What's new with Zcash (ZEC): from halving to transition to Proof-of-Stake
Zcash halving
On November 16, 2024, a momentous event occurred in the Zcash network — halving. Zcash belongs to the first-generation blockchains — such as Bitcoin, Litecoin, Bitcoin Cash, and other early altcoins — whose protocols include a deflationary mechanism to reduce rewards to miners for a mined block.
As a result of the second halving, miners' rewards were halved from 6.25 ZEC to 3.125 ZEC. The halving occurred on block 2,726,400. The previous Zcash halving occurred four years earlier, on November 18, 2020.
As of December 2024, the computational complexity of the Zcash network was 93.3 M (million) — this parameter displays how many times, on average, miners need to calculate the value of a sol function to mine a new block.
The Zcash network hash rate in the same period amounted to 9.52 GS/s, 8.5% higher than a year ago when this figure reached 8.77 GS/s. As you can see, the Zcash protocol hash rate measurement unit differs from other networks, such as Bitcoin or Litecoin, whose blockchains are measured in hashes per second (H/s).
In the Zcash network, the hash rate is measured in "solutions per second" or the number of [hash function] solutions per second (S/s). After halving Zcash, the hash rate of the network remained virtually unchanged. This means miners have not "capitulated" after the reward reduction and continue to keep the blockchain network running as before.
The next halving of the Zcash network is expected in about four years — in November 2028. After the next cut, miners' rewards will drop to 1.5625 ZEC.
Increased activity on the Zcash network
In June 2024, on-chain analysts noticed a surge in user activity on the Zcash network: the number of active addresses reached a local peak of 16,000. Among other things, the increase in activity is associated with the transition of cryptocurrency miners from old mining pools (Sprout and Sapling) to a new one — Orchard.
During the same period, Grayscale, a significant investment company that previously launched its own Bitcoin-ETF and Ethereum-ETF, resumed purchases of the ZEC cryptocurrency. Grayscale owns and operates its closed-end Zcash Trust, which has $28.3 million in assets as of December 2024.
Zcash's transition to Proof-of-Stake
In August 2024, Zcash cryptocurrency co-founder Zuko Wilcox tweeted a post on his X profile that he plans to introduce the idea of moving the Zcash network to a hybrid Proof-of-Stake (Proof-of-Stake or PoS) mechanism.
This initiative has already been noted in the Zcash project roadmap, according to which the transition of Zcash to the Proof-of-Stake consensus algorithm will be carried out in two stages:
- A hybrid consensus mechanism called PoW+TFL will be installed in the first phase. This means that the Zcash protocol will continue to run on the Proof-of-Work or PoW algorithm, but the PoS mechanism will be launched alongside it.
- In the second phase, the Zcash protocol will be fully migrated to the Proof-of-Stake consensus mechanism, and PoW miners will no longer be able to maintain the network or mine new blocks.
So far, as of December 2024, the Zcash development team has not provided specific and more detailed information on updates as part of the protocol's transition to Proof-of-Stake consensus. In addition, it has not yet been decided whether the update will be released. Accordingly, Zcash's possible transition to Proof-of-Stake dates are also unknown.
In his proposal, Zcash co-founder Wilcox noted several advantages of transitioning the blockchain protocol to the PoS consensus mechanism:
- Introducing a staking mechanism, in which validators and their delegates buy cryptocurrency to participate in the network consensus and receive rewards for processing transactions, will help stimulate demand for Zcash cryptocurrency.
- The PoS mechanism will help protect users from so-called "cryptocurrency rollback attacks" and allow for more secure bridges for digital asset transfers between Zcash and other blockchain networks. This will be made possible because the Proof-of-Stake mechanism allows for faster transactions and for transactions to be completed in a shorter time.
- The Proof-of-Stake algorithm will increase the security of the network and its users and have a better impact on the scaling of the Zcash blockchain.
However, several critics have noted that this approach has a drawback, as PoS does not provide value to the ecosystem, while in Proof-of-Work-based networks, economic security is achieved by the presence of expensive mining infrastructure.
Conclusion
As of December 2024, the Zcash cryptocurrency is trading 98.8% below its all-time high, reached back in October 2016, and its capitalization stands at $1.16 billion. By this measure, the altcoin is ranked 103rd in CoinMarketCap's rankings.
Zcash has been and remains one of the key anonymous cryptocurrencies. Despite regulatory attacks, regular bans, and delistings of anonymous cryptocurrencies such as Monero (XMR) and Dash (DASH), the ZEC altcoin continues to trade on major crypto exchanges, including Binance.