ZCash (ZEC) Analysis and Valuation.

in cryptocurrency •  15 days ago

Hi investors, today we're talking about what is arguably the most under-hyped private digital asset in the industry: Zcash.

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Executive Summary.


Zcash (ZEC) is:

"the first open, permission-less [financial network] (1) that can fully protect the privacy of transactions using zero-knowledge cryptography (2)".

1. An Open Financial Network.


ZCash is a POW open-source protocol with a single (for now) financial application built on top of: the ZEC cryptocurrency.

Just like with Bitcoin, the total supply of ZEC is capped at 21 million coins. There is currently 4,930,381 ZEC in circulation for a total market-cap of $601,845,493 USD at the time of writing.

Zcash  ZEC  price, charts, market cap, and other metrics   CoinMarketCap.png

ZCash is listed on over 40 exchanges (included New-York regulated exchange Gemini) in 100 trading pairs including multiple fiat currencies:

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2. A Private Financial Network.


Unlike Bitcoin, ZEC is a private cryptocurrency which means that transactions on the ZEC network can be verified by miners and committed to the blockchain "without requiring users to reveal any details about their identities, the transaction value or any other metadata".

Privacy is made possible through a cutting-edge cryptographic technique known as zk-SNARKs which has been implemented on the ZCash protocol by what is arguably one of the best team of cryptographers in the world.

Zk-SNARKs cryptography allows for 4 types of transactions to take place on the network:

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Until recently, shielded transactions were computationally expensive to perform but the coming release of the Sapling upgrade will soon allow for the possibility to send shielded transactions from a mobile phone, thus greatly improving the portability of the technology.

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This ability to shield transactions also allow for two very interesting properties: asset fungibility and selective disclosure.

a - Asset Fungibility.


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Fungibility is an essential characteristic for cryptoassets assuming a money-like function.

A unit of exchange is said to be fungible when each unit is as good as any other regardless of how it was used in the past.

For example, 2 notes of $10 USD hold the same value and, barring very specific cases, each of them is indistinguishable from the other, can be equally credited to a bank account for the same amount and can be redeemed for an equal value of goods and services.

Just like dollars, ZEC coins are equally interchangeable because shielded transactions un-link each coin from its public history on the blockchain so that one unit is as good as any other unit.

In Bitcoin on the other hand, individual coins do have a public blockchain history which can lead them to be "earmarked" and possibly blacklisted from exchanges or merchants.

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To sum up, fungibility is important for a cryptocurrency because it allows it to behave like real money.

b- Selective Disclosure.


We've seen how in Bitcoin, any piece of data committed to the blockchain is completely transparent and forever engraved into the database for anyone to see.

To make up for this glaring lack of privacy other ledgers like Monero have opted for complete privacy which completely occult the blockchain's history from prying eyes.

As a result Monero has become the currency of choice for money laundering.

Unlike Monero, ZCash strikes a balance between these two extremes by opting for selective privacy.

Selective privacy is the ability to discretionary disclose private information regarding your financial situation.

Zcash achieves that by decoupling the spending key (which is similar to the private key in Bitcoin) with a viewing key which can be shared and allows holder to selectively reveal information about their transaction history (or balance) without exposing their identity, the provenance of their coins or the total value of their holdings.

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We believe that this discretionary approach to privacy is not only empowering for the user but also makes it both compliant to privacy laws like the European GDPR (by protecting privacy) and to anti-money laundering regulations (by selectively allowing some information to be leaked to the regulators).

Investment Thesis.


In November 9, 2017 Grayscale Investments LLC announced the launch of its third investment vehicle, the Zcash Investment Trust Fund which was accompanied by a very comprehensive investment thesis.

In this thesis, Grayscale argues that ZEC is the digital equivalent of private off-shore Swiss bank accounts: a "swiss bank account into your pocket".

The thesis goes into great details to explain the advantages ZEC possess over traditional off-shore solutions and how value could accrue to the network in case this strategy proved successful.

ZCash founder Zooko Wilcox also expressed great interest in using ZCash to help country affected by hyperinflation like Venezuela and several start-ups like AirTM have emerged for this exact purpose and help spread adoption of the cryptocurrency.

Ruben Galindo on AirTM and Venezuela:

We believe that the combined benefits of privacy, portability and fast transactions will give ZCash an advantage over other faster but less private cryptocurrencies like DASH that are also marketed to these markets plagued by hyperinflation.

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Trade Set-Up.


  1. One ZEC is currently trading at around $122 USD, which is only x4 from its all-time-low value ($28 USD) and about 7 times lower than its all-time-high value ($849 USD);
  2. ZEC has almost entirely retraced against BTC and has hit what we believe is a long term zone of support.

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Conclusion.


At this price, we believe that ZCash is considerably undervalued given the strength of its fundamentals and the potential for wider adoption as a store of value both for off-shore investments and in countries affected by out-of-control inflation.

DISCLOSURE: F0x Society is long ZEC.

Resources.


ZCash Website
Grayscale's ZCash Investment Thesis
ZCash YouTube Channel
Zooko Wilcox interview with Laura Shin on Unchained


FØx.


The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.


If you liked this article, make sure to upvote, leave a comment and resteem. You can also follow us on Twitter at F0xSociety.


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Thank you for the article. I also looked into ZCash in one of my analyses and believe it could be seriously undervalued at the moment.

It has also found support after it broke the all-time low against BTC, which could mean that buyers are interested in these prices and have already stepped in.

I'm pretty sure that even if price breaks the current lows, it will reject and push higher once again. I will be really surprised if that doesn't happen.