What is ZCash & How Does It Work?

In the fast-paced world of cryptocurrencies, ZCash has emerged as one of the most prominent privacy-focused digital assets. It aims to provide secure, private, anonymous, and shielded transactions on its blockchain. 

By the end of this comprehensive guide, you will have a profound understanding of what ZCash is and how it works, positioning you to make informed decisions in the cryptocurrency space.

So, Let’s take a closer look into the concept of ZCash.

What’s the history of ZCash?

Scientists came up with the idea for ZCash in 2013 when that group got together to solve Bitcoin’s biggest problem, which was privacy. Their first idea was Zerocoin, a privacy add-on for Bitcoin. They quickly changed direction and brought in more scientists to build Zcash, a protocol that works on its own.

The protocol was made by the Zerocoin Electric Coin Company, which is now called Electric Coin Co. and then Zcash came out in October 2016.

What is ZCash?

ZCash, established in 2016, is a decentralized and open-source cryptocurrency that focuses on safeguarding user privacy during transactions. Unlike Bitcoin and many other cryptocurrencies, which operate on a transparent blockchain, ZCash employs advanced cryptographic techniques to ensure that transaction details, such as sender, recipient, and transaction amount, remain confidential. 

This groundbreaking feature sets ZCash apart as the ultimate choice for individuals valuing privacy and anonymity in their digital financial transactions.

It employs cutting-edge zero-knowledge proofs known as zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge) to ensure private transactions without revealing the transaction details.

What are zk-SNARKs?

At its core, zk-SNARKs is a cryptographic technique that enables one party (the prover) to convince another party (the verifier) that a statement is true without revealing any specific details about the statement itself. 

In other words, zk-SNARKs allow the prover to demonstrate knowledge of certain information without disclosing what that information is.

The term “Zero-Knowledge” refers to the fact that the verifier gains no additional knowledge about the statement’s content, other than the fact that it is true. 

“Succinct” implies that the proofs generated are relatively short, making them computationally efficient and easy to verify. “Non-Interactive” indicates that the prover and verifier do not need to engage in a back-and-forth process to establish the proof; instead, a single proof is provided for verification.

How zk-SNARKs work in ZCash?

  1. Generating the zk-SNARK: When a shielded transaction is created, the sender generates a zk-SNARK that attests to the validity of the transaction without disclosing sensitive information.
  2. Verification by the Network: The zk-SNARK is included with the transaction and transmitted to the ZCash network. The network’s nodes, known as verifiers, use the zk-SNARK to confirm the transaction’s validity without knowing the specific details.
  3. Privacy and Security: With zk-SNARKs, the ZCash blockchain can maintain a high level of privacy and security, as sensitive transaction data remains encrypted and hidden from public view.

What are the features of ZCash?

Shielded Transactions:

Shielded transactions are a critical aspect of ZCash’s privacy features. These transactions utilize zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge) to maintain the anonymity of both sender and recipient, as well as the transaction amount. This technology makes ZCash one of the most privacy-oriented cryptocurrencies in existence.

Multi-sig Transaction Support:

Multi-sig transactions significantly enhance the security of funds on the Zcash network. By requiring multiple signatures, the risk of unauthorized access to funds due to the compromise of a single private key is mitigated. This feature provides peace of mind to users, especially those dealing with substantial amounts of cryptocurrency.

In traditional single-signature transactions, a simple mistake or typographical error when entering a recipient address can lead to irreversible losses. Multi-sig transactions act as a safeguard against such human errors since the transaction is only executed upon meeting the required number of correct signatures.

Decentralization and Security:

ZCash, like most cryptocurrencies, operates on a decentralized blockchain network. This means that transactions are not controlled by any central authority, ensuring that the currency remains free from external manipulation. The decentralised nature of ZCash enhances its security, making it resilient against potential attacks and ensuring the safety of user funds.

Viewing keys:

Viewing keys are a fundamental component of Zcash’s privacy-oriented approach. They are a type of cryptographic key that grants the holder the ability to view specific information on the Zcash blockchain. With a viewing key, users can access details of shielded transactions, such as the sender, recipient, and transaction amount, without revealing the private spending key or compromising the transaction’s confidentiality.

Fast and Low-Cost Transactions:

Another feature of ZCash is its ability to process transactions quickly and at a lower cost compared to some other cryptocurrencies. This efficiency is attractive to users who seek a fast and cost-effective means of transferring funds. ZCash’s network is designed to handle a high volume of transactions, making it a practical choice for everyday use.

ZCash Tokenomics

The process of creating new ZEC tokens is primarily carried out through mining, similar to Bitcoin and many other proof-of-work (PoW) cryptocurrencies. Miners compete to solve complex mathematical puzzles to validate transactions and add new blocks to the ZCash blockchain. 

As a reward for their efforts and resources expended in the mining process, successful miners receive freshly minted ZEC as block rewards.

Like Bitcoin, ZCash uses a Proof of Work mining algorithm to make ZEC for each new block successfully verified. For four years, ZCash used the same halving system for block rewards as Bitcoin. It makes sure that inflation doesn’t happen. 

During ZCash’s first four years, miners got 80% of the block reward. The rest, 20%, went to the Electric Coin Company, the ZCash Foundation, and other stakeholders and key contributors.

How ZCash Transactions Work?

  1. Initiating a Transaction:

    When a user wants to send ZCash to another user, they create a transaction using their private key and specify the recipient’s address and the amount they wish to send.

  2. Shielded or Transparent Transaction:

    The user can choose to send the ZCash using either a shielded or a transparent address. Shielded transactions involve zk-SNARKs to encrypt the transaction details, while transparent transactions are openly visible on the blockchain.

  3. Generating zk-SNARKs (for Shielded Transactions):

    If a shielded transaction is chosen, zk-SNARKs are used to generate proof that validates the transaction’s correctness without revealing the specific details. The proof is then included with the transaction.

  4. Verification by the Network:

    The ZCash network’s nodes (computers participating in the network) verify the transaction using zk-SNARKs or standard cryptographic methods for transparent transactions. This ensures that the transaction is valid and meets the necessary criteria.

  5. Transaction Confirmation:

    Once the transaction is verified, it is added to a block and the ZCash blockchain. This confirmation ensures the transaction is complete and irreversible.

Let’s walk through an example to illustrate how ZCash works in a transaction scenario:

  • Alice and Bob each have ZCash wallets.
  • Alice wants to send 5 ZEC (ZCash coins) to Bob.
  • Alice decides to use a shielded transaction to protect her privacy.
  • Bob provided his shielded address to Alice.
  • Alice creates a shielded transaction using her ZCash wallet software.
  • In the transaction details, she specifies Bob’s shielded address as the recipient and sets the amount to 5 ZEC.
  • Now, Alice’s wallet uses zk-SNARKs to create cryptographic proof that the transaction is valid without revealing the sender, recipient, or transaction amount.
  • The shielded transaction, along with the zk-SNARKs proof, is broadcasted to the ZCash network.
  • Once the network verifies the transaction, it is included in a block along with other transactions waiting to be added to the blockchain.
  • The transaction is now complete, and Bob’s wallet receives the 5 ZEC sent by Alice.


ZCash stands as a pioneering cryptocurrency, emphasizing privacy and security. Through its innovative zk-SNARKs technology, it allows users to perform private transactions while providing the option for transparent ones as well. 

This flexibility, combined with a dedicated development team, positions ZCash as a significant player in the world of digital currencies. As the crypto space continues to evolve, ZCash’s commitment to privacy and user empowerment makes it a compelling choice for those seeking a more discreet financial experience.

Over the years, ZCash has gained significant adoption in various industries. Its privacy features have attracted users from the finance, commerce, and technology sectors. The future outlook for ZCash appears promising, with ongoing developments to improve its privacy and scalability.

FAQs on ZCash

Q: How does ZCash’s zk-SNARKs technology work?

A: zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) is a cutting-edge cryptographic technology employed by ZCash. It allows the network to verify the validity of transactions without exposing transaction details like sender, recipient, or transaction amount. This ensures privacy while maintaining the integrity of the blockchain.

Q: Can I choose between transparent and shielded transactions on ZCash?

A: Yes, ZCash offers selective transparency, allowing users to choose between transparent and shielded transactions. Transparent transactions are similar to those on Bitcoin’s blockchain, while shielded transactions provide enhanced privacy.

Q: How secure is ZCash’s blockchain?

A: ZCash operates on a decentralized blockchain, making it secure and resistant to censorship. Transactions recorded on the ZCash blockchain are immutable, ensuring that they cannot be altered or tampered with once confirmed.

Q: Who oversees the development of ZCash?

A: The development and maintenance of ZCash are overseen by the Electric Coin Company (ECC). The ECC is dedicated to continuously improving and upgrading the ZCash protocol to ensure its efficiency and privacy features.

Q: Is ZCash widely accepted for payments?

A: While not as widely accepted as Bitcoin, ZCash is gaining traction as a payment option, especially in privacy-focused industries.