How is Zcash, the ultimate anonymous digital currency, achieved?

Before talking about Zcash, let me first tell you how Zcash came about.

The world's largest black market trading website in 2011: The Silk Road website was established on January 27, 2011. It is a customer-oriented e-store that displays blocks of cocaine, just like online stores display books. Moreover, the Silk Road uses Bitcoin, which has the anonymity of bitcoin, for transactions. The website also repeatedly assures users that their illegal transactions are under multiple protections. The Silk Road website has become the largest black market in the underground network world, with sales of up to 1.2 billion US dollars and nearly one million customers. In addition to illegal drugs, the website also undertakes a series of illegal criminal transactions such as fake passports and fake driver's licenses, as well as illegal services such as hiring killers, counterfeiting and computer hacking, and has been blacklisted by many countries in the world. It was not until the FBI lurked on the Silk Road website for two years that they caught the leader of the website. As a result, the Silk Road was closed.

Just after the Silk Road incident, in order to make Bitcoin more anonymous, Zooko Wilcox launched the Zerocoin project and worked with the original developer team of the Zcash protocol (i.e. "Zerocash") and various groups at Johns Hopkins University, MIT, Israel Institute of Technology and Tel Aviv University to gradually improve the efficiency and anonymity of the original protocol (i.e. "Zerocoin").

Edward Snowden, the protagonist of the "Prism Gate" incident, commented on the project as follows: It can solve the problem of Bitcoin's insufficient anonymity.

The principle of the Zerocoin project is to add a side chain to the main chain of the Bitcoin transaction blockchain. This side chain enables the "payer" to transfer the digital currency of the "payee" to the "payee" during the transaction. When the "payer" takes the digital currency from the wallet, the digital currency will be split into several parts, and these split digital currencies will be re-issued on the entire network. These split digital currencies will be combined together before reaching the "payer's" address. In this way, the purpose of anonymous transactions is achieved.

As zerocash technology matures, people believe that this technology can be used to develop a new digital currency to replace Bitcoin.

So on January 20, 2016, the official website of Zcash announced: "Zerocash protocol" will be developed into a new digital currency, this new digital currency is called "Zcash". It is similar to the digital currency Bitcoin in that the total amount of Zcash is also set at 21 million.

Zcash uses the POW distribution method. In the first four years, 20% of the miners' mining income will be automatically distributed to the Zcash team and its investors, which is 10% of the total. The characteristic of the Zcash project is that its transactions will automatically hide the sender, recipient and value of the blockchain transaction. Only those who have the correct view key can access these contents. Of course, users can choose who can have this permission. Compared with Bitcoin, Zcash pays more attention to privacy and the controllability of transaction transparency.

Huobi Blockchain Research Center learned that unlike Bitcoin, Zcash digital currency uses an "interactive zero-knowledge proof mechanism" to automatically hide blockchain transactions.

So what is the "interactive zero-knowledge proof mechanism"? The "interactive zero-knowledge proof mechanism" can be explained in two ways: one is "interactive" and the other is "zero-knowledge proof mechanism". The "zero-knowledge proof mechanism" means that you can prove your identity to the other party without showing the secret key that can prove your identity to the other party. For example, how to prove that the lost wallet belongs to the owner without showing the wallet to the owner.

When A loses his wallet and B picks it up, A wants to get it back from B. On the premise that B does not let A see the wallet, A needs to "prove" whether the wallet is A's. This "proof" process is similar to the "zero-knowledge proof mechanism". The following is a simulated "zero-knowledge proof mechanism". B will ask A at least 16 questions.

Question 1: B will ask how much money A has in his wallet?

A’s answer is yes, money.

Question 2: B asked again what else was in the wallet?

A's answer is that he has cards, money, an ID card, and a business card.

Question 3: B asked again what cards there were?

A's answer is gym card, bank card and membership card.

Question 4:～～～

…

A series of questions, asking different questions over and over again for more than 16 times, if the wallet really belongs to A, then A will answer all the questions 16 times, which basically proves that A is the owner of the wallet. Because the probability of A guessing correctly each time is only 1/2, so if A is fake, then the probability of A guessing correctly is 1/65536, which is 1/216. Theoretically, this is extremely unlikely to happen.

During the whole process of exchanging wallets, A did not show B anything related to the wallet, and A proved that the wallet was his. This process is called "zero-knowledge proof mechanism".

Therefore, it can be seen that to complete zero-knowledge proof, multiple communications and interactions are generally required. This process is very easy to be discovered by others, so a more popular method can be used to conceal it. Let's talk about the "Hidden World" underworld method.

In the TV series “The Mansion Gate”, there is a story about buying ginseng. The buyer and seller hold hands in public, which is actually bargaining over the price of ginseng. The hands of both parties are placed in long sleeves that can block everyone’s sight, and they communicate through underworld code. So other people can see the scene of the negotiation between the two parties, but they don’t know the specific transaction amount. Zcash’s anonymous transaction is a similar process.

However, this seemingly highly secretive digital currency is still immature. Huobi Blockchain Research Center found that just five days after Zcash was released, on November 3, 2016, the 1.0.1 version was updated with 7 vulnerabilities.

Then on November 7, 2016, Zcash released a new version.

In summary, although Zcash still has many vulnerabilities that are being addressed, people have special expectations for Zcash. After all, Zcash is currently the most anonymous of all digital currencies.