Is Zcash’s encrypted blockchain Satoshi’s vision? an interview with Zooko

The following is an interview with Zooko Wilcox discusses the Zcash project and talks about the Crypto world in general, a very interesting talk with one of the leaders of the Crypto eco-system.

Zooko Wilcox, Co-founder of Zcash

eCash (1983) – anonymous electronic cryptographic money
“I had wanted something like bitcoin to exist for many years, before I heard about it. In fact, I’m 43 now, more than half of my life ago, I discovered these science papers by a scientist named David Chaum who invented the notion of encrypted crypto currency, internet money that was protected by cryptography.”, according to Zooko, “It didn’t have a decentralized monetary base. There was a central third party but it couldn’t spy on the transactions of the users because of cryptography. It wasn’t a complete solution.”

David Chaum invented eCash, as anonymous cryptographic electronic money in 1983. In 1990, he founded the DigiCash company for the implementation of eCash by third party corporations (mainly banks). The eCash solution ensures the privacy of its users. eCash was implemented by one bank in the US and a few banks in Europe.

It’s all about Berlin’s wall, internet and crypto
“A couple of years before I came across David Chaum’s invention, I discovered the internet. The internet was pretty new then. I thought it was really exciting that distance and national borders were no longer complete barriers to communication. Before the internet, people didn’t really talk to, or learn the thoughts, of people from other countries. The only way was if you read a book or could take from whatever the newspapers or the TV stations chose to tell you about people’s thoughts from other countries.

Another formative event in my life was the fall of the Berlin Wall. It meant that national borders would stop being jail cells to people. In 1993, I discovered Cryptocurrency through DigiCash, and I thought this was the third part of the revolution; so distance and borders would no longer be barriers to resource sharing and going into business together – that one unfortunately didn’t work out.”

In Zooko’s vision, there are the three parts of the revolution – The fall of the Berlin wall, the invention of the internet and the invention of cryptocurrencies which represent a world with open borders, global open communication and an open economy without a distance or origin barrier.

INTERNET – Are we moving in the wrong direction?

“Years later, the internet revolution started to roll back, it became more of the case that national borders are barriers to communication between people. It is profoundly the case in China. In the West we are used to using the internet, and it is like an extension of our brains. When I went to China it felt like having a lobotomy, I couldn’t Google anything. No Facebook, no New-York Times, no Wikipedia… It is moving in the wrong direction.“

Internet Censorship map (Source: www.isoc.org)

Bitcoin vs. Zcash
“Bitcoin and Zcash represent to me the third part that will help sustain the other two – open borders and global open communication – and will keep the internet open and global”.

Our data is owned by private companies

“The potential for protecting and expanding human freedom is exciting. We are currently on a very dangerous pattern. The level of surveillance available for government is unprecedented in human history. Since humans were born until 15 years ago, there was never anything like that. There were cases throughout history when governments were more proactive in collecting data.

Though, the modern large companies and the governments have way more data on us than the German secret police ever had. East German secret police had about one half of their citizens secretly reporting on the other half and they had buildings full of folders and files with the data of all the citizens in the country. But this is nothing compared to the data about us that Google owns today. There is a big difference if you have one data point from everyday compared to a data point of every micro-second.”

How is all of the above background related to Zcash

“Well, that’s really why I started Zcash 3 years ago, because I was concerned about these issues and thought Zcash could make a big difference”

Zcash explained to the normal human being

“It is a kind of money that doesn’t come from any government or company and it protects the information about your transaction so that information is not disclosed to hackers or anyone. That’s basically Zcash.”

Tahoe LAFS

“I made a company that made a cryptographically protected distributed storage system called, Tahoe LAFS. That’s a distributed encrypted storage system like IPFS. Tahoe LAFS, which is still going on, is a very interesting project. One difference between it and IPFS is that the files are encrypted so you have control over who gets to see the content of them.

Another thing that the startup does is security audits for cryptographic software. For example, we were hired by the Ethereum development team before the launch of Ethereum to do security auditing of Ethereum. We were hired by many other good projects to do security audits.”

I wanted to work on Zcash day and night for the rest of my life
“One day, a team of scientists from the USA and Israel, who developed the idea behind Zcash approached me and asked me to commercialize the new project. They knew of my previous work at Tahoe LAFS. At first I said no. Even though I thought privacy is really important to me and is important for society, Bitcoin had a head start. So this new thing (Zcash) would just be a niche product for special purposes and wouldn’t be a mainstream product.”

However, after some deeper thinking, I realized that privacy is necessary for the mainstream users too and eventually I said Yes. And from that point, I wanted to work on Zcash day and night for the rest of my life. In addition to privacy’s importance for humanity, civil rights and the safety of society is also necessary for business. Every mainstream business that wants to use cryptocurrency will need it.”

“If you want to use a cryptocurrency to buy and sell goods and services for your business you need privacy so that you are not leaking information about your transactions to competitors, criminals and unauthorized parties. In the US, it is absolutely illegal for any business that manages customer’s money, to leak information about it to an unauthorized party.”

Fungibility

“For a thing to serve as money, it needs to be transferable, easy to count, and fungible.

If you are selling your used bike for 100 USD, and someone offers you two 100 USD bills, you probably don’t care which one of them you take. Two 100 USD bills means the same to you. However, if you are selling your used bike and someone offers you one of two used laptops, you really care about which used laptop to take. No used laptop is worth exactly the same as another to you. That’s why dollars have fungibility and used laptops don’t have fungibility.”

“Some people don’t trust JP Morgan”
What value does Bitcoin bring to the world?The question was asked a few days after Jamie Dimon, J.P. Morgan’s CEO, called Bitcoin a fraud

“I think the core value proposition is that some people don’t trust JP Morgan. There isn’t any government or a person that everyone on the planet trusts. One can say, let’s make a world bank that everyone trusts. Fact is, that’s not the world we live in. That is the unique value proposition of Bitcoin and Zcash, not the technology. But a thing that you and someone else can rely on, even though you and the other person don’t trust the same bank or the same government. I love Bitcoin, it is a revolution. I’m the author of the first ever blog post about Bitcoin (Jan 26, 2009). In fact, Satoshi Nakamoto’s home page linked to my home page at one point”

Satoshi Nakamoto’s Bitcoin alpha release blog post (March 3rd, 2009) linked to the following blog post written by Zooko: Decentralized Money, 26 January 2009 (created 26 January 2009)

“I’ve been spending a little bit of time thinking about how gaming services like World of Warcraft and (don’t-call-it-a-gaming-service) Second Life have succeeded where we at DigiCash failed — convenient, widely-used, programmable digital cash. A problem is that each of these new currencies are centrally controlled by one entity. This limits the scope of who will rely on that currency and how much value they will risk on that currency. There are ideas floating around about how to facilitate transactions between currencies, but this would not solve the problem. A plethora of competing centralized services is not the same as a decentralized service. Even if it were cheap and convenient to trade some LindenBucks for some WoW Gold, this would only lead us back to the equivalent of the modern nation-state currencies: mostly centralized (because of the Network Externality), heavily taxed/regulated/manipulated, and prone to disastrous failure. What I want is a currency which everyone can cheaply and conveniently use but which no-one has the power to manipulate. No-one has the power to inflate or deflate the currency supply, no-one has the power to monitor, tax, or prevent transactions. Truly the digital equivalent of gold, during the times and places when gold was the universal currency. See the BitGold idea by Nick Szabo and b-money idea by Wei Dai, and recent effort to actually implement something along these lines: BitCoin by Satoshi Nakamoto.”

What value does Zcash bring to the world that Bitcoin does not?

“There is a huge flaw in Bitcoin. Satoshi knew this, he also valued privacy. He talked about how he hoped Bitcoin’s privacy would be sufficient and of the possible ways to improve its privacy using encryption. Bitcoin’s privacy is a total failure. The only reason Satoshi didn’t put better privacy into Bitcoin originally is that we didn’t have sophisticated enough cryptography back then. It was after Satoshi was doing his work that we discovered the new mathematics of efficient Zero Knowledge Proofs that allow us to do it correctly in Zcash.”

Zero Knowledge Proofs

“Zero Knowledge Proof is not what gives you privacy, it is just the necessary glue to allow us to use encryption. The way privacy is provided in Zcash is the same way privacy is provided with every high security computer and network (Secured databases of banks in the world for example). The reason transactions are public in Bitcoin is so the miners can detect invalid transactions and exclude them in order for Bitcoin to work. That’s why Satoshi couldn’t encrypt the transactions; otherwise he would have done it. The innovation of Zero Knowledge Proof allows us to prove that a transaction is valid even though the transaction is encrypted.

It is an interesting discovery that was made about 30 years ago. Shafi Goldwasser is one of the scientists behind this proof. She later won the Turing award for this discovery, which is one of the most prestigious awards for a computer scientist. They identified the concept of proving the solution without revealing the solution, and proved that it was possible to do it. But, the way that they showed that it was possible to do it, was totally impractical, that’s why Satoshi couldn’t use it in 2008.“

The following is a great example, we came by, for the Zero Knowledge proof:

Imagine your friend is color-blind. You have two billiard balls; one is red, one is green, but they are otherwise identical. To your friend they seem completely identical, and he is skeptical that they are actually distinguishable. You want to prove to him that they are in fact differently-colored. On the other hand, you do not want him to learn which is red and which is green.

Here is the proof system: You give the two balls to your friend so that he is holding one in each hand. You can see the balls at this point, but you don’t tell him which is which. Your friend then puts both hands behind his back. Next, he either switches the balls between his hands, or leaves them be, with probability 1/2 each. Finally, he brings them out from behind his back. You now have to “guess” whether or not he switched the balls. By looking at their colors, you can, of course, say with certainty whether or not he switched them. On the other hand, if they were the same color and hence indistinguishable, there is no way you could guess correctly with probability higher than 1/2.

If you and your friend repeat this “proof” times (for large t), your friend should become convinced that the balls are indeed differently colored; otherwise, the probability that you would have succeeded at identifying all the switch/non-switches is at most t^-2 . Furthermore, the proof is “zero-knowledge” because your friend never learns which ball is green and which is red; indeed, he gains no knowledge about how to distinguish the balls.

The same idea works for Zcash. The miner can verify an encrypted transaction without seeing the transaction itself. He repeats some mathematical proof where each time he gains some more certainty that the transaction is indeed valid. After a large number of proofs the probability that the miner will approve an un-valid transaction becomes negligible.

Government recognition of Zcash

Japan as an example: “If you are the financial services authority of Japan, you don’t want Japanese people using a payment system which discloses all of their transaction to North Korea (as in Bitcoin). Bitcoin is more dangerous for Japanese people in that way than Zcash is.”

Just logon to Blockchain.info to see the latest Bitcoin transactions, as seen here for example: everyone can see the sender and receiver addresses, the amount of money transferred and when.

“There are tradeoffs. If the Japanese people use Zcash, you do lose traceability, but it is ok because you don’t have that traceability for cash or even for credit cards” (a third party discloses the transaction information if needed, but it is not open to anyone – selective transparency). That’s the same thing you can do with Zcash, it also has selective transparency. “

Selective transparency is a feature in the Zcash protocol that gives a user the ability to disclose his transaction history to a certain party. For other parties, all the user’s transaction history is encrypted.

“Most of the bitcoin payment transactions rely on a third party intermediary (like CoinBase, BitStamp, Bitflyer etc.). As long as people rely on a third party intermediary, Zcash acts more like the conventional banking system does from the perspective of regulation. In that model, the encryption in Zcash is not hiding the information from the provider and it’s not hiding the information from the Japanese government. It’s hiding the information from the North Korean government. People that don’t use a third party cannot use the banking system, but they can use Bitcoin or Zcash. If you use Bitcoin, your information is disclosed to anyone on the internet. With Zcash the information is protected.”

Adding private information to a transaction on the Zcash blockchain

“Another virtue of Zcash, is that it allows you to put more information into the transaction.

Because the transaction is only visible to authorized parties, you don’t mind adding to the transaction. For example – ‘this is for the shaving brush’, whereas in Bitcoin, you might not want to add further information to it as it is transparent to the world.

That information will be visible to the government either if you use a third party intermediary or you choose to disclose that information to the government.

In conclusion, Zcash might be better for the government in some cases because once the user is compliant or uses a third party for his payments, the information is richer. There is a law which Bitcoin companies cannot satisfy and Zcash can. The KYC (know your customer) of the customer has to travel with the payment if you transfer money on behalf of the customer from one financial institution to another.”

Nowadays, Bitcoin and Zcash serve mainly as a store of value. Will it ever serve as a currency?

“That is my goal; for Zcash and for Bitcoin to serve as a currency. A good strategy for that, is to look for opportunities where the competition is weak. Wherever the competition is worst, that’s where Zcash and Bitcoin can shine. I really want Zcash to take over the USD, but it is going to take a long time, that is a bigger challenge. Currently, I’m really excited about Zcash against the Venezuelan Bolivar, Zcash is obviously way better than it.”

A cup of coffee in eastern Caracas, Venezuela, today costs 460% more bolivar than it cost a year ago (450 to 2,800 Bolivar). As published on the Venezuelan cafe con leche index.

“There are around 250 fiat currencies in the world, the average currency lasts just 100 years. You can basically expect one fiat currency to completely fail every few years. Currently it is the Venezuelan Bolivar.

The great competitor for a failed currency is the USD, one way Zcash and Bitcoin could benefit from that, is to serve as the gateway to USD for these countries. In Venezuela, you cannot have USD in your bank account. I would be happy if Zcash and Bitcoin could serve as a gateway from an unstable currency (Venezuelan Bolivar) to a stable currency (EURO/USD)”