The privacy-focused Zcash crypto asset will implement its fourth major upgrade, Heartwood, on July 15. The upgrade will enable third-party integrations and improved privacy through a shielded coinbase.
Zcash (ZEC) is the most recent iteration of the Zerocoin protocol, developed in 2013. The new protocol was renamed Zerocash, and then rebranded again to Zcash in 2016. The original whitepaper for Zerocoin describes a “full-fledged ledger-based digital currency with strong privacy guarantees.” Zcash achieves a level of privacy by making it possible to shield the origin and destination of transactions.
ZEC is listed as having a market cap of USD 587.8 Million. It currently trades for ~USD 61.32 per token. Its value has risen by ~10% in the last week.
The Zcash privacy model is based on ZK-SNARKs, or Zero-Knowledge Succinct Non-Interactive Argument of Knowledge. This is an optional feature based on zero-knowledge proofs. ZEC addresses that start with a “t” are transparent, and addresses that start with a “z” include privacy enhancements and are referred to as “shielded addresses.”
Unlike with other public blockchains like Bitcoin (BTC) where transaction details indicate the address details of the sender and recipient of a transaction, with the Zcash blockchain, there is an option for the sender and recipient address details to be shielded so that only the date and time of the transaction is recorded.
ZEC uses a “Founders’ Reward” model for funding development of the protocol. The Reward was initially agreed to be distributed as follows; 5.72% for founders, employees, and advisors, 1.65% to initial investors, 1.44% donated to the ZEC Foundation, and 1.19% to the Electric Coin Company, formerly the Zcash Company.
The Reward is scheduled to end after the next Zcash block reward halving in November 2020. The Zcash Foundation also receives donations from members receiving the reward. In total, 20% of the mining rewards are distributed to founders or developers to promote the ZEC ecosystem.
The Zcash foundation and Electric Company endorse the upcoming Heartwood upgrade and have signed a letter of mutual agreement recognizing it.
The Heartwood upgrade follows three previous upgrades in Zcash’s history. The first hard fork titled “Overwinter” went live on June 26th, 2008. The fork enhances transaction efficiency and scalability for shielded addresses.
The second titled “Sapling” was launched on October 29th, 2018 for similar purposes. The Sapling upgrade reduced the zk-SNARK proving times from 37 seconds to 2.3 seconds and introduced zc (legacy shielded) and zs (Sapling shielded) addresses.
The most recent upgrade, “Blossom”, went live on December 11th, 2019 and included; shortening the target block times from 150 seconds to 75 seconds, a mempool size limit to prevent denial of service attacks, and discontinued backward compatibility with Sprout proofs to decrease the attack surface of the ZEC Codebase.
The upcoming upgrade, Heartwood, includes two key network improvements. The first is titled “Flyclient” and this will enable more efficient proofs for light clients. Light clients help users access and interact with a blockchain in a secure and decentralized way without having to sync the full blockchain.
The Flyclient upgrade specifies modifications to be made to the Zcash block header format to include Merkle Mountain Range (MMR) commitments. It is suggested that this will lead to a number of new benefits including enabling efficient cross-chain communication and pegs. The upgrade will also reduce bandwidth and storage requirements for resource-limited clients like mobile or IoT devices.
The second modification is titled “Shielded Coinbase” and defines modifications to the Zcash consensus rules that enable coinbase funds to be mined to shielded Sapling addresses. It does not disable the use of transparent addresses in coinbase transactions. A coinbase transaction is a unique type of Zcash transaction that can only be created by a miner. This type of transaction has no inputs, one is created with each new block that is mined on the network. This is the transaction that rewards a miner with a block reward for their work.
On July 2nd the Zcash Foundation released its quarter two report detailing its ongoing progress on a number of key development initiatives. Initiatives include; deploy foundation-run infrastructure and development support for light wallets, research and deploy cross-chain integrations for Zcash, fund/develop hardware wallet support for shielded addresses, deliver a simplified threshold scheme for multi-signature spends of shielded funds, and research and develop greater network-level privacy for Zcash. The current yearly budget for the Zcash Foundation is USD 2.68 million.