data from LunarCrush. The spam attack vector has been resolved, shielded ZEC has reached an all-time high, and the coin is relatively cheaper compared to payment-focused cryptocurrencies.