In an exclusive interview with Binary District, ahead of the Moscow blockchain meetup on “Zero knowledge proof protocols” on February 6, Zcash founder and CEO Zooko Wilcox expressed his optimism about the integration of Zcash’s unique zk-SNARKs implementation into Ethereum and the privacy improvements that it could bring to the network.
Most major cryptocurrencies on the market have relatively poor privacy systems as anyone on their networks is able to view transactions and addresses. With the help of widely accessible blockchain explorers, it is relatively easy to trace transactions made on public blockchains and link certain addresses or transactions to identities. In fact, several blockchain startups, like Chainalysis and BlockSeer, have made tens of millions of dollars untangling transactions for government agencies. These startups can easily link transactions to Know Your Customer (KYC)-enabled cryptocurrency exchanges or track addresses connected to certain transactions.
“The Bitcoin layer has very bad privacy properties and the measures that experts recommend in order to mitigate the risks are confusing and inconvenient for normal users.”
The encryption in Zcash prevents corporations and criminals from unlawfully obtaining the personal data of cryptocurrency users. Essentially, private cryptocurrencies disable transaction untangling capabilities and provide absolute financial privacy, freedom and independence to users by hiding inputs, outputs, amount transacted and recipients. Wilcox maintains that bitcoin, despite being the most valuable cryptocurrency with a market cap of $180 billion, has poor privacy measures and properties. He emphasized the necessity of being able to settle private transactions and maximize privacy for users but also stressed that this process should be simple. Ultimately, if a cryptocurrency is overly complex, the average user won’t be able to use it regardless of its superior privacy properties.
“The Bitcoin layer has very bad privacy properties and the measures that experts recommend in order to mitigate the risks are confusing and inconvenient for normal users. A good safe product for normal users needs to not only be as easy as unsafe products, it needs to be even easier than unsafe products. Ease of use is king. Now, this is an aspirational goal on our part — we haven't made that safe-and-easy product yet, but we're working toward it,” said Wilcox.
Security Protected by Math
The Zcash network uses a system called “shielded addresses”, which allows transactions to be settled in a completely private manner. Unlike bitcoin and Ethereum, no one on the blockchain network can view the transacted amount, sender or recipient — even with the use of public blockchain explorers.
“The advantage of using Zcash today is that if you use the shielded addresses, you get stronger security — security protected by math — than any currently-available alternative. Zcash shielded addresses are safer than any of the inconvenient workarounds linked above. We are working toward further improving the security and usability of Zcash,” Wilcox added in reference to Zcash’s 2018 development roadmap.
“The advantage of using Zcash today is that if you use the shielded addresses, you get stronger security — security protected by math — than any currently-available alternative.”
The Zcash development team is expected to roll out a network upgrade known as Sapling by September of this year. This will feature significant improvements in both time and memory of shielded transactions. In line with Wilcox’s stance on the importance of ease of use, this update aims to improve the user experience of Zcash by making it easier for wallets to integrate Zcash support.
Besides Dash, Zcash is the only privacy-focused cryptocurrency that is integrated into widely utilized cryptocurrency wallets like Coinomi, Ledger and Jaxx. None of these wallets have integrated support for Monero because, according to the Jaxx team, it is difficult to integrate despite its solid technology and superior privacy measures. In February 2017, the Jaxx development team explained that it had failed to integrate Monero — “we believe to have determined the critical issues that are leading to problems with Monero growth and that these problems are hindering the adoption and success of the Monero ecosystem.”
At the time, Jaxx CEO Anthony Di Iorio communicated that, although he believes the hurdles will likely be resolved by the Monero team in the future, as of now, it is difficult to integrate Monero.
Zcash on Ethereum
Since January 2017, developers from both Zcash and Ethereum have been working toward the integration of Zcash’s zk-SNARKs implementation into the Ethereum network in the hopes of processing private and anonymous transactions using Ether. The Ethereum community has acknowledged the project, called Zcash on Ethereum (ZoE), as one of the main solutions to improve privacy measures on the Ethereum network and ensure that users can transact without their sensitive financial data being released to the public.
While Ethereum transactions are not private yet, the Ethereum development team have already processed Zcash transactions on Ethereum’s testnet. As shown in the photograph below of a transaction shared by Ethereum team lead and Solidity creator, Christian Reitwiessner, Zcash transactions on Ethereum eliminates any information pertaining to the recipient, sender, or the amount of Ether contained within the transaction.
Wilcox noted that, in the future, a Zcash-like token could be deployed on the Ethereum network to process private transactions; “I’m excited to see what Ethereum devs will do with it” he professed.
“The obvious thing to do is make a Zcash-like cash token on top of Ethereum. We call such a thing a "ZoE”, which is short for "Zcash-on-Ethereum". We contributed some code for a ZoE. I'm kind of surprised that I haven't seen any such projects being announced yet. But beyond private cash, there are many other potential applications of zk-SNARKs in Ethereum, such as identity and credentials, voting and maybe even scalability improvements. I look forward to learning from and collaborating with Ethereum developers on such applications.”
Improvements in privacy could have a major impact on scalability because private transactions do not include the data of the sender and the recipient. The elimination of this information would reduce the overall transaction size and, in turn, fees and congestion of transactions on the Ethereum network.
Wilcox also addressed concerns from investors and users about potential government crackdowns on anonymous cryptocurrencies. He reaffirmed that private cryptocurrencies could be beneficial for governments as well as regular users especially in a region like South Korea which is frequently the target of cyber attacks initiated by North Korean hacking groups.
This month, Recorded Future, a cybersecurity firm based in the US revealed that a North Korean hacking group called Lazarus is responsible for many of the security breaches experienced by South Korean cryptocurrency exchanges. Researchers at the company explained that, with tools like spear phishing, North Korean hackers were also able to target individual cryptocurrency users by deploying malware into their devices. Hackers used a piece of software known as Ghostscript exploit (CVE-2017-8291) to trigger malware on the devices of cryptocurrency users through HWP documents — the South Korean version of Microsoft Word documents.
Wilcox asserted that the use of private cryptocurrencies could protect South Korean cryptocurrency users from thieves and direct phishing attacks.
“For example, the national authorities of South Korea are primarily concerned with two things: consumer financial protection and national defense. As far as consumer financial protection, South Korea has banned ICOs but continues to allow cryptocurrencies like Bitcoin, Ethereum and Zcash. As far as national defense goes, they believe that certain thieves who have been hacking into South Korean companies to steal Bitcoin are working for the North Korean regime. The encryption built into Zcash can actually help protect South Korean citizens and businesses from such thieves because it protects their wealth and their transactions from being exposed through the blockchain,” he contended.
The Zcash team has released their technology as open source so that it can be applied to other public blockchains such as Ethereum. Therefore, Zcash’s implementation of zk-SNARKs can be integrated into cryptocurrencies that process several hundred thousand transactions on a daily basis to improve privacy and scalability.
The birth of Zcash was a two-day clandestine affair carried out under the cloak of digital secrecy. And for good reason. The trusted setup ceremony required its six participants to destroy their part of the private cryptographic key. Essentially, the viability and security of the entire network relied on the fact that this occurred uncompromised, and this was ensured with the use of propane torches and angle grinders. Naturally.
With probably less fanfare and power tools, Binary District will be hosting a special meetup in Moscow with Zooko Wilcox on February 6th. Wilcox will be discussing how his project facilitates private and secure transactions and the wider implications of this for the cryptocurrency space. To join us at the event, please sign up here.
Illustration by Ilya Martynov
To contact the editor responsible for this story:
Margarita Khartanovich at [email protected]