Privacy-centric cryptocurrencies have gained in popularity in the past 12 months as it has become clear that bitcoin’s pseudonymity does not provide enough transaction anonymity for privacy-focused users.

One of the most popular privacy-centric cryptocurrencies in the market today is zcash. In this guide, you will learn what Zcash is and whether the digital currency makes for a good investment or not.

What is Zcash?

Zcash is a decentralized, open-source cryptocurrency that providers users with privacy and selective transaction transparency. Zcash transactions, while broadcasted on a public blockchain, details about the sender, the recipient, and the transaction amount remain private.

Zcash grew out of the Zerocoin project, which aimed to improve anonymity for bitcoin users, and is built using Bitcoin Core’s codebase. The improvement over bitcoin that zcash provides is that it uses advanced cryptographic privacy-enhancing technique knows as zero-knowledge proofs to guarantee the validity of financial transactions without revealing any information about them. The developer team created Zcash’s own proprietary zero-knowledge proof cryptography called zk-SNARKs.

Zcash has a total supply of 21 million coins just like bitcoin and also uses a proof-of-work (PoW) consensus mechanism to verify and process transactions.

Zcash (ZEC) is currently in the top 20 largest cryptocurrencies with a market capitalization of over $500 million and in the top 10 according to CoinGecko. The digital currency can be traded on several leading exchanges including HitBTC, Bithumb, Bittrex, Bitfinex, Poloniex, and Kraken. At the time of writing, the price of zcash stood at $236.

Zcash was launched in 2016 by founder and CEO Zooko Wilcox. Wilcox brings over 20 years of experience as a computer scientist. He has worked on decentralized systems, information security, cryptography, and startups. His previous work includes DigiCash, ZRTP, “Zooko’s Triangle,” Mojo Nation, Tahoe-LAFS, SPHINCS, and BLAKE2.

Zcash launched on October 28, 2016, when its genesis block was mined. However, the launch of zcash was not without controversy.

Controversy Surrounding Zcash

The controversy around the launch came from the fact that media outlets owned by zcash investors, such as Roger Ver and the Digital Currency Group, created a massive hype around the new digital currency enticing investors to buy and, thereby, effectively inflating the price of the coin to ridiculous highs. For this reason, some suggested that zcash was just a massive well-executed ‘Pump and Dump’ scheme to enrich its founders and early-stage investors. For instance, BitMex’s Crypto Trader Digest stated at the time, “October 28, 2016 has set its place in the Cryptocurrency History books with what must be the record for the largest Pump and Dump.”

On the first day of trading, the price of zcash experienced massive volatility with one exchange, Poloniex, showing the price of one ZEC being worth 3,299.99 BTC, which was the equivalent of $2.3 million at the time. Needless to say, the price dropped aggressively from that irrational high within minutes but still ranged from $400 to $2,200 throughout the first few days of trading before finding a range around $500. This was at a time when the price of bitcoin was at around $700.

Furthermore, Zcash mining involves what is referred to as the ‘founders reward’ for the first four years. 10 percent of all coins mined are distributed to the stakeholders in the Zcash Company, namely its founders, investors, employees, and advisors. This includes the likes of Gavin Andresen, Vitalik Buterin, Arthur Breitman, Roger Ver, Barry Silbert, Fred Ehrsam, among other blockchain heavyweights. When looking into the details of how the founder’s reward is structured, you can see that 20 percent of all coins mined in the first year will go to Zcash’s team and its backers and that there is a “slow start” to mining to reduce supply to push up its value early on.

The ‘slow start’ feature means that the expected inflation is amongst the highest out of the most well-capitalized cryptocurrencies (see below). The Money Supply (MS) Inflation factor, which accounts for the inflation due to the supply of new coins anticipated to enter the market, is extremely high for zcash, at 876 percent, compared to a range of 16 to 29 percent for bitcoin, litecoin and monero. The sheet also shows that, at most, 11.12 million freshly minted ZEC will enter the supply over the next five years.