Zcash is a decentralized peer-to-peer, private cryptocurrency built as a fork of bitcoin. It uses a proof of work consensus algorithm and a Zk-SNARKS (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) algorithm to protect user’s privacy.
Privacy is important in the regular economy for a variety of reasons. The first case most see for privacy are illegal transactions. While the market for these kinds of transactions is quite large, this is not the only case for private transactions. In many business cases, companies would like to carry out transactions without their competitor’s knowledge of the existence of the transaction or the contents thereof. But more broadly, in a world where all transactions are available to all, it is possible that any vendor with a party’s address will have the power to see all of the transactions related to that address. This gives financial information to vendors that users will ordinarily not be willing to share. Moreover, this information is valuable and will likely be sold to third parties in the future. For these two reasons (among others), there is a strong need for private transactions on the blockchain. To that end, JP Morgan hired the Zcash team to implement their Zk-SNARKS algorithm on their own blockchain.
Zcash allows parties to carry out public or private transactions. For parties who choose the latter, they must rely on the Zk-SNARKS technology. Zk-SNARKS allows two parties to carry out a transaction without showing what the contents of the transaction are. To do this, the sender must demonstrate to the verifier that they have a piece of information that they could only have if they were a legitimate party to the transaction. If you are interested in the mechanics of this algorithm, this is a good place to start.
The main downside to Zcash is the amount of processing power it requires to do a private transaction. It can take over 40 seconds and over 3 gigabytes of RAM to create an anonymous Zcash transaction. For everyday transactions, or transactions that require high frequency, this solution will not be optimal. This could be a factor in the fact that only 11% of Zcash transactions are actually private. Users seeking privacy tend to go with Monero.
Because Monero is more associated with illicit transactions than Zcash, Zcash arguably has an advantage in terms of adoption by enterprise users. Therefore, for Zcash, business execution will be paramount for further scaling. Their mainstream adoption thus far, team and network make them a project worth following.