If you know someone’s Bitcoin address, you can follow their transactions and check all of their addresses and transaction amounts. All data are encrypted using ZCash.
What Is Zcash ($ZEC)?
While the majority of cryptocurrencies publish your entire transaction history on a public ledger, Zcash aims to provide users with privacy. The project is a privacy-focused, blockchain-based payment network that shields transactions using zero-knowledge proofs (ZKPs), ensuring that the contents of a transaction remain private even on a public blockchain.
Launching in 2016, Zcash enables users to choose their preferred level of anonymity by providing two kinds of addresses: transparent addresses (which are visible on the blockchain) and shielded addresses (which do not). Users can also send transactions between the two types of addresses, though this adds another layer of privacy concern.
How Does It Work?
When it comes to using Zcash, you have two types of addresses:
Transparent addresses (t-addresses) imply that addresses on the Zcash blockchain can be traced in the same way that they can on the Bitcoin blockchain.
Shielded addresses (z-addresses) are encrypted using zk-SNARK transactions, which means that since you cannot view the data on the blockchain, neither the transactions made to them nor the money held by a z-address are visible.
Between these two types of addresses, there are four transaction types.
A Z-to-Z transaction appears on the public blockchain, so it is known 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. This type of encryption is only possible through the use of zero-knowledge proofs. Read more: What are zk-SNARKs?
The owner of an address may choose to disclose z-address and transaction details with trusted third parties — think auditory and compliance needs — through the use of view keys and payment disclosure.
A T-to-T transaction works just like Bitcoin: The sender, receiver and transaction value are publicly visible. While many wallets and exchanges exclusively use t-addresses today, many are moving to shielded addresses to better protect user privacy.
The two Zcash address types are interoperable. Funds can be transferred between z-addresses and t-addresses. However, it is important that users understand the privacy implications of shielding or de-shielding information through these transactions.
Zcash allows for faster transactions with a cheap transaction cost of 0.0001 ZEC. It is possible to use Zcash on a significant number of top-tier wallets and exchanges.
Address and transaction privacy
There are two types of addresses available in Zcash: shielded and transparent. In addition, transactions between shielded addresses do not expose either address, the transaction amount, or the contents of the encrypted note field. Shielded addresses are used to protect sensitive information, such as credit card numbers. Zcash addresses that are publicly available, as well as the transactions that take place between them, are similar to how Bitcoin addresses are publicly viewable on the blockchain.
In the case of shielded transactions, a memo field is accessible. This enables the sender to provide pertinent information to the receiver in a totally encrypted manner, without the recipient being aware of it. This is helpful for sending messages and instructions to others, as well as for ensuring compliance with the Bank Secrecy Act’s “Travel” regulation
Owners of shielded addresses have the option of disclosing transaction information in order to comply with regulatory requirements or conduct audits. The owner has the option of disclosing all incoming transactions and the memo field, but not the sender’s address unless it contains identifiable information in the memo field. Zcash will soon offer full viewing keys, which will show the contents of all transactions in and out of the address.
The sender or receiver of a transaction may reveal transaction-specific information to other parties as necessary for visibility, compliance, or auditing. The receiver has access to the transaction’s amount and note but not to the sender’s address.
Zcash enables transaction expiration in order to mitigate the consequences of an unmined transaction. By default, if a transaction is not mined within 50 minutes, it will expire and the funds would become unencumbered (40 blocks).
Zcash enables multi-signature transactions. This implies that before funds are sent, a transaction may need the agreement of two or more parties. Multisignature transactions, on the other hand, are visible and cannot be kept secret. At now, multi signatures can only be used to spend from transparent addresses, but work is underway to expand their usage to shielded addresses.