Analysis: Why is Zcash, which is favored by V God, the worst performer among the three major anonymous coins?

Author: LucyCheng;

Article source: Hash

Unexplored excavation, the futures price has been speculated on BitMEX to about $ 1400; the birth of the block was just born, the price immediately rose to 2 million US dollars / piece – Zcash launched in 2016, is undoubtedly the dark horse of the time. Less than half a year after its launch, it was accepted by AlphaBay, the first black market of the dark network. The related anonymous technology has also won the projects of Ethereum, Wavefield, JPMorgan's enterprise-level blockchain Quorum, Israeli technology developer Starkware and so on.

Part of the data and information from: Coinmarketcap, Bitinfocharts, feixiaohao

However, as of now, Zcash's usage and popularity in the dark network is still not high, and the proportion of private transactions selected by the network is less than one-fifth of the total transaction. Compared with Dharma, which has gradually developed into the most active currency in the dark world, and Dash, which is supported by more than 4,900 merchants, Zcash, which was born late but received more V support in the circle, seems to have developed over the past three years. Not ideal.

The picture on the left shows the proportion of Zcash in the network through transparent transactions and privacy transactions in the past month; the picture on the right shows the proportion of transparent transactions and private transactions in the network in the past month (data from: explorer.zcha.in )

Zcash has not found its own position

Unlike Zcash and Dash, all the transactions in Monroe's three major anonymous currencies are anonymous, and with its determination to resist ASIC, Monroe can quickly and extensively enter the dark market. At the same time, the title of the newly-recognized net coin king (for details, please see the "low price of Monroe coin released by the Hash faction, why squeeze the BTC into a "dark net coin king"). Dash, which has relatively weak anonymity, is gradually becoming popular in Latin America due to its real-time trading attributes and market-oriented strategies. As for Zcash, which also has the flexibility of private transaction selection, the current market positioning and specific application scenarios are Still blurry.

From the project and the attitude of some large companies, Zcash anonymous technology zk-SNARKs has a higher market attention than the ring signature technology adopted by Monroe; however, according to the use of the dark network and private transactions, the former has no anonymity. Get the most out of it. As mentioned above, Zcash users choose to use privacy technology less than 20% during the month (where full anonymous transactions account for less than 2%), and about 95% of the ZECs in the network are stored in public addresses without protection. In addition, it is worth noting that the current dark market for Zcash is less than 7%, which is lower than Dash, which accounts for 16% of the total. Compared with the last VTC, there is only one additional dark market that supports its payment (data Source: Analytical data released by The Block this month).

According to the 31 dark market data analyzed by The Block this month, about 95% of the market accepts bitcoin payments, and nearly half of the market supports Monroe payments; while the dark market that accepts Zcash is less than 7%. It is also worth mentioning that only Bitcoin and Monroe have exclusive support for the dark market. (Data from: The Block)

In theory, Zcash adopts a multi-layer key structure, which is suitable for different application scenarios; it allows some users to implement shielded transactions, and at the same time, it is close to regulatory requirements to a certain extent, avoiding the risk of being completely blocked by government departments. Thanks to this, Zcash is similar to Dash, and is supported by more exchanges than Monroe, including Coinbase, which is committed to compliance (launched last October and has been removed this month). However, this kind of "black and white" wants to touch the edge, which virtually reduces the desire of users of the dark network. After all, complete privacy and anonymity are the necessary foundations for the dark market. This may be the reason why the privacy technology usage rate is still not high after the Zcash technology upgrade .

Data from: Coinmarketcap

In fact, the failure to widely apply Zcash's privacy transactions in the early period is also related to its cost of generating. In the Sprout and Overwinter phases, in order to generate a zero-knowledge proof that miners can use, each time a private transaction is created, the sender must undergo a series of precise calculations that take tens of seconds and the transaction occupies up to 3 GB of memory; Forcing most users at that time to simply abandon the use of privacy technology to directly conduct transparent transactions. Until the Sapling upgrade was optimized in October last year, the time it took to initiate an anonymous transaction was shortened to one second and the required memory dropped to about 40 MB, making mobile trading possible; and the next stage of the BMW upgrade and adding the chain After the lightweight trading technology BOLT, its private trading technology will be further accelerated.

Zcash's roadmap is divided into four phases

If you follow the team's planning and development, and successfully realize fast and convenient private transactions, and then cooperate with the market-oriented strategy, Zcash may be able to become popular in the field of micro-payments, especially in areas with deep inflationary crisis. stand up. However, from the news released by the team in the middle of this month, Zcash seems to be absent.

Active on the chain of the three major currencies (data from: https://blocktivity.info/)

The anonymous currency development company ECC executive Josh Swihart said in an interview that their goal now is to turn Zcash into a platform that people can build for all DeFi applications:

"If you want to make a loan, if you want to do DAO, then all of this work can also be done using Zcash. Finally, we hope that Zcash Shielded can be used in Ethereum smart contracts."

For the time being, I will not discuss whether Zcash can find its market position in the future. From the technical point of view, we can foresee that this goal has a long way to go for Zcash; because of the efficient and fast privacy realized by Zcash at this stage. Trading is achieved by sacrificing its programmability. ECC product designer Daira Hopwood also admitted at this year's Zcon1 annual meeting that Zcash's model can't be expanded at present. If you want to achieve the transformation (developing in a similar direction to Ethereum), you need to build a new blockchain from scratch.

Development process dragged down by team conflicts

Anonymous technology is difficult to fully play and there are some conflicting route plans, so Zcash has not been able to find a suitable application scenario. It is also neglected that the cryptocurrency team and the internal community are also hindered. contradiction.

On the occasion of the Overwinter upgrade in June last year, D. Jane Mercer, the sole maintainer of Zcash Windows Wallet software, threatened the community with financial difficulties, saying that if he did not receive work support, he would stop client development and create a new currency to compete with Zcash. In June this year, Simon Liu, a former employee of Zcash's parent company, also filed a $2 million default suit against the company for equity disputes; in September, ECC also disputed the Zcash Foundation's trademark. The fiscal deficits shown in the Zcash Transparency Report in May and September this year have added to the situation.

The picture on the left shows the ECC company's expenditure category in the second half of 2018; the picture on the right shows the ECC company's expenditure category in the first quarter of 2019 (image from: ZCash Transparency Report issued by ECC)

According to the report, ECC in the first half of 2018 has already had problems with the situation, but in the second half of the year it shows signs of further expansion. According to the average price of 60 US dollars per ZEC during this period, ECC's total revenue in the second half of last year was 2.205 million US dollars; minus the total expenditure of 700,000 US dollars per month and the additional promotion expenses of 950,000 US dollars, the second half of 2018 is near The deficit was $3 million. And Zcash's loss status has continued to this day. After ECC adjusted its spending share, the company's Q1 in 2019 still has a loss of $558,000.

Source: Zcash official website

The reasons for these contradictions and financial difficulties are more or less related to Zcash's founder reward mechanism. In order to allow Zcash to sail smoothly, in the project in 2015, after community discussion, 20% of the ZEC produced in the previous four years was assigned to the founding team, and 80% was allocated to the miners. However, with the fluctuation of ZEC price, the rationality of the distribution ratio has caused community controversy many times; at the same time, the approach of the implementation period of the program in October 2020 has also caused the community to worry about the follow-up funding of developers.

Logically speaking, in the face of a series of difficult governance and funding issues, the community is in urgent need of finding new ways to maintain operations. But so far, the team has not found a suitable mechanism for members to agree. In August, ECC CEO Zooko Wilcox called for the creation of a new development fund, which failed; the emergence of the peaceful hard forked Ycash in July did not have much impact on the market. According to Howard Hoo, the founder of the fork coin, Ycash reduced the founder award of the original chain network from 20% to 5%. It is hoped to solve the future financial difficulties of the original chain development team to a certain extent; but the current Ycash has not yet It was included in Coinmarketcap and the daily trading volume during the month was generally less than $30,000.

Although Zooko Wilcox has issued a blog post promised that ECC will go all out to seek new support; but if the team fails to deal with these funds well within one year, it will greatly affect the subsequent development of Zcash. And Zooko also admitted at the Zcash conference held at the end of June this year that ECC must seek a solution as soon as possible, otherwise the company will have to give up the project:

“If the funds are available for the project to run for less than 12 months, we can only be forced to engage in other businesses to protect the company’s revenue.”

Zcash, once a smash hit, is somewhat disappointing. What is even more difficult is that it is not only the performance is not ideal, but the continued development is also a big problem. In response to this encryption investor WhalePanda sentiment, in fact, when Zcash first launched, he wanted to dig some, but now it seems that it is a bad idea; and Deloitte blockchain expert Tim Davis has a sharper rhetoric, bluntly Zcash is already a failure The project is difficult to develop long-term use cases.

※In early August, ECC CEO Zooko Wilcox issued an open letter to discuss the “Founder Awards” program, hoping to extend it in another way to solve the subsequent funding problems (picture cut from: Medium)

It’s hard to say whether the Zcash team can get through the storm, but the time left for them is really not much. The last time Zuoko issued an open letter saying that it will be "very soon" to announce a community program for more than two months, we still have not seen any progress; if the problem is only verbally resolved, Zcash's follow-up development is not optimistic.