Anonymity is absolutely vital in the world of cryptocurrency. With the birth of Bitcoin, a lot of people thought that they were finally getting a decentralized digital currency. However, as time went on, it has become very clear that Bitcoin isn't really as anonymous as most of us once thought.
In the last few years, we have seen droves of cryptocurrencies – with a lot of them focusing on the privacy aspect – and bragging about being the most secure option. We'll now talk about two of these cryptocurrencies with privacy atop both their agendas.
Monero practically functions in the same capacity as Bitcoin, but sets itself apart through this privacy component. Monero pursues user privacy using two methods: by hiding the account balances and by mixing transactions.
With a ring signature system, Monero can ensure anonymous transactions. Using this ring signature, the keys of users confirm a transaction without showing which user made it.
Having been launched in 2016, Zcash – unlike Monero – is one of the new arrivals in the privacy sector of the cryptocurrency market. Zcash aims to establish a unique digital currency that improves privacy and security with the help of end-to-end encryption. This is accessible only by using 0-knowledge proofs.
The foundation of Zcash protocol is zk-SNARK. Zero-knowledge cryptography is a new form of the zk-SNARK which ensures that transactions on Zcash are always encrypted and its inherent data confidentiality is saved on the blockchain. The only information it discloses is the length of the transactions as long as they take place.
Zcash v. Monero: The Differences
Both Monero and Zcash possess different working systems. While Zcash eliminates traces of transaction data, the Monero cryptocurrency mixes this data with others.
Monero has one clear advantage over Zcash: all its transactions are private by default. This means that as soon as you transfer Monero from an exchange to your wallet, your funds cannot be located. As for Zcash, it has two kinds of addresses: the “z”(or “shielded”) addresses & the “t” transparent addresses – that are similar to Bitcoin addresses. “t” addresses are exclusively used in exchanges and by most users. The choice to have optional privacy will reduce the privacy levels of all users because the transparent transactions will show important data to observers. Even when you are careful to always use “z” addresses, other users you send to and the exchanges you buy from might not always use the z addresses like you.
Monero uses what is known as CryptoNight – a PoW algorithm – established for CPU mining. On the other hand, Zcash uses the Equihash algorithm that has not been designed for mining. This makes the process not operational on ordinary desktop computers.
In its initial setup, Zcash requires trust. If the setup was compromised or carried out incorrectly, the entire currency could be undermined. Meanwhile, Monero is easier to audit and the platform will find out if someone was creating money out of nothing.
In summary, both of these cryptocurrencies have their advantages and disadvantages. Various factors that make the two special have been examined. All that remains is for the investor to make an informed decision on which of them to invest in. Monero is experienced and stable, while Zcash is a budding platform that empowers its users to operate privately or to conduct public payments smoothly and transparently.