There are now thousands of cryptocurrencies but not all of them make a good investment. Zcash, currently in the top 25 of all cryptocurrencies, brings promising new privacy features, potentially increasing its demand for both commercial and private use.
Here’s an overview of Zcash and how to buy it.
Overview: What is Zcash?
Zcash has only been with us for a few years, but it’s built on a mix of technology from the past decade (Bitcoin and Zerocoin) as well as cryptography technology dating back further but not often used, called zero-knowledge proofs. Despite the hype and speculation over illicit use, many cryptocurrencies aren’t very private at all.
With the right tools or in the right circumstances, others — even those not involved in a transaction — may be able to see how much money you have, where it came from, and where it went. This exposure creates risk in many ways, including loss of privacy, but also can make cryptocurrency owners a target. In some cases, it’s possible to match a person to a specific transaction, even to a wallet and all the transaction history of that wallet.
Zcash was built using part of the Bitcoin code base, but changed to address some of the privacy concerns associated with the world’s most successful cryptocurrency. At its core, Zcash functions similarly to Bitcoin, but can provide anonymity by using zero-knowledge proof to verify transactions without disclosing all the details of the transaction to the receiving party.
In effect, the Zcash blockchain can act as an intermediary that confirms a transaction without exposing every previous transaction by that wallet address on the blockchain. The end result? The person who pays you doesn’t know where the money is spent later and the common mechanisms that can be used to track the activity become ineffective.
Notable crypto competitors to Zcash regarding privacy include Monero and Dash, both of which emphasize anonymity as well. Zcash isn’t always anonymous, however. Two types of wallet addresses, shielded (z-addresses) and transparent (t-addresses), determine whether transactions are private or public.
This flexibility, combined with extra features like encrypted memos, allows Zcash to be used for a wider variety of transaction types ranging from public to private because it protects identities when needed or discloses information banking compliance or other purposes.
Low-cost transactions and a more robust network than some competing cryptocurrencies add to Zcash’s appeal, helping it to rise from a fledgling crypto project started in 2016 to a top-25 cryptocurrency by market cap in 2019. The tech behind Zcash can benefit a number of enterprise applications, like Zcash’s zero-knowledge security layer (ZSL) integrating with JPMorgan Chase’s Quorum blockchain recently.
Where Can You Buy Zcash?
Zcash, which trades as ZEC on exchanges, has one big advantage when compared to many cryptocurrencies: it’s available through some well-known exchanges and can be purchased easily without a convoluted chain of trading transactions.
In some cases, you can just buy Zcash directly with U.S. dollars or by using your credit or debit card. On Coinbase, for example, you can by Zcash without first buying Bitcoin or Ethereum and then exchanging, as is common for many other types of cryptocurrency purchases. This makes buying Zcash a breeze. Not all exchanges allow direct purchases of Zcash, however, so it’s important to learn the details of each cryptocurrency exchange before you deposit money.
You can buy Zcash directly with USD using these popular exchanges:
Many exchanges support indirect purchases of Zcash, which means you can purchase Bitcoin (BTC) or Ethereum (ETH) — or deposit cryptocurrency — and then trade for Zcash (ZEC).
Popular exchange choices include:
Make sure you understand the fees of each exchange before you buy Zcash or deposit another cryptocurrency to trade for Zcash. Trading and transfer fees tend to be competitive among the well-known exchanges, but the combination of account funding fees, including credit card fees, trading fees, and spreads can be costly.
For exchanges that do not support direct purchases of ZEC, theyt, can put your trade into negative territory that may take some time to reach a profit.
How to Buy Zcash
Buying Zcash is a fairly straightforward process because ZEC is supported by so many exchanges and a number of wallet choices exist. Electric Coin Company, the creators of Zcash, lists a number of wallet options but only endorses the Zcash desktop wallet.
Step 1: Choose a Zcash Wallet
You’ll need a place to store your Zcash and several popular crypto wallets support ZEC. However, many of these choices may not support the privacy features of Zcash. Wallets that support transparent addresses are more common.
For support of private z-addresses, you can consider Guarda, a third-party mobile wallet for Android, or ZecWallet, the open-source desktop wallet offered by the Zcash Foundation, a non-profit formed to serve users of the Zcash protocol and blockchain. The latter supports Windows, Mac OS and Linux.
Step 2: Fund Your Exchange Account
Depending on which exchange you choose, there are several ways of funding your account. For exchanges that don’t offer direct USD purchases of Zcash ZEC, you’ll have to deposit an accepted cryptocurrency. Bitcoin (BTC) and Ethereum (ETH) have become the defacto gold and silver of cryptocurrency trading and are generally accepted for deposit on exchanges.
Once your BTC or ETH is in your trading account, you can trade for other coins or tokens like ZEC.
A few exchanges accept direct purchase of ZEC with USD. In these cases, you may have one of several funding options, including wire transfers from your bank, ACH bank transfers, or credit or debit card purchases. Generally speaking, credit or debit card purchases are a costlier option with exchanges charging fees as high as 5% for using a credit card. In some cases, multiple fees can apply.
Wire transfers may cost up to $25 per transfer and may have fees at your bank as well. ACH transfers are usually the least expensive way to fund your account but can delay your trading by a day or two while the transfer is processing.
Some exchanges only allow purchases of ZEC with another cryptocurrency but allow direct purchases of BTC or ETH. If your chosen exchange doesn’t support direct purchases of ZEC with USD you can often purchase BTC or ETH directly and then use your cryptocurrency balance to purchase ZEC on the exchange.
Step 3: Make Your ZEC Purchase
The mechanics of your ZEC trade depend on how you buy ZEC. For direct purchases with USD, you may be able to simply buy ZEC at a fixed price set by the exchange. In other cases, or if you’re trading one cryptocurrency for another, you may have a wider range of options, much like when buying stocks through a broker.
Many of the same types of trades used in stock trading are supported by most exchanges, including limit orders, market orders and stop orders. Because cryptocurrency is often volatile, many traders avoid using market orders and stop-loss orders.
Step 4: Monitor Your Investment Performance
Many investors like to keep an eye on their investments and a number of crypto apps can provide market insights, industry or coin-specific news and other features. If you want to see your portfolio performance in real-time, consider using a crypto portfolio tracker to monitor all your crypto investments in one place.
Should You Buy Zcash?
The uptrend in price for ZEC began in early 2017, although like most cryptocurrencies, the chart spikes sharply in late 2017 and into early 2018 — after which, prices fell much lower. This doesn’t make ZEC unique. Many actively-traded coins and tokens have a similar chart. Since early 2017, the price of ZEC has seen measured gains but in the past 12 months, the price has fallen over 60%. While many cryptocurrency prices trend in groups, ZEC hasn’t enjoyed the same gains seen in BTC in recent months.
An investment in Zcash is a bet on the currency’s acceptance. News that buoys the price, like JPMorgan Chase using Zcash’s zero-knowledge security layer (ZSL), can help create awareness and may help build acceptance.
- Anonymity: Zcash uses the familiar tech of Bitcoin and brings the option of anonymity. The vast majority of Zcash transactions use t-addresses, making them transparent (like Bitcoin) but offer e z-addresses to leverage the privacy features of ZEC if combined with a wallet that supports anonymity..
- Interchangeable coins: A concern for some traders and investors is that coins can become “tainted” if used for illicit purposes by others. Chances are good that coins used for illegal or questionable transactions are shielded transactions, effectively making all coins equal in value and completely interchangeable.
- Fixed supply: The supply of ZEC is fixed at 21 million coins, just over 7 million of which are currently in circulation. If demand for the coin increases, a fixed supply can help boost prices in the future.
- ASIC resistance: Bitcoin mining has become more centralized over time due to the increased difficulty of mining, which now requires ASIC mining using expensive and power-hungry specialized equipment. This can prevent independent miners from participating and centralizes mining among fewer miners. Zcash is built to be ASIC resistant and brings a greater level of decentralization.
- Few wallets support z-addresses: Zcash is supported by dozens of wallets and can even be used in combination with uber-secure hardware wallets, but most of the wallet options for ZEC do not support privacy-focused z-addresses.
- Less favored by privacy-conscious users: Competing privacy-focused cryptocurrencies, like Monero and Dash, enjoy both a larger market capitalization and wider use than Zcash among privacy-conscious users. Both Monero and Dash have a 2-year head start on Zcash which didn’t join the privacy-coin party until 2016. In time, we may see a shift in use and acceptance for ZEC.
- Slower transaction speeds: With transaction speeds 4 times faster than Bitcoin and with twice the block capacity, Zcash marks an improvement in speed but a transaction can take minutes to settle, which is still slower than Monero and much slower than Dash, the primary privacy-coin competitors to Zcash.
- Relatively low U.S. trading volume: Exit strategy is an important consideration when entering any trade. The majority of trading for ZEC takes place on Chinese-focused exchanges. Lower trading volume on exchanges frequently used by U.S. buyers can make selling larger quantities of ZEC more challenging.
Is Zcash a Good Fit for Your Portfolio?
While still lagging behind more established privacy-focused coins in market cap and acceptance, Zcash is generally well-regarded by the community and the tech behind the project is admired by peers. ZEC can be a wise addition to a diversified cryptocurrency portfolio, while remaining mindful of the relative newness of the project. Time will tell if Zcash can reach or surpass its previous highs.