Privacy coins are a fascinating technology as they allow people to transact without leaving a record. As world-changing as Bitcoin is, one of its great downsides is that transactions are publicly recorded where anyone can see them.
Because of this permanent record, it’s possible for Bitcoins to become “tainted”. For example, if a set of Bitcoins are associated with an exchange hack or a ransom attack, they will be closely followed through the blockchain and whoever ends up with them may come under suspicion.
(Though note that there are many efforts, such as CoinJoin, to improve Bitcoin's privacy).
Privacy coins solve this problem. The most advantageous feature of a privacy coin isn’t that you can use it anonymously on a darknet market. No, the best feature of a privacy coin is that it’s fungible.
In the same way that any $20 bill is worth any other $20 bill, a privacy coin cannot become “tainted”. Because of their fungibility, a merchant can accept a privacy coin without worrying about where it came from.
As cryptocurrency adoption rises, we expect that fungibility will be an increasingly important concern to everyone in the blockchain space. So with that in mind, let’s begin this article by comparing Zcash vs. Monero, two of the largest privacy coins on the market.
Zcash vs. Monero Privacy
When it comes to privacy, there’s a big difference when comparing Monero vs. Zcash. The difference is that 100% of all Monero (XMR) transactions are anonymous. Transactions on Monero have always been private and always will be unless something goes very wrong.
Zcash (ZEC) on the other hand gives users the option to send a normal transaction or a shielded transaction (private transaction). Recent statistics show that only about 6% of transactions on the Zcash network are fully shielded and 15% are partially shielded.
The problem with this model is that because only a small percentage of transactions are private, sending a shielded transaction immediately draws attention.
For example, imagine that you’re a regular Zcash user. You send 20 normal transactions in a row and then the 21st transaction you send private.
Were someone to examine your transaction history the first thing they would ask is; why did you choose to send this transaction privately? What did you feel the need to hide? This illustrates the fundamental problem with optional private transactions: they stand out.
This low percentage of private transactions also means that Zcash's anonymity set, or other addresses/transactions that a user and his or her transaction(s) can "hide" or blend in with, is small.
On Monero all transactions are private so they don’t stand out as much. This means that Monero has a larger anonymity set, and thus, greater privacy, since it's more difficult to figure out who's on the receiving end of a private transaction.
However, what stands out on Monero is… The fact that you’re using Monero! If law enforcement takes an interest in your finances they’ll probably want you to explain why you feel the need to transact in a private cryptocurrency, rather than something like Bitcoin.
In the future, Monero’s total privacy could hurt it from a regulatory standpoint. However, it could easily be years before regulators take a serious look at it. As crypto stands today, your average person has maybe, possibly heard of Bitcoin but even that’s not a given.
Monero and Zcash are so below the radar that they’re likely to be largely ignored for a while longer. However, that won’t last forever. At some point, ZEC and XMR will face undue attention from regulators.
Will they be banned? Heavily regulated? Kicked off of all the major exchanges? Who can say, however, the risk of some government retaliation is non-negligible and should be taken into account when determining whether or not to use one of these two coins.
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Zcash vs. Monero Mining
It would be difficult to make the argument that mining one coin is more profitable than another. After all, mining profitability can depend on:
- Current hardware costs
- The selling price of the coin
- Current network hashrate
About the only common denominator in mining is the cost of electricity. So the best way to compare profitability is to use a mining calculator. A mining calculator is designed to take into account all of the current factors affecting profitability and give you an accurate idea of how much you can earn.
Here is a mining calculator for Zcash and another calculator for Monero. It’s worth noting that both Zcash and Monero are designed to be ASIC resistant (ASICs are expensive, specialized mining devices). Thus you will typically mine with either CPU or GPU hardware.
Monero and Zcash have two very different funding models. Monero relies almost exclusively on volunteer developers as well as donations to fund ongoing development work.
Zcash has a different strategy whereby mining effectively funds the coin’s development budget. Under the Zcash mining model only 80% of ZEC mined in each block actually goes to the miners (in most coins like Monero, Bitcoin, Ethereum, etc. 100% goes to the miners).
Of the 20% that doesn’t go to the miners, 15% goes to a group of founders and early investors. It’s similar to a premine except that it’s spread out over time. The remaining 5% of the block reward goes toward funding developers to improve the Zcash blockchain.
It goes without saying that giving 15% of the block reward to the founders has been controversial and has turned some people away from the Zcash project. Recognizing this, it appears that Zcash is set to switch to a model where that entire 20% of the block reward will go toward funding development, rather than just 5% to funding development.
Where to Buy Zcash and Monero
If you already have some crypto, you can easily trade for Zcash or Monero using Exodus. Here’s how.
Note: instructions are for Exodus Desktop. See these instructions for how to exchange on Exodus Mobile.
- Select the cryptocurrency that you want to deposit. For this example we’ll use Bitcoin but it could be just about anything.
- After you deposit the currency you can click on the two arrows in the wallet, this will take you to the exchange page.
3. Select whether you want to buy Monero or Zcash and then choose how much you want to buy.
4. Once you’ve inputted all of the information you can click on exchange. The ZEC or XMR will show up in your account soon!
If you don’t already have crypto and would like to buy some ZEC or XMR with fiat currency, such as dollars or euros, there are a few options.
The best place to buy Zcash with fiat currency is via Coinbase. One of the great advantages of Coinbase is that they allow for purchases with either a bank deposit or a debit card.
Buying Monero XMR with fiat currencies isn’t quite so easy. Though Kraken offers an XMR/USD trading pair if you want to buy Monero with US dollars. While Kraken doesn’t support debit card purchases, they do allow users to purchase crypto via a bank transfer.
Where to Store Zcash and Monero
The problem with Zcash is that although the cryptocurrency itself is great, the available Zcash wallets leave something to be desired. For example, there is only one well-known desktop wallet (ZecWallet) but its user interface is dated. There are a handful of web wallets but these are typically not as secure as a desktop wallet.
The official Monero wallet is better and the user interface looks great, however, there have been some unfortunate bugs in the past. Also, the Monero wallet has some advanced features which new cryptocurrency users may find complicated.
An alternative is to use Exodus. Exodus is meant to be user-friendly in case you’re a new user (though ease of use isn’t bad for advanced users either!). Also, you can use Exodus to store both Zcash and Monero instead of having to manage two different wallets at the same time, a big advantage.
(Though note that Exodus doesn’t support shielded, or private, Zcash transactions!)
Here are some other features you might like:
- Support for 100+ crypto assets
- Focus on premium design and ease of use
- Being the only wallet to support desktop, mobile, and hardware wallet (Trezor) integration - Monero support not yet available 😔
- Giving you the ability to exchange cryptos for other cryptos right from your wallet - without creating an account! (desktop guide, mobile guide)
- Support for the best decentralized applications like Compound Finance
- Allowing you to stake some of the hottest cryptos for crypto passive income
- The ability to sync your wallet between desktop and mobile
- and 24/7, fast human support if you ever need help
Zcash vs. Monero Reddit
Both Zcash and Monero have active Reddit communities, which can be good places to ask any other questions that you have about Zcash vs. Monero. The Monero community is available here and this is the Zcash community.
In addition, here are a few specific Reddit threads relating to the differences between Zcash and Monero: The fundamental differences between Monero and Zcash and Monero vs. Zcash.
Also, another option for discussing these two coins is the Exodus public Slack. It doesn’t just have to be privacy coins though, the public slack is a great place for a discussion of all things cryptocurrency whether it’s Bitcoin, Ethereum or your favorite altcoin!
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.