Born to Die? Why ZCash May Not Live Up To Expectations

ZCash, a new Zooko Wilcox project, has an impressive list of investors and advisers, but will the new cryptocurrency pass the reality check of decentralisation and anonymity?

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Born to Die? Why ZCash May Not Live Up To Expectations

ZCash, a new Zooko Wilcox project, has impressive list of investors and advisers, but will the new cryptocurrency pass the reality check of decentralisation and anonymity?

Genesis block’s launch is near

October 28 may see the launch of the genesis block of ZCash - a new cryptocurrency from the same name project led by Zooko Wilcox. The project causes great interest: without being a genuine market player yet, the company has become a part of Digital Currency Group; the buzz around ZCash is really huge, and the currency itself was valued even before the actual release. On the surface it seems that nothing can go wrong; however, there are few things that might compromise the success of the ZCash project.

Complex structure behind the currency

There are two words which became synonymous to the very definition of cryptocurrency: anonymity and decentralization. Usually, these two principles are respected not only towards end-users, but also among people “on the other side”. So far, the community still tries to find out who hides under the name of Satoshi Nakamoto; in many other cases we know one or several personalities standing behind one or another currency - but nothing more.

ZCash development team is doing fine without anonymity; rather, they prefer talking about themselves quite openly. This is understandable: they are sincerely proud of their creation, proud of being noticed and supported by such influential people and companies from cryptocurrency world. There something that ZCash doesn’t hide as well - its impressive list of investors.  

Apparently, such a strong patronage creates obligations. What else explains that there are several levels of power standing behind the сurrency?

Thus, in addition to the main team of engineers and scientists, ZCash also has a whole group of advisers, Gavin Andresen and Vitalik Buterin among them. Following the advisor team, here comes outside council consisting of encryption, litigation and financial regulation experts. And don’t forget the investors!  Pretty massive for a company that haven’t even fully entered the market yet.

(De)centralized

Some crypto community members also paid attention to that fact and took it suspiciously. Indeed, it’s not what users are used to; having such a complex structure around the currency raises questions. Could this in any way be combined with the constant cryptocurrency principle - decentralization? Doubtful.

The monetary base of ZCash is going to be the same as Bitcoin’s: 21 million ZEC are expected to be mined by 2032.

As developers state, at first, 50 ZEC will be created every 10 minutes. And that’s where the most interesting part begins: not all generated coins comes to miners’ hands. It’s all about the so-called Founders Reward, the system where 20% of the newly mined ZEC will go to the founders. Such way of funds distribution is going to last 4 years, till the first ZEC halving.

All figures are clearly displayed in this diagram. So, during the moment all 21M ZEC are mined, Founders Reward will give 10% to ZCash Company stakeholders (founders, investors, employees and advisers) - and it’s neither more nor less of 2.1 million ZEC.

Killing anonymity

However, the situation can turn out even more serious. For more than 5 years now, cryptocurrencies are subject to the regulation of the US Financial Crimes Enforcement Network (FinCEN). The FinCEN regulations also cover the main actors in the whole process - miners; one of rulings states: if the user mines cryptocurrency solely for his (or her) own use, it won’t cause any problems with the current law. However, considering the whole “Founders Reward” thing, how can anybody guarantee ZCash miners won’t be taken for Money Service Business (MSB)?

What it takes to become an MSB? The registration doesn’t seem like burdensome process at first glance. However, passing this procedure will require providing the Treasury Department with a whole list of documents, obtaining it which would not only be troubling for a miner, but also kill any anonymity. One cannot but recall that some media marked anonymity as one of the major ZCash advantages; looks like they missed something.

Zooko’s business

The company may receive as much strong support from investors and advisers as they want, but to survive, it also needs a strong and talented leader. Bryce (Zooko) Wilcox, CEO and developer of ZCash is known as a successful network protocols and cryptographic systems developer with 20-years background. However, if we take a look at his history of working for some big projects and ambitious startups, we’ll see that there was probably even more downs than ups.

An electronic money corporation DigiCash was the debut project for Wilcox, where he came as a developer at the age of 21; Alas, his career at this point wasn’t successful: DigiCash declared bankruptcy in 1998.

Some time later, at the turn of the 1990s and 2000s, Wilcox became a developer in another project, Mojo Nation, led by Jim McCoy. Today, 14 years ago, it's hard to tell exactly what led to the failure of the company. All we know is that after short time Mojo Nation ran out of money, and most of the employees were laid off - including Zooko Wilcox. In 2002, Mojo Nation officially ceased operation, and Wilcox went to work on Mnet, peer-to-peer distributed data store for file sharing which is now considered a fork of Mojo Nation.

According to the latest news updates on Mnet website, Wilcox ended things with Mnet in spring 2005. Another version of this site says at that time the development of the project had been slowed down to the extent that the developers had to remind the community that Mnet was still active. It is symbolic that the last website message begins with "We are not dead yet!". Since April 2005, there were no more updates, and the website was archived in 2012.

Then, in 2009, there was SimpleGeo - a company developed an API for location-aware mobile applications building. It all started out well: the company raised more than $9M from investors, there was a certain buzz about it in the media. Couple of years later, in 2011, SimpleGeo was acquired by another startup, Urban Airship, in all-stock deal. After all, in January 2012, only few months after the acquisition, it was announced that Urban Airship is going to shut down SimpleGeo in March 2012.

Year 2016. Wilcox develops and acts like a CEO in ZCash project. What will happen next? Only time will tell.

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