As Zcash is preparing to become a new standard in the crypto-currency world by creating a totally anonymous system for exchanging funds between two parties one of the fundamental questions that I have heard is “Why do we need a totally anonymous currency at all?” The answer is simple: we already have it.
I want you to stop and think for a second about that $1 or $20 bill in your pocket. That “Federal Reserve Note” is a representation of value in our economy because just about everyone accepts it and it is backed by the government Bank. But what about the physical bill itself? It has a serial number and other security devices that you can use to “prove” that it is real but just because can prove its authentic you really don’t have a way of knowing where that dollar bill has been, nor should you care, because the only thing that matters is that it is yours if you want to spend it and that it is verifiably real.
Now what would happen if the next time you went to spend that dollar bill the cashier scanned the serial number and made you sign your name in a box verifying the transaction for it to be recorded onto a public ledger which everyone can see on the internet? You would say “That’s absurd, I’m not doing that! Whose ridiculous idea was this?” Suddenly that Federal Reserve Note will no longer have the anonymity it once had and there would surely be a public outcry about government overreach and violation of our right to freedom and privacy.
So then why should you have to sacrifice that privacy if you want to buy something on the internet? Right now if you want to buy something from an internet Retailer you use a credit card so that a Retailer can be sure you actually have the funds to fulfill the order. The Retailer then uses the Bank to verify the transaction. That whole process forfeits anonymity for security purposes which is fine but; it also has the negative side effect of letting the Retailer and the Bank into your personal life. The online Retailer then uses this information to sell you more things or even sell your “not personally identifiable” information to others. You become the product whether you like it or not and anyone with the right access can track what you are doing.
This is where Zcash comes in. By creating an truly anonymous Internet currency Zcash promises to give you back your right to tell others exactly what you want them to know, when you want them to know it, and nothing more. Instead of relying on a bank to verify that the currency is real Zcash relies on a widely distributed network of computers to encrypt the transaction so it can’t see who is sending or receiving or even know the amount that was sent. (exactly how the technology works is very complex and I will dig deeper into the details it in a future post) That network process has the same result as spending that dollar in your pocket: it’s yours to spend how you want and it’s verifiably real.
The choice to use your own information how you want is the entire reason why we need an online currency that is similar to using cash in real life. And that is why I’m excited about Zcash.