How does Zcash work?

Zcash is a decentralized and open-source cryptocurrency that provides enhanced privacy for its users.

It was created in 2016 as a fork of the Bitcoin protocol and uses a proof-of-work consensus mechanism to secure the network. Zcash works by using zero-knowledge proofs, also known as zk-SNARKs, to allow users to transact without revealing their identity or the amount being sent. This is done through a process called “shielding” which encrypts the transaction data and hides it from public view.

The Zcash protocol also allows for two types of transactions: transparent and shielded. Transparent transactions are similar to Bitcoin transactions in that they are publicly visible on the blockchain, while shielded transactions are encrypted and can only be seen by those involved in the transaction. In addition to providing enhanced privacy, Zcash also offers other features such as optional privacy (where users can choose whether or not to reveal their identity) and selective disclosure (where users can selectively reveal certain parts of their transaction).

Finally, Zcash also utilizes a unique mining reward system called “zk-SNARKs” which rewards miners for verifying transactions without revealing any information about them. This system helps ensure that miners are incentivized to continue verifying transactions on the network while still protecting user privacy.