The next version of the internet, known as Web 3.0, aims to provide individuals with greater sovereignty over their digital lives. The advent of Bitcoin gave birth to an era of internet-native crypto economies that now give people the economic and social freedom to own their money (Bitcoin), applications (Ethereum), interactions (Decentraland), and, importantly, data (Zcash).
Data privacy is coming back into focus as a key trend within crypto Web 3.0. On November 14th, Bitcoin’s Taproot upgrade went into effect, enhancing several key features, one of the most notable being greater transaction privacy. While the upgrade is viewed as a positive for Bitcoin, the spotlight on privacy may also draw attention to other digital currencies such as Zcash (ZEC).
Zcash is a decentralized, peer-to-peer (P2P) digital currency and payment network similar to Bitcoin, but offering more advanced privacy and security features. Zcash was the first widespread application of privacy technology known as zero-knowledge cryptography. Zcash technology allows someone to prove something is true — without telling anyone what that “secret” is — by using advanced mathematical proofs. This allows transactions to be validated without the data being revealed. As a result, Zcash gives users the option, but not requirement, of having strong transaction and data privacy when using the network (read our Introduction to Zcash for a deeper dive). As applications continue to grow, Zcash aims to be a critical solution for protecting economic and social liberties. Two examples that exist today are:
- Payments: Zcash is already accepted as a payment option to buy goods and services at 500,000 points of retail distribution around the world, giving users privacy over their shopping data, which big tech firms could otherwise sell or use for intrusive targeted advertising.
- Social Media: Zcash is already powering the decentralized social blogging network ZEC Pages. Using the Zcash network, the application offers users a platform for free speech, where data is immutable, and privacy protects human rights.
The Zcash digital currency, ZEC, has seen its price increase over the past several days as the importance of privacy comes back into focus and as news has been spreading about planned enhancements to the network.
The Zcash network is a fully decentralized, open-source, and permissionless protocol that anyone can contribute to, like Bitcoin. One group that’s focused on improving the Zcash protocol is the Electric Coin Company (ECC). The ECC released a product roadmap on November 19th, which outlines three key product development areas that are designed to materially improve the utility, usage, and adoption of Zcash:
- Proof-of-Stake Consensus: The transition from a Proof-of-Work (PoW) protocol to a Proof-of-Stake (PoS) protocol would be the most notable modification to the Zcash network. Completing the change would move Zcash from an energy intensive PoW consensus, like Bitcoin and Ethereum, today to a more efficient PoS process, like Solana or Ethereum 2.0, after their planned upgrade.
- Cross-Chain Interoperability: Zcash is working towards interoperability with other networks, like Ethereum or Solana, by integrating with Cosmos. ZEC transportability across blockchains could unlock a major crypto innovation by allowing users to interact with Decentralized Applications (dApp) while maintaining the privacy of the Zcash network.
- Official ECC Digital Wallet: Improving the Zcash UX/UI and opening up additional functionality could help boost user adoption. Once Zcash is more tightly integrated with other networks, a more feature-rich wallet could serve as a hub for accessing and using ZEC within dApps or for providing an interface for network governance.
While Zcash’s transition will likely take multiple years to be fully implemented, the clear roadmap could benefit network adoption today. For example, Ethereum has been under a multi-year transition to PoS as well. While their full scalability roadmap has not yet been implemented, developers have been willing to build on the network while waiting on the infrastructure to scale to meet their application needs. As Zcash matures and becomes more integrated with other areas of Web 3.0, the network’s privacy features introduce innovative possibilities such as:
- Ecommerce: Users could perform a range of private ecommerce transactions by purchasing digital goods represented as NFTs using shielded ZEC, giving the purchaser privacy from onlookers or the marketplace platform where the item is listed.
- Financial Services: Consumers are already bypassing local banks and underwriters today by going directly to Decentralized Finance (DeFi) protocols to get loans from lenders across the world. Implementing Zcash technology in this process could make lenders’ rates private to protect their pricing from competitors, while consumers would just know they chose the lowest rate. Lenders would not need to know the collateral being loaned against, just that the stated value of the collateral is verified and meets underwriting requirements.
- Digital Identity: Consumers can prove their identity, reputation, or creditworthiness, without having to reveal any personal information to the verifier. Use of zero knowledge technology would protect against corporate data hacks since consumers would maintain ownership over their data instead of it being stored on a centralized database.
The need for data privacy is not limited to crypto, it is a universally important requirement that extends across democratic societies. For example, a survey conducted by the European Central Bank (ECB) found that payment data privacy was the most important feature for EU residents when using the proposed digital euro.
Crypto networks like Zcash are already delivering on these privacy requirements today. The ECC and Zcash community are continually developing the network, aiming to deliver further application utility for ZEC, and allowing the privacy technology to play an even more important role in the next generation of the internet (Web 3.0).