In about five hours, the privacy-oriented cryptocurrency Zcash will spawn a new blockchain network called Ycash.
It’ll be the first of its kind to boast a near-identical codebase to the Zcash blockchain but function as a separate network and de facto competitor.
First announced in April, the effort is spearheaded by long-time Zcash supporter Howard Loo. Loo described in a Zcash forum post that Ycash was a preemptive move to resist future community decisions that may extend Zcash’s system of developer funding known as the “Founder’s Reward” beyond a promised 10 percent cap of total token supply.
“We are also launching Ycash to uphold a promise – that the Zcash Founders Reward would be forever capped at 2.1 million coins – that we fear will come under increasing pressure between now and the expiration of the Founders Reward in October 2020,” Loo wrote in the forum post.
Since then, prominent leaders in the Zcash community such as founder of the coin Zooko Wilcox have publicly expressed their support of Loo’s initiative, agreeing to disagree on certain network changes to the Founder’s Reward and others that will make Ycash backwards-incompatible to Zcash.
Normally, network splits of this nature actually add value to a user’s cryptocurrency holdings. This is because users are able to redeem the exact same amount of coins minted on one blockchain on the new blockchain, free of cost.
“From a speculator’s standpoint, network splits often present an intriguing investment opportunity,” said former CoinDesk markets analyst and current crypto trader Sam Ouimet. “New money often buys up the cryptocurrency being forked in order to secure his/her claims of the new coins.”
Of course, the value of these newly issued coins, called YECs, on the Ycash network may be significantly lower than ZECs on the Zcash network. However, if past blockchain forks that have spawned spin-off cryptocurrencies are any indicator, coin prices shortly after a hard fork tend to take a hit and then rebound.
Take bitcoin cash for example. The world’s most popular cryptocurrency, bitcoin, forked on Aug. 1, 2017. In just four months time, the resulting cryptocurrency network dubbed bitcoin cash hit an all-time market capitalization of $69 billion with one BCH trading at roughly $4,000.
The markets have since cooled considerably but the spin-off network is still ranked among the top five most highly valued blockchain networks in the world. This despite having undergone its own network split in November of last year and a presumed 51 percent attack in May.
As such, for users of the near $700 million blockchain network that is Zcash, the creation of Ycash at roughly 3:00 UTC on Friday, July 19 may mark the beginning of a new source of investment returns.
But in order for users to properly take advantage of their new YEC holdings, they must ensure they’re in control of their own private keys and wallet addresses. Alternatively, they can also ensure that the exchange on which they are holding their ZEC tokens offers support for the Zcash/Ycash network split.
Crypto exchanges including Binance, OKex, Coinbase and Huobi have yet to affirm support for the impending launch of Ycash.
A spokesperson for Binance told CoinDesk the team would be evaluating “community feedback” surrounding the coin to determine a possible future listing.
What it means for ZEC holders
If you are a holder of ZEC, Loo tells CoinDesk one of the best ways to secure access to newly generated YEC coins is by downloading the ZEC wallet.
“In order to access Ycash coins, you need to have your Zcash coins at the time of the fork in a wallet that allows you to export your private keys,” explained Loo. “One possible way to claim your coins is to download your ZEC wallet and make sure your coins are in the ZEC wallet at the time of the fork.”
Some cryptocurrency exchanges have publicly announced they will be managing private keys of users to support the network split and ensure equivalent holdings of YEC once the spin-off cryptocurrency in created. These exchanges include but are not limited to SafeTrade, BigONE, Hoo and Citex.
However, for all Zcash users who have left their coins on unsupported exchange platforms, Loo says that downloading ZEC wallets not only secures a user’s holdings of YEC but actually creates “ancillary benefits” to the original Zcash network.
“A ZEC wallet is a Zcash full node so now all of a sudden all of these people who were Zcash users who weren’t running full nodes are now running full nodes because they’re interested in getting their Ycash,” said Loo.
Even so, Zcash Foundation Executive Director Josh Cincinnati says that management of private keys can be a risky endeavor.
Cincinnati told CoinDesk:
“It’s possible you may wind up manipulating your private key on a computer that’s connected to the internet that might have some exploit on it. That’s a tail risk. It’s unlikely something would happen but anytime where you change someone’s security model that way it’s a risk to users.”
As such, Cincinnati says that no matter the “friendly” intentions, there are always risks associated with chain “splits, forks, or anything of the sort” that users should be aware of.
What it means for everyone else
Now, for everyone else who neither holds ZEC or intends to hold YEC, the upcoming blockchain split will simply mark the creation of a new privacy-focused cryptocurrency project.
Ycash at launch will differ from the Zcash blockchain in three key ways.
First, Ycash will implement a tweaked version of the Equihash mining algorithm currently used on the Zcash network. This is meant to prohibit specialized mining hardware known as ASICs from mining on the newly created Ycash network.
However, in time, ASICs can be adapted to take advantage of the tweaked algorithm which is why Loo says the long-term goal for Ycash is to eventually get rid of Equihash entirely. ProgPoW and RandomX are two commodity hardware mining algorithms that the Ycash developer team is researching.
Second, Ycash will implement a reduction to the Founder’s Reward rate, which awards 20 percent of block rewards to a development fund on the Zcash blockchain. On Ycash, this percentage will drop to a perpetual 5 percent and be entirely funneled to one non-profit organization led by Loo called the Ycash Foundation.
This reduction to the Founder’s Reward is a key part of why Loo started the Ycash initiative.
Loo told CoinDesk:
“I started to see the writing on the wall that there was going to be some subset of the community that favors not honoring the original promise that 90 percent of the money supply be allocated to users via the free-market mining process and that key organizations of the Zcash ecosystem, including the Electric Coin Company, were likely to take that route as well.”
As such, Loo called Ycash a “preemptive move” to preserve the original promise of capping the Founder’s Reward rate to just 10 percent of all newly issued coins on the network via block rewards.
The third and final difference will be a cosmetic change to the address formats of Zcash and Ycash addresses. In order to “make it impossible” to accidentally send Zcash to a Ycash address or vice versa, Loo explains that all shielded addresses (these are private addresses on a Zcash-based network) will begin with a “y” instead of a “z”.
“With these bitcoin forks, there was always this concern after the fork of accidentally sending bitcoin to a bitcoin cash address,” said Loo. “To honor the spirit of a friendly fork, we put in engineering effort to change the address format … so it’s impossible to send Zcash to a Ycash address.”
What’s next
For all the preparation that has gone into this self-funded initiative to create a “Zcash-based chain that can be mined on commodity hardware and that honors the original allocation promise,” Loo gives credit for the underpinnings of the idea to the founders of the Zcash, Zooko and Nathan Wilcox.
Their early writings on a pluralistic and multi-coin future, Loo argues, not only coined the term for “friendly forks” but laid the groundwork in making Ycash a reality.
Loo said:
“It’s a credit to them both philosophically and technically because of the technical groundwork they laid. This fork I hope will be safer for users than [other blockchain] forks in the past.”
Since the original unveiling of the Ycash initiative back in April, Loo and his team of developers have completed three different dry runs of the split on the Zcash test network and one privately on the Zcash main network.
“Because I’m a long-term holder of Zcash, I have a vested interest in the health of the Zcash network,” said Howard. “We put a lot of engineering time in making sure the fork goes smoothly.”
Where to watch
For users who want to watch the fork in real-time, cryptocurrency markets site CoinGecko features a public countdown clock and coin price tracking chart. In addition, crypto exchange SafeTrade and blockchain analytics site BitFly are also supporting a Ycash blockchain explorer where users can track block confirmations in real-time.
SafeTrade CEO Jeffrey Galloway said the main thing to watch for will be chain stability and security.
“We’re looking at the stability of both chains at launch and any unusual activity,” said Galloway. “There’s a number of things you can look for. For instance, a high number of confirmations. Having a high number of transaction confirmations [is important] before you accept trades.”
A network statistic Ouimet uses to gauge network security and stability is hashrate. Hashrate is a measure of computing power being contributed by miners on a blockchain network to validate transactions and create new blocks.
“I’d keep an eye on the network hashrates for both ZEC and YEC to see how much computing power leaves the original chain and transfers to the new one,” Ouimet said.
The lower the hashrate is on a network, the easier a potential attacker can overtake a blockchain and meddle with transaction activity.
For these reasons, SafeTrade’s Galloway says larger cryptocurrency exchanges will likely choose to begin listing Ycash as a cryptocurrency after it is clear that both the Zcash and Ycash networks are stable with high transaction confirmation counts and hashrate.
Said Galloway:
“If there are bugs in the code, they will be exploited shortly after launch. If there are bugs in the wallet, you’re going to see them exploited shortly after launch. So those are all reasons why exchanges sometimes wait a few days after launch before they list a coin.”
Zooko Wilcox image via CoinDesk archives