In recent weeks, the price of Zcash has literally skyrocketed.
Although it seems to be just a speculative bubble, to assess the situation it is advisable to thoroughly analyze the project to try to understand its real long-term potential.
In fact, while the price of Zcash was rising, that of Bitcoin was falling, and many were quick to claim that Zcash was about to replace Bitcoin.
What is Zcash
Zcash is a high-privacy cryptocurrency launched in 2016 as a fork of Bitcoin.
In fact, like BTC, it is based on Proof-of-Work and undergoes a halving approximately every 4 years.
The first halving occurred in 2020, while the second took place last year.
Unlike Bitcoin, whose on-chain transactions are all public and with data in clear text, Zcash uses a cryptographic technology called zk-SNARKs (zero-knowledge Succinct Non-interactive Arguments of Knowledge) which allows for proving that a transaction is valid without necessarily revealing the sender’s address, the recipient’s address, and the transferred amount.
In other words, on-chain transactions in Zcash are indeed public, but without the necessity for the data to be explicitly clear and readable by everyone.
This cryptocurrency indeed supports two different types of addresses: the transparent ones, known as t-addresses, and the shielded ones, known as z-addresses.
The former are equivalent to those of Bitcoin, while the latter use zk-SNARKs, thus making the transactions completely private. These transactions are called shielded, meaning protected.
Zcash was initially developed by the company Zerocoin Electric Coin Company, but it is now supported by the non-profit organization Zcash Foundation.
However, it is neither the only cryptocurrency with a high level of privacy nor the first, as for example Monero (XMR) was launched two years earlier. Currently, however, it is the one with the highest market capitalization, having risen to the 16th position overall, ahead of Monero, as well as Litecoin and Avalanche.
Utility
The use of z-addresses and shielded transactions enhances fungibility, as the ZEC tokens used in private transactions become more indistinguishable from one another, thereby reducing, for example, the risk of tracked tokens and addresses being blacklisted.
The disadvantage in this case is that many centralized exchanges have had to delist cryptocurrencies with a high level of privacy because they do not comply with regulations, but Zcash is still available on many CEX thanks to t-addresses and transparent transactions.
It is noteworthy that, unlike Bitcoin, a new Zcash block is mined approximately every 75 seconds, instead of 10 minutes, making its use more accessible.
The true advantage of Zcash is that it is one of the few cryptocurrencies offering strong privacy while still allowing the option to be transparent when desired.
The Competition with Bitcoin
The competition between Zcash and Bitcoin doesn’t actually exist.
In fact, Zcash has never competed with Bitcoin, and it most likely never will, despite being a fork of BTC.
Unlike Bitcoin, Zcash is still backed by a private company, as ECC (Electric Coin Company) remains the focal point for its development.
It is true that in recent years governance has shifted towards greater decentralization, thanks especially to the Zcash Foundation, but it cannot be said that it is a completely decentralized governance like in the case of Bitcoin.
For example, over its nine-year history, there have been five major hard forks of the Zcash protocol, averaging more than one every two years. Bitcoin, on the other hand, in its sixteen-year history, has undergone only three major hard forks, averaging less than one every five years.
In fact, the governance of Zcash was designed to balance innovation, privacy, and long-term sustainability, with an increasing focus on community and token holder participation, whereas Bitcoin’s governance was designed solely to promote security and community participation.
This prevents Zcash from being considered a true alternative to Bitcoin. Instead, it should be regarded as an altcoin with a high level of privacy for specific use cases, with the added advantage of also having transparent public transactions.
The Price Boom
Shortly before the end of September, the price of Zcash was around $50. About ten days ago, it nearly reached $700.
In other words, in just over a month and a half, its market value has surged by more than 1,000%!
However, this rise is evidently a parabolic rise, and parabolic rises are almost always due to speculative bubbles.
Something similar happened to Zcash in 2017, with a rise from $30 to over $700 in just over eight months. Although the rise in recent weeks has been lower in percentage terms, it has been much faster, and therefore even more parabolic than that of 2017.
At the time, the speculative bubble burst at the beginning of 2018, and within about a year, the price fell back to around $50.
It is noteworthy that in 2021 a speculative bubble also inflated around Zcash, but even though it started from around $50, it stopped at $320. Then that bubble burst as well, and within two years it fell back below $30.
It is therefore evident that this is also a speculative bubble, which moreover might have already burst last week. However, it should be added that in the event of an altseason, the price of Zcash could rise again, although in the case of a true bear-market crypto, another significant drop is to be expected.