Zcash (ZEC) vs Monero (XMR): Which Coin is More Secure & More Private?

Privacy-oriented cryptocurrencies have been increasingly adopted as they allow users to transfer funds without revealing too much about the origin (sender) of the transaction or their personal (identification) information. Monero (XMR) and Zcash (ZEC) are among the leading privacy coins - not only in terms of market capitalization, but also as far as their adoption is concerned. In this article, we’ll carefully compare and contrast these two cryptos.

XMR: Untraceable Payments, "Unlinkable Transactions", Resistant To "Blockchain Analysis"

Monero (XMR) is an open-source, decentralized digital currency which was launched in April of 2014. It aims to be “a digital means of exchange with untraceable payments, unlinkable transactions, and it is resistant to blockchain analysis.” This is achieved using Monero’s proof-of-work (PoW) algorithm - which is called CryptoNight.

CryptoNight was created by the CryptoNote project - which uses ring signatures and stealth addresses. These two features make it difficult to accurately identify and track the origin (sender) of transactions. In addition, Monero’s CryptoNight consensus mechanism is considered to be very secure and allows users to maintain the highest level of privacy (when compared to other privacy coins).

Unlike many other altcoins, XMR coins are not associated with the fund holder’s public crypto address. So, if a user shares their public address with anyone, the address itself will not reveal the amount of funds that the user is holding.

Monero (XMR) Market Cap Drops From $3.7 Billion To $1 Billion 

Moreover, the Monero platform does not have a block size limit and it may be (adjusted) increased according to its network requirements at a particular time. Because of this dynamic block size, the Monero blockchain can potentially process 1,000 transactions per second (TPS) - assuming that its network participants are using proper hardware and the latest client software.

In April of 2018, the market capitalization of XMR coins was $3.7 billion and has now dropped considerably to around $1 billion at the time of writing, according to CryptoCompare data. However, this is likely due to the overall decline in the market of cap of almost all major cryptoassets.

Zcash (ZEC) is another fully open-source digital currency platform that was launched in 2016, however, many in the crypto community do not think it is completely decentralized. Similar to Monero, Zcash transactions are considered highly secure and maintain user privacy.

ZCash Network Uses Fungible Tokens/Coins

The Zcash platform was developed by some members of the Zerocoin project - which is an initiative that aims to improve the anonymity of bitcoin (BTC) transactions (and is built off of the Bitcoin Core codebase). Total supply of ZEC coins has been capped at 21 million.

One of the main (proposed) use cases for ZEC was to develop a fungible cryptocurrency. These types of coins are interchangeable, meaning that ZEC coins can serve as a replacement for other crypto tokens and coins. Transactions with fungible cryptos are more difficult to track - which makes it harder to identify the sender and recipient of funds.

Both Zcash and Monero use the proof-of-work (PoW) consensus mechanism, however, there are fundamental differences between how both platforms have implemented their respective network management protocols. Transaction data for XMR coins is “mixed” with others, while transfers involving ZEC aim to eliminate traces of transaction data.

Zcash Does Not Offer Privacy By Default

The main difference between Zcash and Monero is that the former is not private by default, so as soon as a Zcash miner discovers a block, the ZEC coins associated with that block are sent to the corresponding private Zaddress. Moreover, Zcash uses fixed 2 MB block sizes with 2.5 minute intervals between consecutive blocks - which is basically equivalent to a (hypothetical) 8 MB block size for bitcoin (BTC) with 10 minute intervals between blocks.

What this means is that (theoretically), the Zcash network can handle 8x as many transactions per second than the Bitcoin blockchain - which is about 50-65 TPS.

Compared to Monero, Zcash transactions are usually less expensive. Notably, in April of 2018, the market capitalization of ZEC coins was of about $1 billion and has now dropped significantly to around $440 million

Chainalysis Launches Real-Time Suspicious Transaction Alerts for 15 Cryptocurrencies

Blockchain intelligence firm Chainalysis has introduced "suspicious cryptocurrency transaction alerts" in "Chainalysis Know Your Transaction (KYT)", its "real-time anti-money laundering (AML) compliance solution".

Chainalysis, which was founded in 2014 by Dr. Michael Gronager (the current Chief Executive Officer), Jan Moller (the current Chief Technology Officer), Jonathan Levin (the current Chief Operating Officer), is a company with two main products:

  • Chainalysis Reactor -- its investigation software suite
  • Chainalysis Kknow Your Transaction (KYT) -- its compliance software suite

Chainalysis KYT supports "real-time transaction screening"; "case management capabilities"; "enhanced due diligence"; and "KYT for token issuers".

In a press release published on its blog on Thursday (August 22), Chainalysis says that Chainalysis KYT's alerts are "designed to help cryptocurrency businesses and financial institutions mitigate exposure to regulatory and reputational risk by helping compliance teams focus on the most urgent activity and enforce compliance policies while better allocating resources."

John Dempsey, VP Product, Chainalysis, had this to say:

As lawmakers and regulators focus their attention on the industry, it is more critical than ever that cryptocurrency businesses demonstrate compliance best practices.

According to Chainalysis, this new feature results in alerts being generated "whenever a transfer involves a risky counterparty and crosses a value threshold." Alert levels (Severe, High, Medium, and Low) are "based on factors such as category, service, direct versus indirect exposure, direction of funds, and amount," and are available for all 15 cryptocurrencies that Chainalysis supports (including BTC, ETH, BCH, LTC, USDT, and DAI).

Michael Breu, Gemini's Chief Compliance Officer, also chose to comment on this announcement:

As a New York Trust company we are required to monitor transactions on and off our platform. Tools like KYT alerts, which provide real time and ongoing blockchain analysis, coupled with Gemini's own compliance policies, help us meet our regulatory obligations.

 

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