Zcash (ZEC), one of the longest running privacy coins in the cryptocurrency market, is getting even more private.
On Tuesday, at block level 1,687,104 (approximately 17:56 UTC), the NU5 upgrade was activated with the Halo Arc product suite on Mainnet, the live version of the network.
Zcash is designed to allow users to decide whether or not to disclose the details of their transactions. In Bitcoin and most other cryptocurrencies, transactions (including amounts and sending and receiving addresses) are usually visible to all on the public ledger or blockchain.
Private transactions in Zcash use zero-knowledge proofs (ZKPs): a type of mathematical calculation that signals to the network that something is definitely true - like the validity of a transaction - without disclosing additional information about that transaction, like the addresses or transaction amounts.
Tuesday's upgrade not only improves the platform's future scalability, but also, more importantly, the fundamental way it protects user privacy.
Digital Currency Group, the parent company of CoinDesk, holds ZEC. With a market cap of $1.16 billion as of Tuesday, ZE is the 57th largest cryptocurrency, according to Nomics, a digital asset data provider.
What's included in Halo 2?
Halo Arc, invented and developed by Electric Coin Company (ECC) with support from the Ethereum Foundation, includes updates to Zcashd (Zcash's consensus node software), an ECC wallet prototype, and the ECC wallet software development kits (SDKs). Perhaps the most notable change to the wallet software is the change in privacy settings. While users previously had to opt-in to have their transactions shielded, the upgrade now allows privacy-friendly transactions shielded by default.
The Wallet SDK also includes automatic migration so funds are automatically moved to the latest shielded pools. A shielded pool is a collection of all shielded transactions stored on the network.
Further simplification is achieved through the introduction of Uniform Addresses, a feature that creates a single Zcash address compatible with all Zcash pools of value, including both Shielded and Transparent pools, so users no longer have to juggle multiple address types.
No more "trusted setups".
When Zcash launched in 2016, the team performed a "ceremony" that relied on a trusted setup. This involved creating a secret number, from which a derived number was created in multiple parts by multiple actors. Once the protocol was established, the owners of these parts - known as "cryptographic toxic waste" - were trusted to destroy their parts without revealing their contents. This kind of ceremony would then have to be repeated for every "hard fork," or major system-wide update.
Tuesday's update eliminated the need for trusted setups in future hard forks. This means that these trusted parties are no longer a potential attack vector or vulnerability in the security of the protocol. It is also now easier to implement future hard forks by eliminating the time-consuming and costly procedures required to set up and secure the original ceremonies.
Improved scalability
Halo 2 also introduces PLONK, a new type of z-SNARK (zero-knowledge succinct non-interactive argument of knowledge) to verify transactions more efficiently. Essentially, PLONK is an instance of a proof that can verify itself, "so that with arbitrary computational effort and arbitrary data, a short proof can be generated that can be quickly verified," according to an ECC blog post.
Halo 2 is an open-source project that encourages community participation and contributions. However, Zooko Wilcox, the creator of Zcash and founder and CEO of ECC, pointed out, "While the Halo zero-knowledge proof system is available to the world under a permissive (MIT) open-source license that allows anyone to do anything with it, that's not the case with the new Zcash Shielded Money protocol."
Zk proofs have long been part of the development plan for Ethereum, the second-largest blockchain, and are expected to play a role in future scaling and privacy solutions for the knowledge-free Ethereum Virtual Machine (EVM). Distributed storage protocol Filecoin has also used Halo as part of its scaling solution.