Investors flock to Zcash, less traceable than bitcoin
Speculators are snapping up a new virtual currency known as Zcash, designed by university academics and built to be all but untraceable.
Investors were paying over $1,000 for a single unit of Zcash on Monday, a few days after the currency was first brought online.
The company behind Zcash, led by a developer named Zooko Wilcox, has the support of privacy activists and computer scientists at Johns Hopkins University and Massachusetts Institute of Technology. It has secured $3 million in backing from a number of Silicon Valley venture capitalists who are involved in the virtual currency industry.
Zcash’s developers said they have used advanced cryptography to create a virtual currency that can be sent around the world essentially without a trace, unlike Bitcoin.
While Bitcoin was initially described as an anonymous currency, its transactions are recorded on a public ledger that can be tracked and traced by law enforcement. Each Bitcoin user has an address, made up of letters and numbers, and authorities are often able to link an address to a real person using data analysis.
In contrast, Zcash uses a method developed by a team of cryptographers working at M.I.T. and in Israel — known as zk-Snark — that allows transactions to be confirmed by the network without anyone recording the Zcash addresses involved in the transactions. Users can opt out of this privacy function.
The privacy features of Zcash could make it harder for the currency to win support from regulators and bankers.
Investigators have used Bitcoin’s ledger, known as the blockchain, to track down some people selling drugs for Bitcoins on black market websites.
Most projects in the virtual currency area, though, have been pushing in directions that would make it easier to integrate with the existing financial system.
Jonathan Levin, a founder of Chainalysis, a startup that helps banks and regulators track activity on blockchains, said authorities had become comfortable with virtual currencies because they had been able to trace transactions in cases of criminal activity.
“It’s going to be quite difficult for Zcash in its opaqueness to show that, no, it is not all bad stuff going on,” he said.
Wilcox and the programmers who created Zcash said they developed the currency not to facilitate illegal activity, but to provide a degree of privacy for people who do not want their financial transactions visible to the world. “The basic story is that we have been losing our privacy in a whole bunch of ways that people don’t appreciate,” said Matthew Green, an assistant professor at Johns Hopkins who began developing Zcash with some of his graduate students in 2013.
Wilcox said existing virtual currencies have been unattractive to businesses because their transaction details are exposed to competitors.
Zcash is modelled closely on Bitcoin. The currency will be released slowly to computers that help support the network underlying the currency. New Zcash units will be distributed to users until there are 21 million of them in the world. Initially Zcash units are being released slowly — as of Monday, only about 1,500 were out in the world. NYT