When you think of cryptocurrencies, particularly Zcash and Bitcoin, it’s hard not to be amazed at the incredible technology at play in each. Zcash took virtually all the elements that made Bitcoin great, and added amazing technology over the top to add optional privacy. The fact that you can choose to shield, or not to shield your transactions is an amazing feature. But there is a big problem with Zcash and it’s not necessarily in the technology.

When Bitcoin was being dreamt up the technology was critical to create the system. However, that technology was put to use to achieve an extremely specific outcome. So what was that desired outcome? Here, within the first sentences of Satoshi Nakamoto’s whitepaper, you can spot a critical word which highlights Satoshi’s aim:

“Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.”


Bitcoin and all decentralized cryptocurrencies are amazing because for the first time, humanity has found a way to remove trust in a transaction. Certainly the advancements of blockchain and Bitcoin are wildly impressive, the speed of transfer reduced from multiple days with a wire transfer down to 10 minute blocks for Bitcoin. The intense security of the blockchain. The ease of transport – for example private keys or hardware wallet instead of hauling a duffle bag full of cash. With Zcash even greater advancements are made including true fungibility and true anonymity via zero-knowledge proofs. These advancements are all amazing, but to me, removing trust from the equation is absolutely paramount to all of it.

Bitcoin Zcash Trusted SetupWhen Satoshi Nakamoto says that:

“the main benefits are lost if a trusted third party is still required”

It makes perfect sense that re-introducing the trust requirement completely unwinds what the cryptocurrency is working toward with the technology it employs. All the technological advancements mean nothing if trust is still required. Bitcoin was created to remove trust as an essential requirement of a transaction.

While I am incredibly impressed with the Zcash team, and the incredible problem they solve with technology, it is all lost because you must trust the initial setup. This is what people are talking about when they allude to “Trusted Setup” or the Zcash Ceremony.

This is not FUD, this is a fact. You absolutely have to trust that the setup of Zcash was done in a way where the master private key was not obtained by anyone, and that it is no longer in existence. Since humans (6 main people) were involved in the initial Zcash ceremony, we have to trust that they were not heavily surveilled, that their equipment was not backdoored, that the equipment and master private key was destroyed. We have to be 100% sure that every scheme imaginable to obtain the master private key did not take place.

To be absolutely clear it is not that the Zcash team is not trustworthy, I have the deepest respect for the team, I also believe in them. I think they are incredibly smart and capable. The technology in Zcash is some of the absolute best in the space. That is not the question or the issue. The issue is the fact that we have to trust anyone in the first place. Removing trust is the miracle Satoshi Nakamoto truly performed. Technology was merely the means to create a system that could remove trust from the equation.

I have my eyes on 2018 as Zcash has quite a lot in the works. I’m really interested in the upcoming ceremony The Powers of Tau where anyone is encouraged to register and participate. Please check out the link to learn more for yourself.

Ledger Nano S - The secure hardware wallet


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