Time of Change for Zcash — Transition to PoS

Veronika Nicoladge
6 Min Read

The blockchain ecosystem is constantly evolving. The reality of climate change is pushing projects like Ethereum to think over their choice of consensus mechanism and slowly abandon Proof-of-Work (PoW) for more sustainable solutions. 

Privacy coins that can be found on an anonymous cryptocurrency exchange have accepted this change of tides as well. ECC, the company behind Zcash, has recently revealed a plan to transition to Proof-of-Stake (PoS) and ensure sustainable growth for the project. But what would this entail exactly? 

This article will educate those unfamiliar with how Zcash works and how this change will transform the chain. To this end, we will go over the nitty-gritty of the ZEC blockchain and explain how the switch to PoS can benefit the project. 

How Does Zcash Work Now?

Zcash is an incredibly popular privacy-focused cryptocurrency, second only to Monero. The ZEC blockchain allows users to transfer value without revealing any of their transaction data. It achieves this with zero-knowledge proofs. A cross-chain exchange like ETH to ZEC will effectively remove your transaction trace from the ledger. 

In a zk-proof environment, the prover can show to the verifier that a given statement is true without revealing any information about this statement. Sounds complicated? 

Imagine having a “Where’s Waldo” drawing and covering it with a sheet of paper, with a small hole showing Waldo’s location. If you show it to someone, you would effectively prove that Waldo is on the drawing, without revealing where he is. That is how zk-proofs work in a nutshell.  

The Zcash blockchain currently runs on a PoW consensus mechanism. This means that miners use powerful computers (ASICs) to solve increasingly complex mathematical problems to reach consensus. This results in the creation of new blocks, validating transactions, and releasing new coins into circulation. 

However, there’s a caveat with PoW — ASICs use huge amounts of electricity for mining. In a period where we need to save every bit of natural resource, wasting it on blockchain mining might seem unreasonable. 

PoW consumes more and more electricity as more people join the network. Transaction fees increase, and so does the difficulty of the algorithm. This means that ASICs need more power to solve the puzzles. 

All in all, PoW is not sustainable in the long term. Zcash aspires to become a massively-used privacy coin, with hundreds of millions of simultaneous users. The current system would quickly get saturated and prevent people from using the network as it was intended. 

Transition to PoS

The Electric Coin Company (ECC), which is behind the Zcash project, has started research on transitioning toward PoS. In PoS, there’s no need for miners, and the hardware is much more energy efficient. 

In a PoS environment, validating transactions relies on validators that stake a significant amount of coins on the network. Validators receive incentives through transaction fees and have to provide honest work or they can get penalized on their holdings. 

The benefit of going to PoS is twofold: 

  • The blockchain will become much more sustainable and scalable. It will open a path for growth without the technological shortcomings of PoW
  • There will be less selling pressure from miners, which should in turn impact the price of ZEC positively. 

As a result, Zcash could become competitive with the current top blockchains in terms of transaction throughput. Simultaneously, it would still lead with its incredible privacy features that have been proven over the years. 

PoS for Zcash: The Next Step

The next step for the project to transition is opening a blockchain proposal that will shift the entire blockchain onto a PoS consensus. This would mean that the ECC will need to persuade miners to vote positively, as they would need to abandon mining ZEC. 

Mining ZEC is a profitable venture, and the move to PoS might create a bit of controversy. However, the ECC aims to provide thorough research on the subject prior to pushing the proposal forward. 

To conclude, Zcash migrating to PoS could mean a much more sustainable, secure, and cost-effective blockchain. There are really very few disadvantages for the userbase. So, we can cross our fingers and hope this takes place in the next few years. 

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Veronika Nicoladge
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