The Zcash Protocol Explained: A Journey into Privacy-Preserving Cryptography

Abstract

Privacy in blockchain-based cryptocurrencies has become a critical area of research and development. This is driven by the transparent nature of public ledgers and the growing demand for confidential transactions. This study provides a comprehensive exposition of a prominent privacyenhancing protocol, Zcash. We begin by elucidating the design and operation of Tornado Cash, a smart contract-based mixer on Ethereum that leverages zero-knowledge proofs to enable unlinkable transactions. Building on this foundation, we explore the Zcash protocol, tracking its evolution from Bitcoin and its innovative use of zk-SNARKs. We also examine the intricate mechanisms that highlight its privacy guarantees, including circuit design, Merkle tree structures and transaction relations. By systematically analyzing and comparing these protocols, this study aims to clarify their inner workings, highlight their strengths and limitations, and provide information on the future of privacy in decentralized finance.