Crypto Academy Week 16 - Homework Post for @levycore: Privacy Coins

Hello, all Steemians,
In my journey at Steemit Crypto Academy, Privacy Coin is a completely new topic for me. I never went into detail about such coins.
Here, after reading the lesson I am submitting the homework and hope it will be up to the standard required by the professor.

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Task 1

Choose a Privacy Coin and perform a fundamental analysis of the coin in detail.

Privacy Coin

In the world of a cryptocurrency transaction, privacy is breached by transparency and this transparency in any transaction makes it more popular as in fiat transaction transparency is always a concern. But having no privacy in cryptocurrency transaction also raise come concern and in response to that these privacy coins came into existence. E.g. the pioneer privacy coin Dash came into existence after the hard fork of Bitcoin.

Right now there are various privacy coins available like Monero, Zcash, Dash, Beam, Grin etc. For this homework task, I decided to select Zcash.

Fundamentals of Zcash

Zcash is a privacy coin launched in 2016 by Zooko Wilcox-O’Hearn and a team of scientists at MIT, Johns Hopkins and other academic and scientific institutions and Electric Coin Co. It was built on the original Bitcoin codebase. Initially, it was named ZeroCoin and later given this current name Zcash.

Zcash is actually a fork of Bitcoin that occurred in October of 2016. Development work on Zcash was started in 2013 and the first coin was mined in 2016.

Similar to Bitcoin, Zcash transaction data is posted to a public blockchain; but Zcash provides the option of confidential transactions and financial privacy through shielded addresses which are not available in Bitcoin transaction.

User's privacy is increased in Zcash by zero-knowledge proofs (zk-SNARKs). It validates the transactions without revealing information that could compromise a user's privacy.

zk-SNARKs is a cryptographic tool that allows two users to engage in transactions without revealing their payment addresses to each other. Due to this tool ZCash transactions are untraceable on ZCash's blockchain.

Electric Coin Company (ECC), Zcash Foundation (zebra) are the Developers of Zcash.

Zcash in figures as of 2nd June 2021

S No	Parameter	Value
1	Market Cap	$1,758,438,356
2	Max Supply	21,000,000
3	Circulating Supply	11,157,574
4	24 Hour Trading Vol	$1,128,549,634
5	Market Cap Rank	63
6	All-Time High	$3,191.93 Oct 29, 2016
7	All-Time Low	$19.75 Mar 13, 2020
8	Current price	About $161

Started with Sprout, released in Oct 2016, The latest release of Zcash is Canopy, before that from time to time, there were several improved versions were released.

S No	Version	Release date	Description
1	Sprout	October 28, 2016	Came into existence after BTC fork
2	Overwinter	June 26, 2018	The first network upgrade for Zcash
3	ZcashSapling	October 29, 2018	This upgrade introduced significant efficiency improvements for shielded transactions
4	ZcashBlossom	December 11, 2019	Improved shorter Blocktimes
5	ZcashHeartwood	July 16, 2020	It enables more third-party integrations
6	ZcashCanopy	November 18, 2020	This fifth major network upgrade hospitable ecosystem for many participants

_Source

Network Information of Zcash

S No	Parameter	Details
1	Transaction Size	Unshielded, 500 bytes; shielded, 2,000 bytes
2	Algorithm	Equihash
3	Mining	Proof of work
4	Current ZEC mined per block	3.125
5	Default fee	0.0001 ZEC
6	Block size	2MB
7	Block time	1.25 min
8	Active Nodes	https://blockchair.com/zcash/nodes

_Source

Zcash Governance and Development

80% of the mining rewards go to the miners and 20% go to the Zcash development funds. Zcash development fund further distributes these funds to its other organizatins.

• Zcash Open Major Grants (8%) - The ZOMG distributes funding to third-party developers for their work on Zcash-related projects.
• Electric Coin Co (7%) - This subsidiary support the project by R&D, engineering, regulatory relations, adoption and demand generation.
• Zcash Foundation (5%) - This public charity foundation builds financial privacy infrastructure for the public good, mainly to the users of the Zcash protocol and blockchain.

In November 2019, Electric Coin Co. and Zcash Foundation reached an agreement under which both parties must agree on any network upgrade that would create a new consensus protocol of Zcash. Zcash governance depends on community input. ECO also donated the Zcash trademark to the Zcash foundation. The trademark agreement prevents either party from taking action that is blatantly contrary to the clear consensus of the Zcash community.

_Source

Task 2

Describe the steps in creating a wallet for the Privacy Coin of your choice. (Screenshot required)

Types of wallets that support Zcash

There are different types of wallet in which Zcash can be stored, sent and received.

Wallets that support shielded-address.

• ZecWallet Lite (Available for mobile as well as desktop)
• Nighthawk Wallet ( Mobile only)
• Unstoppable (Mobile only)

Wallets that support only transparent-address

• Coinbase
• Ledger
• Trezor
• Atomic
• Trust
  And other third-party wallets.

Full node wallets
These wallets are specially designed for miners and for those who validate transaction and blocks, in addition, to send and receive Zcash.

• ECC Zcashd (Official wallet of The Electric Coin Co)
• Zecwallet (Frontend wallet for Zcashd)

Creating a wallet first time

• To create Zcash wallet I landed on its official website https://z.cash/
• There was an option Get a Wallet

• On the next page there were 3 options
  (1) ZecWallet Lite
  (2) Nighthawk Wallet
  (3) Unstoppable

I opted 1st one ZecWallet Lite

• Clicked on Visit site and landed here ---> https://www.zecwallet.co/
• There were 3 options I decided to go for Download for desktop

• After clicking on Download for desktop Next was https://www.zecwallet.co/#download here I opted for WINDOWS (.MSI)

• After clicking on that a setup file was downloaded in the folder.

• Ran the setup and the wallet was installed on the desktop.
• Clicked on the icon and it opened. There were two options Creat new and Restore Existing. As I downloaded for the first time so opted for Creat New

• A new window opened with seed phrase and I saved that securely and clicked on start wallet.

• Finally, my wallet was created as below.

Task 3

Explain the reason you chose the Privacy Coin. (State the advantages and disadvantages)

Why I chose Zcash?
The reason behind this is some interesting and important features I found.

• I found that It has a well-established governance structure that not only manages its operation but also ensures that it remains to decentralize blockchain. e.g. no network upgrade can be done without the consensus of Electric coin Co and Zcash foundation.
• The team of Zcash is highly professional as it involves experienced computer scientists and cryptographers.
• Zcash users have two options of the transaction, transparent and private. The transparent transaction is the same as in Bitcoin.
• As Zcash have an open-source protocol they don’t have any control over the mining and distribution of ZEC

Advantages and Disadvantages of ZEC

Advantages

• ZEC is a community drive decentralized blockchain and the ecosystem is designed in such a way that as it grows more funding becomes available and more it becomes decentralized. Ultimately community priorities become more diverse, and the technology gets stronger.
• Its features utility are the same as Bitcoin with an additional feature of privacy coin.
• To protect the user's privacy Zcash uses customize zero-knowledge-proof construction known as a zk-SNARK.
• Both private and transparent transactions can be done on Zcash blockchain.
• Fix supply of Zcash has an advantage as limited supply would prevent it from falling too low.

Disadvantages

• Its master key requires all 6 shards, so in order for someone to gain access to the master key, it would require all six participants to either be dishonest or compromised.
• It can be mined through the only CPU so it is highly energy consuming similar to Bitcoin.
• Similar to other privacy coins it also could have legal issues because there is simply no way to know how a person will use it.
• For this privacy reason dark web marketplace AlphaBay was reportedly considering the use of ZCash for their transactions. This makes ZCash an unsuitable candidate for trustworthiness.

Task 4

Conclusion.

A privacy coin is a double edge sword. If you chose to select it to protect your privacy a legal complication could be a problem and if you do not use it for your transaction which you want to keep private, there are no other options.

Privacy is not only for illegal purposes but also required for so many conditions like some chronic medical conditions, anonymous donations etc. In such cases transaction by privacy coins are suitable, as in non-privacy coins your identity can be revealed.

Despite revolutionary technology, Privacy coins are always considered doubtful and it is the reason that so many leading exchanges do not prefer to list and trade them.

To keep in mind the legal issues privacy coins must have dual features of privacy and transparency including wallet addresses and transaction amounts, as Zcash provide this feature to its users. It helps to build trust over particular blockchain and project.

In future, some governments can ban privacy coins due to their misuse in criminal and illegal activities. But it would be a drastic step as in the absence of privacy coins criminal won't stop their activity and they would find so many other ways to operate their activities.

I am thankful to Prof @levycore for his informative lecture.