How to Buy Zcash (ZEC) – A Beginners Guide
The first step in the Zcash journey for investors will be deciding upon which wallet to use to store the Zcash coins. Investors have the choice of downloading the official Zcash client wallet or selecting one of the 3rd party wallets available.
Step 1 – Create a Zcash Wallet
The official Zcash client wallet was initially developed for Linux, with the wallet now also compatible with Windows and MacOSX thanks to the Zcash community. Therefore, we recommend this wallet as it is compatible with Zcash features.
Third party wallets are few and far between, with most wallet providers unable to cater for the privacy component of the Zcash protocol.
As is the case with other cryptocurrencies, hot and cold wallets are available, which comprise of internet wallets, hardware wallets, local wallets and exchange wallets.
Internet Wallets: Internet wallets can be downloaded for desktops and mobile phones and it’s important to use particularly strong passwords and it is also encouraged to enable 2-factor authentication where possible.
Web-based wallets that are compatible with Zcash Transparent addresses include:
Coinspot; Jaxx; Freewallet; waterhole.io; coinBR.net; HolyTransaction; Bitpie and Coinomi.
For those looking for the greatest degree of anonymity, Jaxx; ZCash Swing GUI Wallet, Agama, and ZCash Cockpit UI Wallet are recommended, while Coinomi caters for the greatest variety of cryptocurrencies.
Hardware Wallets: Hardware wallets are considered to be the safest way to store Zcash coins, though at present they only support Zcash transparent addresses and are on the expensive side, which some will consider acceptable when considering its recovery capabilities in event of coin loss.
Hardware wallets include TREZOR and Ledger.
Local Wallets: While local wallets are considered to be on the more technical side for use, they support Zcash’s private addresses and have been developed by Zcash and the Zcash community. It is important to frequently backup the wallet
Finally, exchange wallets are also available, though none support Zcash privacy characteristics and should also be the choice of last resort, particularly when considering the issues faced with exchange wallets and the risk of being hacked.
Step 2 – Buy Zcash (ZEC)
Once the wallet has been created, there are two ways in which ZEC coins can be purchased. The first option to buy Zcash (ZEC) would be with fiat currencies, the second option is obviously with Bitcoin or Ethereum.
Buying Zcash with Fiat Currencies
In the case a trader is not holding Bitcoin or Ethereum and wishes to buy Zcash with fiat currencies, there are some exchanges that provide the option to buy Zcash with USD or EUR.
HitBTC allows a trader to purchase Zcash (ZEC) with fiat currencies. Another exchange that provides Zcash with USD is CEX.IO.
Buying Zcash with Bitcoin or Ethereum
The other option to buy Zcash ( ZEC) is with Bitcoin or Ethereum. If you already hold Bitcoin or Ethereum, you can move forward to the next step.
There are many exchanges that provide Bitcoin or Ethereum for fiat currencies. Coinbase is a popular exchange that allows traders to purchase Bitcoin or Ethereum with US dollar.
After using the link to go to Coinbase, select “Sign up” and enter your personal information. Coinbase treats client identification very seriously, so be sure to verify your account by supplying a phone number, uploading an image of your photo ID and verifying a credit/debit card or bank account.
After completing these steps, select “Buy/Sell” at the top menu. Select “Bitcoin” and enter either the number of coins or the amount you want to spend. Bitcoin can be purchased in fractional units and the system will do the math for set amounts of local currency. Verify the information you have entered and “Buy”, and then “Confirm buy.”
If you are located in a country that Coinbase services are not available, you can purchase Bitcoin in other exchanges such as CEX.IO or Coinmama.
Step 3 – Exchange Bitcoin or Ethereum for Zcash (ZEC)
Now go to an exchange such as Binance or HitBTC to exchange your Ethereum or Bitcoin for ZEC.
First, enter the exchange and open an account, verify the account in the email you received. Then, you need to fund your account with BTC or ETH that you have purchased before at one of the exchanges above. In order to do that, click the “Funds” tab and search for BTC or ETH, choose “deposit”, copy the BTC or ETH deposit address and paste it to the exchange that you withdraw the money from. The process might take up to one hour (vary according to different exchanges).
Now, after completing these steps, you have Bitcoin or Ethereum in your HitBTC or Binance account. Click the “exchanges” and search for ZEC/BTC or ZEC/ETH, enter the amount and click “Buy ZEC”.
What is Zcash?
Zcash utilizes cryptography to deliver a significantly greater degree of privacy than its peers, with the evolution of Zcash starting from Zerocoin protocol that had been code adjusted into Zerocash before the ultimate release of Zcash in 2016.
While Zcash payments are published on a public blockchain, the sender, recipient and amount of a transaction are kept private. The privacy functionality on the blockchain is an optional one, where the user has the choice of taking the privacy option.
ZCash is based on peer-reviewed cryptographic research, built by a security-specialized engineering team on an open source platform that is based on Bitcoin Core’s codebase. Privacy is considered to be the key enhancement over Bitcoin, with zero-knowledge proof cryptographic techniques being used to guarantee the validity of transactions, whilst maintaining privacy.
ZCash encrypts the contents of transactions that have been selected to remain private and, because payment information is also encrypted, the protocol uses cryptography to verify the validity of transactions.
In the case of Zcash, a zero-knowledge proof construction called zk-SNARK is used that was developed by the Zcash team. The construction enables the network to maintain a secure ledger of balances without disclosing the parties or amounts involved, with the zk-SNARK protocol proving that there is no fraud or theft.
The basic concept is not too dissimilar to Bitcoin, where Zcash facilitates public payments, the only difference being that Zcash payments remitted from a transparent address to a shielded one protect the remittance amount. The option is also available from shielded to transparent, where the remittance amount is unprotected and from transparent to transparent addresses that will have information fully disclosed.
As at the end of 2017, only 4% of Zcash coins fell within the shielded segment, though the number is expected to increase as a greater number of wallets are developed to support Zcash coins.
As is the case with the likes of Bitcoin, Zcash has a fixed total supply of 21 million coins. Within the first 4-years, 20% of the coins generated will be distributed to investors, developers and a non-profit foundation.
Zcash went live in October 2016 and currently sits at $750, following a 149% rally since 1st December 2017, with Zcash having rallied 965% in the calendar year 2017.
How to Trade Zcash with CFD’s?
For those looking to trade Zcash, another method to gain from Zcash volatility is through CFDs.
A CFD is an instrument that closely tracks the movements of an underlying asset, in this case, Zcash, with traders using CFDs never actually owning the asset, but instead establishing a contract with a broker.
Leading brokers that offer a Zcash CFD trading platform includes IQoptions, which has a presence in 183 geographies, has monthly trading volumes of close to $11bn and accepts debit and credit card payments.
For traders looking for higher frequency trading of Zcash, there are many benefits of trading with CFDs that include:
- The ability to go either long or short to take advantage of the dips as well as the rallies.
- Trade across a wider range of pairings to take advantage of the volatility seen on both sides of the trade pairs.
- Take advantage of margin financing platforms that limit initial capital outlays, whilst taking on leverage to enhance returns.
For traders looking to increase exposure to the volatility that persists across the cryptocurrencies, some caution is needed with the inclusion of stop-loss limits advisable to avoid significant losses, particularly when leverage is included that could result in losses that may exceed initial investment sizes. Leverage on offer can be as great as 50x, with traders required to fund margin calls in the event of trades going the wrong way.
In addition to trading CFDs, Zcash futures trading is also an option available to traders, offering Zcash futures in BitMEX.
CFDs and futures contracts are both geared derivative contracts, the key difference being that a futures contract is an agreement to buy or sell the asset at a set price on a specific date in the future.
CFDs have no set future price or date and behave more closely with holding the actual asset from a trading perspective, with the buy or sell price not reflective of market sentiment towards the asset class on the settlement date, as is the case with futures contracts.
That said, interest charged on leverage in a CFD trade is daily, while baked into the asset price in a futures contract. From a traders’ perspective, CFDs do tend to be the preferred choice, with CFDs considered to have greater flexibility.
The Unique Mining Model of Zcash
Mining provides an alternative source of Zcash coins, which is an option for those willing to provide support to the Zcash network from home and interested in building a mining rig.
While it has been possible to mine for Zcash using computer processors (CPUs), there have been significant advancements in both hardware and software, which has left CPU miners with very low returns, as miners with computers built with one or several graphics cards (GPUs) taking over much of the hashrates.
The good news for miners with GPU mining equipment is that they will also be able to mine for other cryptocurrencies including Ethereum, but not Bitcoin that has progressed to ASICs mining rigs.
Once a miner has selected the GPU hardware to build the GPU rig, the next step is to select the most appropriate software.
While the Zcash team have developed software to support mining with CPU rigs, miners will need to look elsewhere for software that supports GPU mining rigs.
GPU software for mining includes, but are not limited to Optimizer, Claymore, NEHQ and Nicehash EQM, with some research needed to understand the best software – GPU hard combinations.
Once the hardware-software combination has been decided, assuming that the miner is not looking to build a mining warehouse, a mining pool will need to be chosen.
Mining pools provide individual miners an opportunity to link up with other smaller miners and then share the rewards based on individual hashrate contributions.
The downside to joining a mining pool include fees charged by the pool, which not only cover server costs but also fund the pool organizers who are looking to make a profit. It’s strongly advised for those looking to join a mining pool that they identify a reputable pool that is known for its honesty and does not have any reputational issues stemming from previous members of the pool not receiving fees earned.
Zcash mining pools include, but are not limited to Zcash4U; MININGSPEED; Coinotron; Dwarfpool; MinerGate and Zpool.guru amongst others.
Key details for interested miners include:
- The total number of Zcash coins is limited to 21 million. The Zcash team are unable to estimate how long it will take for the 21 million coins to be mined, with technological advancements and the increased difficulty in the verification process an unknown.
- For Zcash, the Proof-of-work algorithm is Equihash, which is resistant to specialized mining hardware such as ASICS that are used to mine Bitcoin.
- Block Rewards: A total of 50 Zcash coins will be issued every 10 minutes, with 10% of coins mined being distributed to the Founders Reward.
- Block Reward Halving: The Block Reward will halve every 4-years, as is the case with Bitcoin.
- Founders Reward: The Founders Reward was established to fund the developers for building Zcash and to meet ongoing development costs. For the first 4-years, miners will receive 80% of the block rewards, with 20% going to the Zcash team. After the first 4-years, 100% of block rewards will then go to the miners, with miners receiving 100% of transaction fees from launch.
The Benefits and Risks of Zcash
While ZCash and its ability to provide a private transaction environment have been an attractive proposition for investors, the cryptomarket is changing and more and more exchanges are calling for disclosure of identification.
Much of this has stemmed from regulatory pressure, with governments and central banks imposing rules on exchanges relating to money laundering and “know your customer,” with exchanges being threatened with closure if they fail to meet the ever-changing regulatory landscape.
Other concerns over the near-term include the fact that many wallets that support Zcash do not cater for the privacy component of Zcash’s blockchain, which is certainly a negative for Zcash and acceptance of its cryptocurrency has an alternative to Bitcoin. Added to this is the fact that vendors are also keen to know with whom they are dealing, the anonymity raising some concerns.
On the upside, however, is the fact that the cryptomarket landscape is ever changing. The security strength supports the view that Zcash can survive and break through current barriers, though it may take some time.
As with any cryptocurrency, success will ultimately come down to whether there are prospects of the currency being accepted in the mainstream. For now, the list is small and how that list grows will be key to Zcash’s success.