Zcash (ZEC) moving to POS, joining the Cosmos?

5 Min Read
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An interesting proposal came out from Electric Coin Co (ECC), The company that launched and continues to support ZCash. Best known as a Proof of Work privacy coin, ZEC was launched in October 2016. Since then it has gained some traction, as an optional privacy alternative. However, it could be said that it has never really fulfilled its full potential, and has failed to keep pace with gains in other crypto's during the current market.

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Source: Zcash media kit

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New Roadmap

ECC released a roadmap document on the 19th November, looking at the future for ZEC over the next few years. The focus of this post is on three key areas that EEC see as important for ZEC's future. These areas of focus are: Building a wallet; Moving to Proof of Stake (POS); and Interoperability.

Wallet.

... the best way for ECC to contribute to the Zcash community over the next three years is to release an official ECC wallet on top of a highly interoperable Zcash protocol that leverages proof-of-stake consensus.

Building a new, dedicated wallet here obviously depends on moving to POS. The document talks a lot about Web 3 and ways of keeping ZEC relevant in this shift. They obviously feel an "official" wallet for the migrated POS Zcash chain is the best way to position ZEC for relevance in the Web 3 era. Having an official wallet will allow ECC to quickly role out new features, and they intend to deliver a new wallet in 2022. They also plan to make an SDK, and open source the code so others can use it.

POS.

For many chains that started life as POW, the shift to POS seems to be an evolutionary process. We see with ETH that the benefits are compelling, but the process can be difficult and time consuming. "Just 2 more years" seems to be the phrase that comes to mind. According to the blog post, discussions have been ongoing in the Zcash community for most of this year about a shift to POS, and most of the broader community is in favor.

We experienced the impact of the introduction of ASICs miners to Zcash in 2018. The amount of activity on the Zcash chain quickly dropped by 80% as many Zcashers were forced to abandon their GPU miners as their means for acquiring ZEC.
There are other benefits of moving to proof of stake which include the reduction of the ZEC energy footprint, providing a possible path to on-chain governance mechanisms, and support for interoperability by addressing problems with proof-of-work transaction finality, among other reasons further discussed below.

A major difficulty many POW chains experience is the price suppression that occurs by miners. Most miners sell some or all of the tokens they mine to cover their mining costs (mainly electricity), and this causes a steady sell pressure on the coin. Shifting to POS can been seen as a way to overcome this, as stakers have very little costs, and many elect to compound their staking income rather than selling. This can reduce the downward pressure on the price.

ECC conclude that shifting ZEC to a POS chain is achievable within three years.

Interoperability.

Here is where it gets interesting for the Cosmos community. While not committing to using a Cosmos based chain, the post does mention Cosmos in all its examples. Cosmos is the obvious choice for interoperability, and moving Zcash into the Cosmos and making the most of the IBC protocol seems logical. Cosmos's "internet of blockchains" vision would appear to be a better fit for ZEC than other chains approach

By leveraging a highly trusted and used platform such as Cosmos to move Zcash to proof of stake, we would immediately realize the benefit of cross-chain interoperability with other projects participating on the platform.

Another interesting link to the Cosmos is that the post mentions Agoric, and a separate post from a couple of weeks ago details how ZEC could participate in the Agoric ecosystem. Agoric is building a Cosmos IBC enabled chain, linked also with Ethereum through gravity bridge. This will be a smart contract platform, based on Javascript. ECC invested in Agoric years ago, and will participate in the chain. IBC and a Cosmos SDK chain seems to be the most logical way for ZEC to be interoperable with the soon to launch Agoric platform.

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Reaction.

The most interesting reaction I saw to this today came from the main rpivacy focused project currently in the Comsos eco-system - Secret (SCRT). As the leading PRrivacy focused project in the Cosmos, it it would have been unsurprising to see Secret react negatively to the move. However, that is not how the Cosmos eco-system works. Collaboration and co-operation is the hallmakr of Cosmos, and Secret's reaction exemplifies this.

Congratulations to the @zcash ecosystem on the potential move to Proof of Stake! 🎉@SecretNetwork is more than happy to share our learnings as the first private by default PoS network for smart contracts :)

And of course, we’re very happy to ensure interoperability w $ZEC!

— Tor Bair 𝕊 🤫 (@TorBair) November 21, 2021

TorBair, who wrote this tweet, is a key contributor to Secret, and this reaction highlights everything that is driving a mass of activity and growth around the Cosmos.

Zooko, the founder and CEO of ECC replied with a simple "Thank You!".

The market seems to have reacted favourably to this news. ZEC looks to have been quite volatile over the last few weeks, ranging from about $150 around the time this announcement was made, up to a spike up to $220, its highest price since May.

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It's going to be interesting to see if ZEC does end up transitioning to POS and joins the IBC gang.

Fun times ahead for fans of privacy crypto projects.

Thanks for reading,

JK.

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