How To Trade Zcash

Introduction

Bitcoin came to market as a universal currency solution to make the FIAT banking system obsolete. However, it turned out that Bitcoin is just one permutation of how blockchain technology can be implemented. Enter Zcash trading in 2021. 

Zcash sought to plug the perceived holes in Bitcoin’s privacy levels. Zcash is not the only cryptocurrency to focus on user anonymity – Monero is its biggest competition. There is a demand for privacy in the cryptocurrency world, but is this just a means of supporting illegal transactions? Is there a significant enough market for Zcash now and in the future? Will they be able to beat off their competition and, if they are a good investment, where and how can you trade Zcash? 

Defining Zcash

Zcash is a digital coin for making anonymous payments. It uses cryptography to make sure peer-to-peer transactions are kept private. Zcash is also a fungible cryptocurrency. “Fungible,” in this context, means the coins themselves do not contain any identifiable information, such as transaction history. This makes the coins harder to trace. Zcash’s biggest rival, Monero, aims to achieve the same results as Zcash but with slightly different methodology and technology. Monero was released before Zcash in 2014, so Zcash had Monero in its sights when it launched two years later. One way it has separated itself from Monero is by allowing optional public transactions which can be tracked. This has not only given its users a choice, but it saved them a lot of headaches with regulators. 

CEO Zooko Wilcox-O’Hearn released Zcash in October 2016 with a team of blockchain engineers. Zcash was a fork of Bitcoin, and it was created using the same codebase as Bitcoin, which is why, like Bitcoin, they also have 21 million units in circulation. Aside from privacy, their goal has always been aligned with that of Bitcoin. Both cryptocurrencies want a fully decentralized network. True to this ambition, the Zcash team does not control the network. They simply work on it from the outside. They create changes for the blockchain and then offer them to the broader Zcash community to be implemented (who may or may not agree with them). Shortly following Zcash’s launch, their price rocketed from under $100 to over $7,000 before settling back down to its starting levels.  

Zcash Explained

Like Bitcoin, Zcash uses “proof-of-work” consensus to validate transactions on the blockchain. This means Zcash requires mining to keep the blockchain running, and it rewards its miners in the same way as Bitcoin. Miners are paid with tokens every time they complete a “block” in the blockchain. The number of tokens they receive halves every four years. Around 20% of the tokens go to the inner circle of Zcash. This includes its team, investors, founders, the Zcash Foundation, and the company itself.

Challenges

Zcash faced one problem: finding a way for transactions to be validated without knowing who is making them. Their technological solution to this is colloquially known as “NIZK” or “zk-SNARKS” (“Zero-Knowledge Succinct Non-Interactive Argument of Knowledge”). By adding a secret key to transactions, the network can authenticate them without knowing personal information about the sender or receiver. As a symbol of their commitment to privacy, Zcash allegedly destroyed the first-ever key they created, along with the computers which had made it, as a sort of opening ceremony.  

Although privacy is synonymous with Zcash, it also allows users the option of sending ZEC (“ZEC” is the name of the Zcash coin) publicly or semi-privately. This is a clever differentiation from Monero, which only allows private transfers and, as mentioned above, it has helped them avoid attracting too much attention from financial regulators. Their semi-private option, which they call “shield,” allows users to remove their personal information from transactions yet retain their public key. Allowing for different privacy settings keeps their potential market wide open instead of appealing to people from the pro-privacy camp. 

Buying Zcash

If privacy coins float your boat, then you may want to consider investing in Zcash. Like Monero and Dash, this altcoin has made its reputation as an avant-garde privacy-oriented coin developed by a steely team of cryptographers. The zk-SNARKs system used to hide transactions is a superior technique to Monero’s ring signature. The optional anonymity of Zcash has pulled some privacy advocates away from bigger coins like Bitcoin and Ethereum, whose transactions can be viewed on the public ledger.  

How Can You Invest in Zcash?

There are basically two main ways to invest in Zcash: buying coins directly through a cryptocurrency exchange or trading Zcash through a regulated broker. If you choose to purchase Zcash coins outright, then keep that guard sky high. The cryptocurrency market is flooded with exchanges, and you should not trust all of them with your money. Once you find a suitable exchange, you can use your fiat currency (dollars, euros, etc.) to buy Zcash. If you have invested in another cryptocurrency that you want to swap out for Zcash, you may be able to exchange altcoins directly.  

At this point, many traders will choose to move their Zcash out of the exchange and onto an offline wallet where it will be safe from online cyberattacks. Storing your coins in a “cold wallet” (offline) is more secure than a “hot wallet” (any storage connected to the internet.) Treat your seed phrase as the key to your kingdom. There is no “lost password” option for accessing cryptocurrency wallets! 

If you decide to keep your Zcash on the exchange, enable two-factor authentication and get creative with your passwords. It may seem like a headache at the time but taking small steps like using strong passwords, privacy-focused browsers, and VPNs will protect your long-term investment. Also, season your online activity with a healthy dose of skepticism to avoid “phishing attacks” (those not-so Nigerian royalty asking for loans or imaginary lottery winnings – any suspicious text, email, or phone call.)  

Trading Zcash

Perhaps it is not so much the long-term vision of Zcash that interests you so much as how it is doing against other coins in the cryptocurrency market? If you are a short-term trader looking to profit from Zcash price movements, you will need an online broker.  

There are many options and strategies available for Zcash trading. You could buy and sell Zcash or other cryptocurrency pairs. Another way is to open a Zcash CFD. That means that instead of simply putting your money into Zcash directly, you could open a CFD (“contract for difference”) with your broker. You will buy it at one price and sell it at another with the hope of pocketing the difference, without actually owning the underlying cryptocurrency. This way, you can speculate on even minor price changes in the market – without the hassle of holding the coins themselves. Another advantage to using a derivative is that you can trade with leverage and essentially borrow money from your broker to place larger bets than your capital would otherwise allow.   

Find a broker who will offer all the above and more. Ideally, you want a platform with a suite of trading tools to armor you for the markets: charting software, a customer support team, market insight, and analysis. Here at TradeOr, we offer cryptocurrency trading with leverage of up to 500:1. Trade Zcash and other cryptocurrency pairs alongside forex, indices, commodities, and stocks. Our stellar customer support team will be with you every step of the way.

Looking Ahead

The cloak of privacy around Zcash transactions could make or break the coin. The zk-SNARK system and impenetrable underlying tech of Zcash are touted by many as promising the future of financial privacy. Privacy goes both ways, though, and coins such as Zcash and Monero have the dark side of enabling money laundering and other illicit activities. Some Zcash investors fear that major exchanges may delist the currency over this. That said, privacy is a valuable feature for users for many reasons (anonymous purchases, protection from data leaks, etc.) The long-term future of this altcoin may be uncertain, but the cryptocurrency market promises short-term volatility, which will draw many investors to trading Zcash and riding the wave.