Name: Insights: What Does It Take To Be A Bitcoin Rival?
Uploaded: 2020-02-25
Duration: 6 min 58 s
Description: Zcash could reshape the financial system in ways Bitcoin couldn't. (December 2017)

[MUSIC PLAYING] ZOOKO WILCOX-O'HEARN: Blockchain is like an Excel spreadsheet that anyone in the world can add information into it. You have three columns-- the sender's address, the recipient's address, and how much money they're sending. And whenever you want to make a transaction, you append a new row that says this address will send this much of its money to this other address. The problem that I'm most concerned about is that the history of all those transactions is visible to everyone in the world, and so if you actually rely on that for your real life, like if you get paid in that kind of ledger, and then you go buy coffee, you'll be revealing to the coffee shop owner what your salary is. Every time you transact with anyone, you're exposing more and more of the history and your behavior to more and more people or to everyone. So in Zcash, we approach that by using encryption. ROBERT HACKETT: Zcash is a virtual currency, sort of like bitcoin. In fact, a lot of it is ported over from bitcoin's codebase with one pretty big difference. And that is the fact that Zcash uses encryption to conceal payments on the blockchain. ZOOKO WILCOX-O'HEARN: Well, all the important information today is protected by modern encryption. And we use the same style of modern encryption in Zcash to protect the information about who's transacting with whom and what they're doing. ROBERT HACKETT: The interesting thing is they employ a mathematical technique called zero-knowledge proofs in order to make this ledger still auditable. ZOOKO WILCOX-O'HEARN: We can prove to everyone that a certain transaction moves money that was correctly, like, legitimately owned by the owner. It wasn't, like, fraudulent. And we can prove that without revealing what's underneath the encryption. So it proves a fact about an encrypted data without opening the encryption. And so the only reason we need zero-knowledge proofs in Zcash is to allow us to have encryption and also to have a ledger filled with only valid transactions. SAMUEL CASSATT: There are lots of reasons why I might want to be able to prove to someone that I know something without them seeing exactly what it is. You might want to pay your daughter for a medical bill. I want to do it maybe over blockchain technology, and you don't want your neighbor to see it. Using zero-knowledge proofs allows us both to understand the contents of our transaction without displaying the contents to other parties. JAMIE DIMON: There will be no currency that gets around government controls. SPEAKER 1: Anybody here want to take an opposite view? ROBERT HACKETT: So Jamie Dimon, the CEO of JPMorgan Chase, has been pretty vocal about his distaste for cryptocurrencies. He's called bitcoin a fraud. That being said, his company is working on blockchain technology, which is a really promising new way to create databases in very simple terms. ZOOKO WILCOX-O'HEARN: JPMorgan and the Zcash company, my company, are in a technology partnership. They asked us to work with them to add the Zcash-style encryption into the JPMorgan enterprise blockchain. ROBERT HACKETT: Quorum, which is the blockchain that JPMorgan Chase has built, it does not use open cryptocurrencies like bitcoin or like Zcash for that matter. What they've done instead is they've taken some of the privacy technology that Zcash has developed and incorporated in their cryptocurrency, and they've stripped that out and basically put it into their blockchain system. ZOOKO WILCOX-O'HEARN: It's a great data point showing why privacy is important, which is that privacy is necessary for business because JPMorgan and the other makers of enterprise blockchains are trying to make a technology that is fitting for various enterprise use cases. And over the past two years or so, all of the people in that whole industry-- the whole blockchain industry-- have come to realize that privacy is a strong requirement. It's an absolute showstopper. AMBER BALDET: You can't run a financial marketplace-- a real financial marketplace-- where everybody knows what's going to happen in the future because literally, what you are trying to trade on is expectations about the future. So the more that that information is known in advance, you end up with kind of the Heisenberg uncertainty principle of financial markets, like it exists too quickly. So privacy is integral to having functioning markets. SAMUEL CASSATT: If I am JPMorgan and I'm conducting a trade with Goldman Sachs, I don't necessarily want Santander to see my trade or vise versa. While they might want certain parties, like regulators for instance, to see the trade, they don't want their competition to see the trade. ZOOKO WILCOX-O'HEARN: It's also necessary for business for consumer protection reasons. If you're running a large business and taking care of a lot of people's personal information, you can't risk leaking that to the world. There's also regulatory requirements like the Health Information Protection Act, and the Child Online Protection Act, and things like that, which specifically require that you protect information as part of your business. ROBERT HACKETT: Zooko is a longtime cypherpunk, which is sort of a term that encompasses somebody who's part activist, part coder. They tend to be pretty libertarian in their views and have really, really strong respect for privacy. And they try to take these into the technologies they build. If you spend even a little bit of time with Zooko, as I had the pleasure of doing this fall for writing the story, it becomes clear that he's not motivated by material gain. He's definitely more of an idealist. Certainly working with JP Morgan is a good business opportunity for his company Zcash, but you get the sense that Zooko wouldn't be working on this project if he didn't feel as though it had some great potential to benefit society at large. ZOOKO WILCOX-O'HEARN: Do you know the story of the encrypted love notes in the blockchain? SPEAKER 2: I don't. ZOOKO WILCOX-O'HEARN: Very shortly after Zcash launched about a year ago after the blockchain launched, a young woman of my acquaintance said she had received a Zcash payment of a tiny amount, and in the encrypted memo field, there was a document. It was tickets to an event that she and her boyfriend had been talking about going to. So it was an encrypted love note in the blockchain. And that actually exists. Now, I've never seen it, but I take her word for it. Only the sender and the receiver can see it, but it's in the Zcash blockchain. SPEAKER 2: That's beautiful. ZOOKO WILCOX-O'HEARN: Encrypted love notes in the blockchain. 

Insights: What Does It Take To Be A Bitcoin Rival?

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Zcash could reshape the financial system.

What Does It Take To Be A Bitcoin Rival?

Zcash could reshape the financial system in ways Bitcoin couldn't. (December 2017)

Blockchain is like an Excel spreadsheet that anyone in the world can add information into it. You have three columns, the sender's address, the recipient's address and how much money they're sending. Whenever you want to make a transaction, you opinion you row that says this address will send this much of its money to this other address. The problem that I'm most concerned about is that the history of all those transactions is visible to everyone in the world. And so, if that if you if you actually rely on that for your real life, like if you get paid in that kind of ledger and then you go buy coffee, you'll be revealing to the coffee shop owner. What your salary. Every time you transact with anyone, you're exposing more and more of the history and your behavior too more more people or to everyone. So in ze cash we approach that by adding by using encryption. The cash is a virtual currency, sort of like Bitcoin. In fact, a lot of it is reported over from Bitcoin's code base with one pretty big difference. And that is the fact that Z cash uses encryption to conceal humans on the block chain. All the important information today is protected by modern encryption, and we use the same style of modern encryption and the cash protect the information about who's transacting with whom and what they're doing. The interesting thing is the employee a mathematical technique called zero knowledge Proof. In order to make this ledger still auditable, we can prove to everyone that a certain transaction moves money that was correctly like legitimately owned by the by the owner wasn't like fraudulent. And we can prove that without revealing what's under neath the encryption. So it proves the fact about encrypted data without opening the encryption. So the only reason we need your knowledge proofs in cash is to allow us to have encryption and also to have a ledger filled with only valid transaction. There are lots of reasons why I might want to be able to prove to someone that I know something without them seeing exactly what it is you might want to pay your daughter for a medical bill. I want to do it. Maybe over blocking technology, you don't want your neighbor to see it. Using your knowledge, Chris allows us both to understand the contents of our transaction without displaying the contents to other parties. There will be no currency that gets around government control. Anybody here wanna take a a, uh, an opposite view. So Jamie Diamond, the CEO of J. P. Morgan Chase, has been pretty vocal about his distaste for crypto currencies. He's called Bitcoin fraud. That being said, his company is working on Blockchain technology, which is a really promising, a new way to create databases in very simple terms. J. P. Morgan and the cash company, my company, are in a technology partnership. They asked us to work with them toe add the cash style encryption into the J. P. Morgan Enterprise Blockchain Quorum, which is the Blockchain that J. P. Morgan Chase has built. It does not use open cryptocurrencies like Bitcoin forelegs e cash, for that matter. What they've done instead is they've taken some of the privacy technology that cash has developed and incorporated in their crypto currency, and they've stripped that out and basically put it into their Blockchain system. It's a great data point showing why privacy is important, which is that privacy is necessary for business. J. P. Morgan and the other makers of enterprise block chains are trying to make a technology that it's fitting for various enterprises use cases. And over the past two years or so, all of the people in that whole industry, the whole block chain industry have come to realize that privacy is a strong requirement. It's an absolute showstopper. You can't run a financial marketplace, really finance a marketplace where everybody knows what's gonna happen in the future, because literally, what you are trying to to train on his expectations about the future. So the more that that information is known in advance, you end up with kind of the Heisenberg uncertainty principle of financial markets like it exists to quickly, so privacy is integral to having functioning market. If I'm J. P. Morgan and I'm conducting a trade with Goldman Sachs, I don't necessarily want uh, I'm there to see my trade. While they might want certain parties like regulators, for instance, to see the trade, they don't want their competition to see the trade. It's also necessary for business for consumer protection reasons. If you're running a large business and taking care of a lot of people's personal information, you can't risk leaking that to the world. There's also regulatory requirements like Health Information Protection Act, the Child Online Protection Act and things like that, which specifically require that you protect information is part of your business is a long time cipher punk, which is sort of a term that encompasses somebody who's part activist, part coder. They tend to be pretty libertarian in their views on have really, really strong respect for privacy. They try to take these into the technologies they build if you spend even a little bit of time with Zuko. As I had the pleasure of doing this fall for writing the story, it becomes clear that he's not motivated by material gain. He's definitely more of an idealist. Certainly, working with J. P. Morgan is a good business opportunity for his company's cash. But you get the sense that Zuko wouldn't be working on this project if he didn't feel as though it has some great potential to benefit society at large. You know the story of the encrypted love notes in the Blockchain. Very shortly after the cash launched about a year ago after the Blockchain launched, a young woman of my acquaintance said she had received a cash payment of a tiny amount. And in the encrypted memo field, there was a document. It was tickets to an event that she and her boyfriend have been talking about going to sew. It was encrypted love note in the Blockchain and that that actually exists. I've never seen it. Um, I take her word for it only at the center, and the receiver can see it, but it's in the cash box Encrypted love notes in the water.