Steemit Crypto Academy Week 16, Season 2 Homework Task for Professor @levycore

Hello everyone and welcome to this week lecture on privacy coins presented to us by our able Professor @levycore. It’s a pleasure to be part of this week lecture.

Understanding Privacy Coin
Just as individuals need privacy once dealing with others, cryptocurrency also requires some sort of privacy from the public. Privacy is keeping some vital information within you and not share it with anyone.

Privacy coins are cryptocurrencies that does not allowed transactions of users to be made public. A good example of such coins is Zcash. The only person who has access to all details concerning transactions is the user who carried out the transaction. For example transactions performed on other crypto assets, one can quickly get into users wallet to see all the details concerning the transactions but with privacy coins the case is different as you cannot access users wallet to get all the details with regards to transactions of a user. The priority of privacy coins is for users security first.

^Source

Transactions on privacy coins are recorded with anonymous names on the blockchain. With privacy coins, users data is highly protected and secured.

Transparency is primordial to crypto currency as one can easily trace transactions on the blockchain but with privacy coins, transactions are untraceable. In some cases, each time a user send or receive coins, a different address is issued for the transactions. This made it difficult for any third party to trace details of the transactions.
Individuals who care about the privacy of their finances should used privacy coins.

However, some countries considered privacy coins to be harmful and should not be allowed to be traded by individuals. This is because they believed that it promotes money laundering and allows terrorists to use it to fund terrorism activities. This has caused some exchange platforms such as bittrex, and Coinbase to delist the coins on their platforms.

There exist different privacy coins, my focus will be on Zcash(ZEC) coin.

Understanding Zcash (ZEC)
ZCash is among the popular privacy coins issued in 2016 as a result of some setbacks recorded by Bitcoin. One of the setbacks is that Bitcoin did not put privacy of users top priority. With Zcash transactions are secured on the blockchain as users details cannot be traceable. Zcash was developed by Zooko Wilcox-O’Hearn, a software developer. With Zcash, transactions are recorded anonymously on the blockchain.

The main preoccupation of Zcash was to create a coin with different features from Bitcoin, making users transactions secured and untraceable. That is making transactions by users anonymous which was not done by Bitcoin.

Also, the Proof of Work (PoW) algorithm used by Zcash known as “Equihash” has made mining the coin easy. Zcash uses zero-knowledge proofs (zk-SNARKs) to ensure that users information should not be revealed to the other party involved in the transaction. This has increased the privacy of its users. The sky-SNARKs has made Zcash fungible in nature. This means that one party involved in a transaction cannot identify or trace transaction history done by two parties. This makes it difficult for a user to reject the coin in a case where one suspects the source of the coin.

Exchange Rates of Zcash
It is ranked today at 53rd position according to coinmarketcap. Today Zcash is valued at about $166, with market capital of about $1.9billion and a fully diluted amount of about $3.5billion. It has a percentage increase of about 8.09%. This means that the coin can increase or decrease in value as a result of the volatile nature of crypto currencies.

Mining Zcash
There exist different ways in which one can mine Zcash but I am going to explain the two major ways to mine Zcash. This include but not limited to Pool, and Solo Mining methods.

• Pool mining: This method promote team work. That is miners form a pool which enables them to easily mine a block. The rewards are evenly divided to the miners within the pool based on the miners computer power contributed in mining Zcash in the pool. This pool system increases a miners chance of winning but decreases the shares. About 50Zcash is issued after 10 minutes as rewards for successfully mining a block. This rewards are then shared among pool miners but 10% is rewarded to founders to keep development on Zcash.
• Solo mining: With solo mining, miners do not need to belong to a pool before mining but has almost the same reward system. This method of mining Zcash was profitable in the past. Of recent it is no longer profitable as it requires a lot of energy consumption which is expensive for my miners to make profits. So, I will recommend anyone interested to mine Zcash to go in with pool mining.

What is Required to start Zcash Mining
Mining Zcash requires a hardware used to run the Zcash software. This requires computational power and consume a lot of energy (electricity).
To own Zcash is necessary for one to have a Zcash digital wallet that will enable you to keep the coin safely. To do this, the following steps should be followed to create the wallet address. I am using my phone to demonstrate this.

Step 1:
Open your google app and used the search bar to enter “z.cash”. Once the page opens, Scroll down, click "Get a wallet".

Step 2:
A new page loads as you click on “Get Wallet” which is the wallet page. Here you are required to download a wallet app for Zcash with regards to the device you are using. I am downloading Zecwallet lite for iPhone. Once you click on “visit site”, it takes me to AppStore. I downloaded the app. Once it’s complete downloaded, you open the app.

Step 3:
Click on “create a new wallet”, it will lead you to a new page where you are expected to copy and keep safe your seed phrase. This is important as you need it to recover your wallet.

Step 4:
Click on “I have save the seed”, which takes you to the Zcash wallet. Remember that with the mobile app, is different from the desktop app. With mobile app, there is no encrypted password for you to change but with desktop app, there is an encrypted password which you can change it.

From the screenshot above you see that my wallet is ready to receive or send Zcash. Remember that your seed phrase is as precious as your funds, so keep it secured and safe. I have copied mine and save on my google drive.

I prefer Zcash over other privacy coins because of the following:

• Security: Zcash has a more enhanced security system as compared to that of Bitcoin which protects users privacy. I am someone who love privacy and always want to operate within my space without involving others especially when it comes to my financial transactions. Thus, the fact that users identify are kept as secret whenever a transaction is initiated makes me chose Zcash over other crypto currency such as Bitcoin.
• Encryption: Zcash transactions are encrypted in such a way that even if one has my wallet address, it is difficult to trace my wallet details.

Pros of Zcash

• One of the things that investors need to look at before venturing into investing in a particular coin is the reputation of those involved in the development of the crypto assets. Zcash happened to have a reputable team of developers such as Zooko Wilcox , and Nathan Wilcox whom have developed the coin to be highly secured. This has made it difficult to be hacked by hackers as compared to Monero.
• Transactions are recorded anonymously putting the privacy of users first. This makes it difficult for users account to be trace and hacked. This is of importance to companies and individuals who intended to keep their details private from the public.
• The use of the cryptography "zero-knowledge proofs" (The sky-SNARKs) has greatly improved on the security of transactions on the system. This technology helps to verify data on the blockchain without necessarily exposing information of the transactions initiated.
• The PoW algorithm (Equihash) used makes it easier for one to mine Zcash.

Cons of Zcash

• It is highly inflated, and the 10% reward given to founders at the end of each mining block, at times devalued the asset. This often discourage investors intending to hold the coin for a longer period of time.
• It has faces high market competition with other privacy coins such as DASH.
• The coin is not run on a fully decentralized structure , but run by a centralized company known as “Electronic Coin”.
• The sky-SNARKs is not used only by Zcash, other crypto currency such as Ethereum can as well used it. This makes it not unique to Zcash.
• It can easily be used by terrorist to fund terrorist activities in a country since transactions are not traceable.
• It slow down development of a country as the government cannot calculate tax rates on such coins.

Conclusion

CC: @levycore