Anonymous blockchain project Zcash from the perspective of technology, economics and psychology

Cryptoeconomics is fascinating because it is a combination of technology, economics, and psychology. Satoshi Nakamoto got all three of these just right when he created Bitcoin. Therefore, whenever a new cryptocurrency emerges, we must evaluate it thoroughly from all three perspectives.

Zcash is expected to release its genesis block today. With the release of Zcash imminent, blockchain privacy projects are gaining more and more attention. This article analyzes this project from three perspectives: technology, economics, and psychology. It is good to launch a new blockchain privacy project, but we cannot only study whether the project is feasible from a theoretical perspective. On the contrary, testing the theory in practice is an effective way to ensure the long-term development of the project.

technology

From a technical perspective, Bitcoin currently lacks privacy protection. Although it is popular, it is an unqualified medium of exchange for users who value financial privacy. Because Bitcoin transactions are recorded on a transparent ledger, every address, timestamp, and transaction amount are visible on the network. This transparent ledger also helped the FBI arrest the founder of Silk Road, while also exposing some corrupt US Drug Enforcement Administration (DEA) agents involved in the Silk Road case.

Many projects have made technical improvements to improve Bitcoin's privacy. Some of them, such as Confidential Transactions and Mimblewimble, are still theoretical and require major Bitcoin protocol improvements to be deployed. However, projects such as Monero and Zcash are viable in the short term and will create new blockchains and tokens.

economics

Zcash’s goal of strengthening Bitcoin’s anonymity is to leverage Bitcoin’s network effects and brand power. Currency is the ultimate network effect product, and in an ideal world, Zcash’s approach makes perfect economic sense.

Judging from the development process of Bitcoin, it will take several years to add privacy features. From an economic point of view, it is better to create a new token than to add privacy features directly to Bitcoin, because it is more profitable. Therefore, we have seen more and more new systems appear recently, such as Monero and Zcash.

psychology

There is relatively little research on blockchain in psychology, but this is an angle that is worth exploring. Whether the economic incentive mechanism of market participants can be properly adjusted is the key to the success of blockchain projects, because such methods can enhance brand recognition and trust.

Zcash is an interesting project from a psychological perspective because it is funded through traditional fundraising methods (VCs and investors) and its blockchain rewards investors and other market participants differently ( 10% of tokens are allocated to early investors and employees as a return on their initial investment). Accepting investment from well-known investors is good for Zcash's brand, but it also means that its reward structure cannot be similar to projects such as Monero, which can be said to be a grassroots movement where everyone has equal rights to participate at the beginning.

Wait and see

After Zcash is officially released, many people will definitely ask "Have you bought Zcash?" or "Are you mining Zcash?" However, the more important question should be, can the Zcash project bring some inspiration to improve blockchain privacy? Of course!