Zcash - an ode to the digital cash thesis

in previous posts anon62677964 Zcash: getting smothered reiterated the ideas:

  • the trilemma to have: scaleable, secure and decentralized
  • cambrain explosion of possible L1 designs with own tradeoffs. then ossification.
    nfts as a new asset that is not cash, but can be collateral for stables.
  • that money is a store, measure and exchange value.
    the ‘measure’ in zatoshis at present is unlikely, but mere ui design issue to show sats instead.
  • zcash is digital cash: value changed hands but no tracks and no dilution.


But crypto evolved, and the picture is:
With BTC as trust anchor and high-value tx at slow pace it becomes global collateral of large entities: midterm states, companys, later DAOs and known high net individuals with staff to defend turf. Cryptographic research advances to allow trustless, scaleable designs to move value to a maximum of handful L1s. The high TPS on low node count with mere EVM compatibilty on sidechain wont suffice to run it. L1 STack implosion and ossification. No more the rising tide lifts all boats and gullible dump money in bulk. Even bridge tech* goes obsolete since few L1 remain and standardization will bake in primites into the L1-node itself to exchange value between BTC-ETH-Cosmos-(bsc). The power-law value distribution is already in effect.*

Zk-tech will become core scaling solution, then privacy added.** Tech ppl and credible investor push zk-tech.*** Most projects have low validator sets, in cosmos ~100. These are similar to the high ETH node requirements pushing these into datacenters ( or intel TEE on server cpu only) and slashing fear if retail internet cutoff/poweroff. But does it suffice to stem an entire ecosystem?
While economic games and pos consensus secure enough, the risk of large planned sting to shutdown a data-center node is high. Before redelegate tx to new validators the network is ground to halt.
But there is relief: The regulatory pressure creates antifragility that breaks the monolithic into a decentralized infra that keeps its function intact, no matter attacked. Web3 projects already provide decentralized RPC to L1 infra, and many idependently run webRPC access points == hard to censor. In POS coined “decentralize the node”, many real-life hardware constituting it.

Beside Zcash has organisational problem**** but good tech, it is mostly incorporated/experimented with by other projects: AleoHQ was at zcon3, mina, horizen-zkEVM, dusk, ren etc.
The partnerships are benefitial and hopefully reciprocte to ease integration, team collab, even financials. Adding independent projects polygonZero, scrt, starknet, zksync, railgun the purpose of zcash diminishes. Why?
The orange ellipsis shows the range of expected privacy solutions appearing. ‘Privacy’ boils down to large anon set and be it as eth contract, eg railgun, that once wrapped is compatible with the entire defi ecosystem farm&co or privacy higher up with specialized circuit on performant ASIC. Projects like FRAX, DAI will start doing private stablecoin minting and voila the private money is born. The ‘bug risk increases with stack complexity’ does not count: Besides regular measures formal verification, peer review blah, a defi insurance will provide cover (private one yet to come).

Wrapping up, the anon sets will be large enough, the access to a permissionless web3 api available, there is no need for user to do L1 for the sake of privacy. Even worse, the constant zec anonpool hopping fear of being stuck (constraints or deprecated), the cumbersome sync of a node in a private setting and unsolved network privacy gluing in tor/i2p etal is worse than a quick, anon RPC call in rl setting. The ‘digital-cash thesis’ is done with.

Copium: The pie is large. Nature has a way to hedge itself, to grow a distributed, secure fungi mesh under the green moss carpet. It might not scale well and thus become a niche product, but is yet so important as an alternative medium of hidden value/message transfer…more of a cyperpunk movement worth cultivating, while sheeple is sheeple. Leaving utopian, give zcash a high node count no matter if pow/pos, abolish disruptive pool hopping, stick to the monetary policy but add tail emission, squash the entire chain in a constant/log blockchain-size (eg 1year tx tail <10GB; or spv/fullnode combi on retail hw!) and low node requirements to run serveless on mobile.

* All Chains TVL - DefiLlama
** The different types of ZK-EVMs
*** https://twitter.com/a16zcrypto/status/1575124707187347457
**** A Failed Zcash Sticker Store Idea - #27 by grassroots

1 Like

Interesting perspective. My initial reaction is the private L1 rectangle is much much to small in your model.

I often look to nature for insight as well. In many ways, you can almost say nature is ZK’s biggest use case. I also found it interesting you use the term IBC pond.


Overall this is a striking critique. I would border the private L1 and BTC because that private L1 will ultimately become directly convertible to BTC without intermediary (atomically swappable).

Measuring in local fiats will remain predominant, I don’t find it meaningful to even dream about a future where goods and services are locally priced in crypto assets, why? Because in that thought exercise, the crypto asset will have become fiat like (meaning long-term dilutive, and lacking volatility). We’re all here in part because we understand that crypto is an investment which is intended to yield great returns compared to fiat over time.

This is great. The mainstream may not understand yet, but many industry insiders already see it.

NFTs are collateral is going to be a major trend during the cycles ahead.

Zcash upgrading to Proof of Stake is paramount, and it will provide access to paths for success where your critiques reside. Add on the long-term prospect of layering in recursive proofing and the success paths multiply. Its not going to be easy, perhaps it will never happen, but for now we understand the vision for Zcash and the teams that are working to manifest it.