Zcash and Bitcoin are both cryptocurrencies. Well the basic use of crypto coins is known to every person i.e. to be used as a medium of payment for transaction in goods and services or even swapping in between different cryptocurrencies (say ZEC to BTC conversion). Both of these cryptocurrencies serve this purpose very well. Although, there are quite a few differences in the architecture and features offered by them. The most debut distinguished between the two is the privacy. Zcash offers an option for the transactions to be private or not as per the will of the user. But there is no such feature available with Bitcoin.
Zcash in itself, is a divergence of the bitcoin protocol. ZEC is a separate cryptocurrency and maintains its own blockchain. Although the infrastructure on which Zcash has been developed is built on top of bitcoin’s core code. There are certain additions to the underlying crypto code that are specific only to Zcash which include updating the proof-of-work consensus model and outlining of zero-knowledge proofs to enhance user privacy.
How does Zcash Works?
Zcash selectively share address and transaction information for auditing or regulatory compliance. Zcash addresses are either private (z-addresses) or transparent (t-addresses). Z-addresses start with a “z,” and t-addresses start with a “t.”
A Z-to-Z transaction appears on the public blockchain, thereby providing its conformity to have occurred and that the fees were paid. But the addresses, transaction amount and the memo field are all encrypted and not publicly visible. Using encryption on a blockchain is only possible through the use of zero – knowledge proofs.
(Zcash is the first extensive application of zk – SNARKs, an original form of zero – knowledge cryptography. The strong privacy assurance of Zcash is resultant from the fact that shielded transactions in Zcash can be fully encrypted on the blockchain, yet still be verified as valid under the network’s consensus rules by using zk-SNARK proofs.)
The owner of an address may elect to reveal z – address and transaction details with trusted third parties — (think auditory and compliance needs) — through the practice of view keys and payment disclosure.
Transactions between two transparent addresses (t – addresses) work in the same manner as that of Bitcoin. The sender, receiver and transaction value are publicly visible. Now a days, while several wallets and exchanges entirely use t – addresseses, many others are opting for shielded addresses in order to better protect user privacy.
Now, the two Zcash address options are completely interoperable. Funds can be relocated between z – addresses and t – addresses. However, it is important to note that users must understand the privacy implications of shielding or de – shielding data through these transactions. Please refer Zcash anatomy for more information on the various transaction types.
The underlying idea of Zcash algorithm
The fundamental base of Zcash technology are zero – knowledge proofs, benefitting from which, the transactional data can be validated without revealing information about the amount and the parties involved. Which is made possible because Zcash uses specific zero – knowledge proofs called zk – SNARKs (zero – knowledge concise non – interactive influences of knowledge).
Moreover, as its founder like to demonstrate, Zcash is built on strong science and audited precisely by third parties. It is an open – source protocol, built by a security – dedicated engineering team, and originally based on Bitcoin Core’s battle-tested codebase.
After all this discussion it can be safely concluded that Zcash is essentially the same crypto as that of Bitcoin. It can be traded in all possible manners similar to Bitcoin including cryptocurrency trading platform. The only difference is that both could serve to the distinct needs of different users.