The company behind Zcash, led by a developer named Zooko Wilcox, has the support of privacy activists and computer scientists at Johns Hopkins University and Massachusetts Institute of Technology. It has already secured $3 million in backing from a number of Silicon Valley venture capitalists who are involved in the virtual currency industry.
Zcash’s developers say they have used advanced cryptography to create a virtual currency that can be sent around the world essentially without a trace, unlike Bitcoin.
While Bitcoin was initially described as an anonymous currency, its transactions are recorded on a public ledger that can be tracked and traced by law enforcement. Each Bitcoin user has an address, made up of letters and numbers, and the authorities are often able to link an address to a real person using sophisticated data analysis.
In contrast, Zcash uses a method developed by a team of cryptographers working at M.I.T. and in Israel — known as zk-Snark — that allows transactions to be confirmed by the network without anyone recording the Zcash addresses involved in the transactions. Users can opt out of this privacy function.
The privacy features of Zcash could make it harder for the currency to win support from regulators and bankers.
Investigators have used Bitcoin’s ledger, known as the blockchain, to track down some people selling drugs for Bitcoins on black market websites.
Such websites have proliferated since the first popular black market site, the Silk Road, was taken down in late 2013.
Since the demise of the Silk Road, mainstream financial institutions have shown significant interest in virtual currencies and particularly in the blockchain technology, which provides a new decentralized way to keep financial records and to power transactions of all sorts. Major central bankshave recently been talking about using the technology for their own currencies.
Most projects in the virtual currency area, though, have been pushing in directions that would make it easier to integrate with the existing financial system.
Jonathan Levin, a founder of Chainalysis, a start-up that helps banks and regulators track activity on blockchains, said that the authorities had become comfortable with virtual currencies because they had been able to trace transactions in cases of criminal activity.
“It’s going to be quite difficult for Zcash in its opaqueness to show that, no, it is not all bad stuff going on,” he said.
But Mr. Wilcox has the help of a former top New York state financial regulator and a former federal prosecutor to help ease the concerns of government officials. Mr. Wilcox is hosting an open virtual meeting later this month with law enforcement officials from across the country to explain the project.
Mr. Wilcox and the programmers who created Zcash say that they developed the currency not to facilitate illegal activity but to provide a degree of privacy for people who do not want their financial transactions visible to the world.
“The basic story is that we have been gradually losing our privacy in a whole bunch of ways that people don’t appreciate,” said Matthew Green, an assistant professor at Johns Hopkins who began developing Zcash with some of his graduate students in 2013. “This brings back a little bit of that privacy that computers have taken away from us. This technology gives us a defense against something that until now we have been defenseless against.”
Mr. Wilcox said that existing virtual currencies have been unattractive to businesses because their transaction details are exposed to competitors, creating a business need for a more private virtual currency.
“All of the conversations I’ve had with businesses, banks, regulators and law enforcement have been about the need for data security for commercial applications,” he said.
Zcash is modeled closely on Bitcoin. The currency will be released slowly to computers that help support the network underlying the currency. New Zcash units will be distributed to users until there are 21 million of them in the world. Initially Zcash units are being released slowly — as of Monday, only about 1,500 were out in the world, helping to feed the speculative frenzy around the currency.
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