Everything You Need to Know About Zerocoin Protocol
June 29 2022 - 7:18AM
Finscreener.org
The Zerocoin protocol was created
with privacy and anonymity in mind—both of utmost importance for
blockchain technology and cryptocurrency enthusiast. It was
proposed in 2013 by professor Matthew D. Green from Johns Hopkins
University and his graduate students Ian Miers and Christina
Garman. It was originally designed to improve anonymity for Bitcoin
but it never ended up being implemented in the Bitcoin
protocol.
The protocol uses a
zero-knowledge proof method, which was recognized as a great
opportunity for creating a cryptocurrency that will rely on the
increased anonymity and privacy provided by it. The Zerocoin
protocol-based decentralized cryptocurrency Zcoin (XZC) was created in 2015 as a part of an
initiative to build an independent cryptocurrency.
Zcoin Cryptocurrency (XZC)
XZC is the first cryptocurrency
to implement the Zerocoin protocol. However, aside from it,
nowadays there are several cryptocurrencies that use zero-knowledge
proof to ensure anonymity, including Pivx, ZCash, SmartCash,
Monero, Zoin, and others.
Zcoin makes use of the Zerocoin
protocol to supply anonymous transactions. The protocol initially
planned to be an expansion of Bitcoin, permits you to send out
coins with no transaction history. Bitcoin records the history of
each transaction on a public ledger for anybody to see, whereas
with Zerocoin the transaction history is deleted
immediately.
The decentralized cryptocurrency
XZC was officially launched on September 28, 2016, two years after
a master’s student in Computer Security, Poramin Insom wrote a
paper about implementing the Zerocoint protocol in a
cryptocurrency.
When you want to send Zcoins, the
transactions are recorded in a
public ledger, a process identical to that of Bitcoin
transactions. This protocol improves anonymity and privacy
protection by destroying a coin and then minting new, clean ones,
and erasing the transaction history. More specifically, with the
Zerocoin protocol, your Zcoins are destroyed to mint a clean
Zerocoin.
You are then able to make use of
the Zerocoins in a transaction, which converts the Zerocoins back
into Zcoins. With many people minting Zerocoins, it will not be
obvious where the spent Zerocoins originated from. And this way
your anonymity is guaranteed.
Thanks to the Dandelion protocol
Zcoin is able to hide the sender’s source IP address, without using
Tor (The Onion Router) or a VPN (Virtual Private Network). XZC was
the first cryptocurrency to implement this protocol. Zerocoin was
later on replaced with the Sigma protocol, which prevents
counterfeit privacy coins from inflating the coin supply. To allow
this, it removed the feature called “trusted setup” from the
Zerocoin protocol, which was considered to be one of its biggest
flaws.
Mining XZC
In its beginning, Zcoin used
proof of work for mining. This was eventually abandoned and
replaced with a
Merkle tree proof-of-work algorithm. This mining algorithm
is more memory-hard, which is why it discourages the use of
Application Specific Integrated Circuit (ASIC) in
mining coins, which can lead to centralized mining farms. As a
result, users can use their CPUs (central processing units) and
graphics cards to mine. Powerful Nvidia (NASDAQ: NVDA)
and AMD (NASDAQ: AMD)
graphics cards are used for crypto mining so often that Nvidia
actually released a GPU specifically designed for crypto
mining.
Zerocash Protocol
Founded in 2013, the Zerocash
protocol provides additional anonymity, while protecting the
history of the transaction. It reduces transaction size
considerably but is significantly more expensive in terms of
computational requirements. Namely, it requires up to 3.2GB of
memory to be able to generate. More recent developments in the
protocol have reduced it further, to 40 MB.
To prove the integrity of the
computations, Zerocash Zero-Knowledge Succinct Non-Interactive
Argument of Knowledge (also known as zk-SNARKs), a special type of
zero-knowledge method. These types of proofs are less than 300
bytes long and can be verified in just a few milliseconds. An
additional advantage they bring is hiding the amount traded.
However, unlike Zerocoin, Zerocash requires an initial setup by a
trusted entity.
Zero-Knowledge Proofs
To maintain their privacy
Zerocoin transaction verifications rely on zero-knowledge proof.
So, everyone interested in them should understand how this method
works. Although the math behind it is complicated, in simple terms,
a zero-knowledge proof is a method of verification in which one
party can prove to another that a statement is true, without
revealing additional details.
Final Words
The Zerocoin protocol was born
out of the desire to make it harder or eliminate the possibility of
tracing transactions. Although it did have some flaws and is being
replaced by alternatives that have found ways to address its
issues, such as Sigma, the Zerocoin protocol has made a huge
difference in the crypto world.
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