This Zcash vs Monero guide is intended as a resource for Zcash and Monero’s privacy credentials, their teams, backstory and suitability as investments.
If you feel we are missing something in particular, please let us know in the comments and we will research this for you.
Background on Zcash and Monero
In the beginning, there was only Bitcoin. It appeared seemingly out of nowhere, anonymously. It became the privacy currency of choice for the Silk Road, a darknet bazaar built by a young libertarian from Austin called Ross Ulbricht, a former boy scout. While studying crystallography at Pennsylvania State University, Ulbricht once crafted a blue crystal in a lab, mounted it on a ring and gave it to his girlfriend, Julia.
He later told friends of his disenchantment with science and growing interest in economics. He read the Austrian economist Ludwig von Mises, according to whom a citizen must have economic freedom in order to be politically and morally free. Ulbricht wanted nothing more than to be free. He is currently serving a double life prison sentence, plus forty years, at United States Penitentiary, Florence High, with no chance of parole.
If you only read about Ulbricht’s May 2015 sentencing in the news, which found him guilty of everything from selling drugs to money laundering to masterminding an ongoing criminal enterprise, you might have the wrong idea about Ulbricht. Arguably, he’s a libertarian who lost his way, not a mob kingpin. Major questions about the criminal investigation surfaced in Alex Winter’s documentary, Deep Web. These questions remain unanswered.
You might also have the wrong idea about Bitcoin. It’s not a Ponzi scheme or cybercriminals’ celebrated coin of choice for drug trafficking and illegal gambling. It’s also not anonymous. In fact, says Matthew Green, a cryptographer and professor at John Hopkins University, “Bitcoin is the least private financial system ever invented.”
In January 2018, researchers from Qatar University in Doha published a paper documenting their successful attempt to track down Bitcoin users. The paper explains a clear and simple method for de-anonymizing sensitive transactions on deep web markets such as The Pirate Bay, Wikileaks and Ulbricht’s own baby, Silk Road. Bitcoin, it turns out, is practically a gift for law enforcement. Should the need arise, law enforcement agencies could track down every single prosecutable felony executed through Bitcoin since the inception of the network.
So despite being the founding father of crypto, a word which literally means ‘hidden’ in Greek, Bitcoin is anything but.
Why do we need privacy?
In September 2013, the European Parliament began hearings to investigate National Security Agency surveillance on EU citizens and companies. At the hearing, Jacob Applebaum, an encryption and security software developer, said:
“I’ve noticed a really interesting discussion point. What people used to call liberty and freedom, we now call privacy. And we say, in the same breath, that privacy is dead. This is something that really concerns me about my generation, especially when we talk about how we’re not surprised by anything. I think that we should consider that when we lose privacy we lose agency – we lose liberty itself – because we no longer feel free to express what we think. There’s this myth of the passive surveillance machine, but actually what is surveillance except control? This notion that the NSA is passive, this is nonsense. What we see is that they actively attack European citizens, American citizens and in fact anyone they can if they perceive an advantage.”
Some politicians divert this debate along the lines of ‘if you have nothing to hide then you have nothing to fear’. However the very knowledge that this surveillance exists causes people to either consciously or subconsciously self-censor, and the development of human thought and expression becomes stifled.
“Arguing that you don’t care about the right to privacy because you have nothing to hide is no different than saying you don’t care about free speech because you have nothing to say.”
– Edward Snowden
The problem with using many cryptocurrencies is that their permanent public ledgers actually afford you less privacy than your credit card. There are all sorts of transactions, for example, your paycheck, a doctor’s visit or a surprise gift, that you might want to keep out of the public eye.
If privacy matters to you, then you want to investigate alternatives.
Enter Zcash and Monero.
What is Zcash?
What you need to know about Zcash is that while payments are still recorded on a blockchain, the sender, recipient and amount of the transaction remain private.
Zcash is the first cryptocurrency that can fully protect the privacy of transactions, using something called zero-knowledge cryptography. A lot of the basic code was taken from Bitcoin’s core codebase, on top of which a group of engineers added a heavy helping of security with something called zk-SNARKS, which stand for ‘Zero-Knowledge Succinct Non-Interactive Argument of Knowledge’.
In February 2017, Ethereum founder Vitalik Buterin wrote a three-part blog series explaining what zk-SNARKS are and how they work. In the introduction to the third instalment, Buterin wrote, “the previous articles on quadratic arithmetic programs and elliptic curve pairings are required reading, and this article will assume knowledge of both concepts.” This is extremely complicated mathematics. Even professional cryptographers who have spent large chunks of their waking hours trying to explain zk-SNARKS to others, including those with whom they have chosen to share a home and family, struggle to find the appropriate language.
But I’ll have a go.
Imagine being able to prove that you know something, for example a PIN number to a gym locker, without revealing the PIN and without any interaction between you and the person you want to prove it to.
Of course, but that’s zero-knowledge proof.
Perhaps Eli Ben-Sasson, Zcash founding scientist and zk-SNARKS co-inventor put it best when he told Fortune magazine, “It’s like a magical restaurant bill where the items are blanked out but the restaurant can’t cheat you, even if you can’t see the individual sums.”
Who created Zcash?
The Zcash team is made up of scientists hailing from MIT, John Hopkins University, Berkeley and Tel Aviv University.
A few years ago the Colorado-based founder, Bryce “Zooko” Wilcox, was running a file-sharing startup and sleeping in his car. Previously, he had studied computer science at Boulder University, and taken a leave of absence to work as a coder at the world’s first e-money startup, DigiCash. He was fascinated by the possibility of making DigiCash decentralized, but couldn’t work out how. Then Bitcoin happened and the path became clear. Now Wilcox is at the vanguard of privacy, collaborating with the biggest bank in America, JP Morgan Chase.
In 2015 Wilcox teamed up with Matthew Green, an award-winning researcher at John Hopkins. The pair flew to California to seek venture capital funding. Despite some rejections, they managed to put together $720,000 seed money from some far-sighted angel investors including Naval Ravikant, CEO and founder of the startup network AngelList, and investment firms such as Shanghai’s Fenbushi Capital and Pantera Capital. The following year, they scooped another $2 million and Zcash was officially launched in October 2016. The Zcash team’s stated mission is to “set a new standard for privacy through the use of groundbreaking cryptography.”
What is Monero?
Founded in 2014, Monero is only the second cryptocurrency to be accepted by the world-famous Room 77 in Kreuzberg, Berlin (after Bitcoin).
The “restaurant at the end of capitalism” prides itself on “warm beer, cold women and fast food made slow” and has been accepting Bitcoin as payment for beer and burgers since 2011. On receiving his first customer payment in Bitcoin, Room 77’s owner, Joerg Platzer, said, “I felt 20 years younger. This was the sort of money I read about when I was young.”
Like Zcash, Monero claims to be a private, decentralized digital currency. Instead of zk-SNARKS, Monero uses technology called ‘ring signatures’, which make it very difficult to pinpoint the origin of a transaction, as well as ‘stealth’ wallet addresses, random one-time addresses which can’t be associated with an individual publicly. The difference is that the transactions are still visible, but no outside observer can decipher the source, amount or destination.
Monero’s mining process is famously egalitarian, making it an alternative choice for websites and applications looking for substitute sources of income. It also became one of the first cryptocurrencies to make mainstream headlines in December 2017 when it was announced that up to 45 musicians, as well as several online stores, would start accepting Monero as payment, and offering discounts for those who chose to do so.
Who created Monero?
As you might expect for a privacy-focused project, only two of Monero’s 7 core developers have chosen to make their identities public; David Latapie and Riccardo Spagni.
As Monero is crowdfunded and open source, there have been over 500 developers who have contributed to the project so far, and these developers are generally referred to by nicknames. For example, in a recent announcement about an update to the ‘Core Team’, Monero posted: “We are delighted to welcome Jeremie “binaryFate” Dubois-Lacoste on board as the newest member. binaryFate holds a Ph.D. in computer science, with academic expertise in combinatorial systems and optimization algorithms.”
The use of monikers is the status quo for Monero. Intriguingly, lead developer Spagni – aka “fluffy pony” – doesn’t know who created Monero. “The Monero white paper was written by a guy using the pseudonym Nicholas van Saberhagen, I don’t know who he is,” Spagni admitted in an interview with biznews.com. “He wrote the white paper and disappeared. And then Monero was launched by someone called “thankful_for_today”, which is also clearly not his real name.”
Despite the general secrecy, Spagni is by far the most public member of the team. The colorful South African, who has a background in informatics, logistics and software development, has made a few headlines for himself. In May 2018 he received criticism for flaunting an $800,000 Richard Mille watch. In July, he was controversially blocked on Twitter by Coinbase Chief Technology Officer Balaji S. Srinivasan, for what was deemed to be bullying behavior towards Naval Ravikant, one of the earliest investors in Zcash. If one were to speculate, you’d expect to see Zcash listed on Coinbase before Monero.
How to buy Zcash
Depending on which exchange you use, you can buy Zcash (ZEC) with another cryptocurrency (the most common pairings are with Bitcoin and Ether) or normal fiat money.
You can also acquire Zcash by investing in your own mining node to earn tokens for taking part in securing the network. You pay the upfront cost of the mining hardware, but once you have earned back your original cost, you are printing money every day that your miner is running, which is a wonderful feeling.
If you were so inclined, you could avoid exchanges altogether and find someone to sell you some Zcash in exchange for plain old paper notes. You can store and send Zcash from an exchange, but this is far from ideal from a security point of view. Instead, the officially supported Zcash wallet is called zcashd and there are a number of third-party software, hardware and local wallets.
How to buy Monero
You can buy Monero through an exchange with normal fiat money, or by converting another cryptocurrency through a service such as Shapeshift, which is easy to use and offers reasonable exchange rates.
Alternatively, like Zcash – and anything else for that matter – you could also just find someone to sell you some. Monero is perhaps the simplest of all cryptocurrencies to mine because it can be done through your computer, without the need for additional mining hardware. The Monero Project refrains from endorsing any particular tools but has listed a resource page on its website for informational purposes.
Zcash and Monero communities
If we look at their respective communities on Github – the world’s leading software development platform – it’s fair to say that these two privacy coins enjoy comparable support from evangelists and developers.
But in terms of a public following at the time of writing, the Monero subreddit has 136k followers, while Zcash is languishing way below, with just 14.2k. Perhaps a telling difference in how the teams are being compensated accounts for this. The Monero development team is funded exclusively through crowd donations, with most developers contributing pro bono. The Zcash team, on the other hand, is compensated with 20% of the Zcash mining reward, up until 2021. Founder Zooko Wilcox, for example, currently receives approximately 2,033 ZEC each month. At current prices, this amounts to a monthly ‘salary’ of $333,333.00 per month, or $4 million per year. On a very simple level, it’s easier to get behind – and want to actively contribute to – the more egalitarian Monero.
Ethereum founder Buterin has come to Wilcox’s defense, pointing out that the only reason he has received criticism in the first place is owing to Zcash’s decision to provide complete financial transparency. “The $4m/year only lasts for 4 years. So that’s $16m for making a $700m ($3.5b counting not yet issued coins) cryptocurrency. I think phrasing it as a salary was a horrible PR move; as far as premines / founder shares go it’s not that high.”
Which has better privacy, Zcash or Monero?
Both Zcash and Monero offer excellent privacy using advanced cryptographic techniques, but they do so in very different ways.
What most people don’t know is that Zcash’s privacy features are not used in the majority of transactions because they require that both sender and receiver are using ‘z’ wallet addresses. In these fledgling days of the new crypto economy, many wallet providers currently only support transparent ‘t’ addresses. For example, the gateways for buying Zcash, cryptocurrency exchanges, only use ‘t’ addresses, and this option is incentivized through lower transaction fees. Critics of Zcash point out that the privacy of all users is reduced because this option exists. Even if a sender always uses ‘z’ addresses, they need to check in advance that their receiver does too.
Monero’s transactions meanwhile are private by default, which arguably is the way things should be. As time goes on and more transactions take place, the layers of obfuscation snowball, increasing its privacy. While Zcash’s zk-SNARKs are theoretically perfect, they are also unproven, which lends the upper hand to Monero’s more traditional cryptographic ‘layers’.
So, which is better?
It’s hard to make a definitive call on which currency offers better privacy. It depends on your personal circumstances, outlook and preferences. But tellingly, it is speculated that Monero has become the coin of choice for illegal activity on the darknet. Objectively, it was also the ransom currency of choice for the Wanna Cry ransomware attack, which targeted computers running Microsoft Windows in 2017. Follow the money, as they say.
Should you invest in Zcash?
Zcash has momentum.
The team is methodically increasing the adoption and demand for this coin across multiple markets. In July 2018, Coinbase announced they were exploring adding Zcash, which would expose your position to 20 million new investors. As mentioned earlier, Monero’s chances of such as mass market listing are slimmer. Lead developer Riccardo Spagni is currently blocked on Twitter by a senior Coinbase decision maker.
Whether you consider Edward Snowden a friend or a foe, there’s no denying he’s clued up on privacy. He tweeted:
“There’s nothing else in the digital currency space like the cryptographic technique underlying zcash. It’s a moonshot: risky, but certain to change everything if it succeeds.”
Should you invest in Monero?
Even if you have no day-to-day use for Monero yourself, the global demand for the value it offers is high.
The powerful network effects of straightforward mining software with browser add-ons and extensions have made it easy for anyone to mine Monero before converting it to Bitcoin and other crypto currencies. If adoption is a metric by which you’d measure an investment, then it sits streets head of privacy rival Zcash, but some way behind big hitters Bitcoin, Ethereum, Litecoin and Dash.
But for some investors, Monero becoming the new darling of cybercrime is too much to swallow. Privacy might be a fundamental desire of human nature, but the majority of humans make decisions based on emotion and are incredibly sensitive to reputation. If privacy is an intrinsic human need, so too is trust. There is a chance that institutional investors will shy away from a currency that indirectly keeps questionable company.
Zcash vs Monero: Conclusion
There will always be demand for a truly private and secure cryptocurrency, a quality unique to these coins. If just one coin were to win that race, it would have a shot at becoming one of the most valuable assets in existence. Then again, given its existing market dominance, if Bitcoin were able to add a new privacy layer to its existing protocol, Zcash and Monero could find themselves in an awkward position in the market. All things considered, the battleground is simply too large for one currency to dominate, making both Zcash and Monero smart additions to your portfolio as the world realizes its demand for private money.
Featured image by Justas Gulaburda