I’m excited for the launch of Zcash tomorrow, October 28th. It’s a cryptocurrency that is very similar to Bitcoin in terms of how it is acquired and used, except it promises full privacy and fully anonymous transactions. In Bitcoin, all account balances, transactions, and addresses are fully visible on the blockchain, so if someone can tie and address to a particular person, then they can trace everything that they’ve done. With Zcash, they’re using a cryptographic technique called zero knowledge proofs which will allow the network to verify that transactions are valid, without revealing the parties involved or the amounts. This is powerful, as it can promise full anonymity.
There are a few things that are interesting about the Zcash launch:
- The founders reward
- The slow start
- The initial price on exchanges due to the trading of futures contracts
- The pent up demand for this functionality
The combination of the last three here are interesting, because crypto enthusiasts aren’t just excited about some future potential of what a fully built out ecosystem could deliver; they are actually excited about what Zcash can offer them upon launch. There is clearly demonstrated demand for fully anonymous and confidential transactions on the internet. Unfortunately many of these use cases have hurt the perception of the ecosystem due to being associated with illegal activity, but there are also viable and important use cases here including the ability to skirt oppressive economic controls.
So people want to use Zcash, but in the early days the supply is going to be highly restricted because the amount of Zcash available via mining rewards will be slowly ramping up over 30+ days until it actually starts to be distributed at normal pace. Additionally, the price is already sure to be high, since there’s a high volume market for futures contracts on Zcash already trading on the Bitmex exchange, indicating that the price could open in the same order of magnitude as Bitcoin.
All of this is to say that regardless of what one thinks about Zcash as cryptocurrency itself, there’s clear demand, constrained supply, obvious use cases. Yet, unsurprisingly the ecosystem won’t be nearly robust enough upon launch to support easy acquisition and usage of Zcash. This creates enormous developer opportunity in the coming months. The ecosystem needs points of anonymous Zcash acquisition, key storage, anonymous merchant/app integrations, and more. Many of the same things that you’ve seen emerge in the Bitcoin or Ethereum ecosystem, plus new services that apply only to an anonymous, private network, will be needed. So far it seems like the cloud mining operators, and derivatives exchanges are taking advantage of the Zcash excitement based around speculative interest. This is great for bootstrapping, but since demand seems to already be high, ecosystem services seem like the next big opportunity.