What Is Zcoin?
Zcoin (XZC) is a decentralized cryptocurrency that uses zero-knowledge cryptographic proofs to provide anonymous transactions. It is ASIC-resistant, implementing a CPU-friendly MTP mining algorithm once ASIC rigs were developed to crack its original Lyra2z algorithm. The Zerocoin protocol was originally based off of a research paper, which proposed anonymity-enhancing transactions for Bitcoin. It was later adapted by Vertcoin (VTC) Founder Poramin Insom to create Zcoin.
Privacy is important among many in the crypto community, and anonymity features have been implemented in enough coins to create an entire category of “Privacy Coins.” Zcoin, Zcash (ZEC), Monero (XRP), and Pivx (PIV) are a few examples. Not all of them use the same Zerocoin protocol, however.
These coins use advanced cryptography, pass-thrus, and pseudonyms to create a mathematical barrier that’s difficult for modern computers (except quantum computers) to crack. But just because they support anonymous transactions doesn’t mean they’re supporting illegal activity. Fiat cash like the US Dollar is just as difficult to trace, even with serial numbers attached. And the privacy in these coins is typically turned off as they pass through regulated cryptocurrency exchanges like Coinbase and Binance.
Privacy is important online, but it’s only as good as the math behind it. The RSA encryption used by privacy coins like Zcoin are at risk from quantum computing. This is why the Zcoin team (and Zerocoin and privacy enthusiasts at large) are constantly looking for new ways to increase anonymity. It’s not just blockchain security that’s at risk here – all current encryption is about to change.
Some, like Qtum (QTUM) and HyperCash (HC) claim quantum-computing resistance, but Zcoin’s dependency on RSA encryption leaves it vulnerable to RSA-2048 decryption. So far, we haven’t seen proof of this happening yet, and the team is taking steps to change the encryption.
Let’s start our exploration of the Zcoin platform with an inspection of the market performance of the XZC cryptocurrency.
XZC Cryptocurrency Summary
The circulating supply of Zcoin is 6,736,013 out of a total supply of 21,400,000 XZC as of February 6, 2019. The peak price so far was $141.19 on December 25, 2017.
ZCoin was released September 2016, at which time the genesis block was created. Fourteen percent of XZC mined through September 2020 goes to the Founder’s Reward. Of that cut, approximately 43 percent each is distributed to seed investors and the Zcoin team, while the remaining 14 percent goes to Poramin Insom.
XZC is spent and destroyed using an RSA cryptographic key to create Zerocoins, which are newly minted coins. This is done at a transaction cost of 0.01 XZC. These Zerocoins are what is actually transacted, obscuring which Zcoin is attached to which transaction. To keep this obscuration secure, it’s not recommended to spend the exact amount of Zerocoins required, and you should wait at least an hour before spending them.
Zcoin is mined using a Proof-of-Work MTP mining algorithm. This CPU-friendly algorithm is ASIC resistant, meaning it can be mined using a home computer or mining pool. Zcoin’s block processing time is approximately 5 minutes, with 25 coins per block awarded. This reward is halved during set times until the full supply is minted.
XZC is accepted on a variety of cryptocurrency exchanges, including CHAOEX, Binance, Bittrex, and Huobi Global. Over $400,000 worth of XZC is traded on a daily basis, and typical trading pairs include BTC, XRP, ETH, and fiat currencies like USD and EUR.
Zcoin can be stored in the official Zcoin wallets for Windows, macOS, Linux, iOS, and Android. It can also be stored in Coinomi’s multi-currency wallet, or hardware wallets like Ledger and Trezor.
Zcoin Stuff You Should (and Shouldn’t) Know
At its core, Zcoin has much in common with vanilla cryptocurrencies like Bitcoin (BTC) and Litecoin (LTC). It’s run on a decentralized network of individual nodes, called Znodes. Each Znode runs a full copy of the Zcoin blockchain and processes new transactions for a 30 percent share of mined XZC.
Running a Znode requires a stake of 1000 XZC, incentivizing Znode operators to keep the network running with a forced stake in the network itself.
The foundation also strictly opposes ASIC mining, as these high-powered machines can centralize the network, causing it to be victimized by a 51 percent attack. Ironically Vertcoin, the other cryptocurrency developed by Insom, was subjected to a 51 percent attack in the fourth quarter of 2018.
The MTP algorithm implemented by Zcoin is memory-intensive, leading GPU-heavy ASIC rigs unable to complete them any faster than a home computer. Although adding CPU cores or increasing GPU memory capacity can overcome these hurdles over time, it’s prohibitively expensive, and the team plans to stay ahead of any efforts.
Despite the possible risks in the blockchain architecture, Zcoin is heavily focused on RSA cryptography keeping its user’s transactions secure.
SHA and AES are symmetric encryption, meaning a single key (like your password) is used to decipher the encryption. Meanwhile, RSA is asymmetric, meaning it’s encrypted with a public key but can only be decrypted using the private key.
RSA 2048 uses a cryptographic key that’s 617 digits, making it 2048 bits long, and nobody ever recovered the original prime key. While quantum computing could theoretically crack it, until it happens, Zcoin (and all cryptocurrencies) are secure.
Zcoin is one of many privacy coins based on the Zerocoin protocol. It uses a combination of security methods to anonymize transactions, creating clean digital ledgers for each individual coin spent. The success of this privacy coin rest on these key ingredients.
- XZC is mined using a MTP Proof-of-Work mining algorithm. This memory-intensive algorithm is CPU friendly and resists ASIC mining.
- Zcoin uses the RSA 2048 prime key to mint Zerocoins using XZC. If this key is ever deciphered, it could be used to mint Zerocoins at will.
- XZC is a vanilla cryptocurrency like BTC and LTC. It is meant to be used purely as a digital currency, with no investment, commodity, or security value offered.
With these pieces in place, Zcoin is likely to continue being used so long as a need for private transactions is there. By moving assets between Zerocoin protocols, you can effectively cover your tracks, but with big data, you never know if there’s always another way for your transactions to be discovered.
This article has been edited to reflect feedback from the Zcoin team.
The author is invested in digital assets, including Bitcoin, Litecoin, and Zcash, which are mentioned in this article.