Zcash vs. Bitcoin vs. Ethereum

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Date Published

01/29/2021

Bitcoin (BTC), Ethereum (ETH), and Zcash (ZEC) have become three of the most popular forms of cryptocurrency over the past few years. While bitcoin has long been the leader of the crypto space (and still is), altcoins Ethereum and Zcash are two of the hottest up-and-comers on the market to date.

All three forms of crypto are blockchain-based, but that is one of just a few key similarities they all share. Knowing the unique differences between each of these digital assets can help inform your decision on which to invest in or which to mine. You may decide to invest in all three, or to pick a combination that best suits your goals. After all, diversification is a wise and important strategy for both your crypto holdings and your greater portfolio.

Here are the main similarities and differences between Bitcoin, Ethereum, and Zcash to help decide which can have the biggest impact in your investment strategy.

Origins of Zcash vs Bitcoin vs Ethereum

All three of these cryptocurrencies have been around for several years now, but none can beat the longevity of bitcoin.

The Bitcoin network was launched in January of 2009 as the original form of cryptocurrency, and we have since seen it go through many different phases, including three halvings and a multitude of price swings.

Ethereum was created several years later, surfacing in July of 2015 as an open-source software platform for decentralized applications.

A little over a year later, in October of 2016, Zcash was created as a fork of Bitcoin designed to provide increased privacy over its predecessors.

How they work

Bitcoin, Ethereum, and Zcash are all decentralized peer-to-peer blockchain networks that allow users to send currency between one another. All three also use proof-of-work algorithms as their go-to functionality, wherein miners compete against one another to solve blocks and get a reward.

But there are also a few key differences in how each of these networks operate.

On the Bitcoin network, transactions are anonymous but they are also traceable, meaning you can see the digital wallet information of both parties involved in the transaction. The total supply of bitcoin is capped at 21 million, meaning that is the total number of bitcoin that will ever be mined into circulation. The halving of bitcoin takes place every 210,000 blocks in order to prolong the amount of time it will take for all bitcoin to be mined.

The Ethereum blockchain network is powered by the cryptocurrency ether and allows users to move money or otherwise execute transactions directly between one another without any need for a third party. A key difference between Ethereum and Bitcoin is that it has its own programming language that allows developers to program the network to perform other tasks and to transfer other digital assets – including bitcoin and Zcash.

The Zcash network is also powered by its own cryptocurrency – ZEC coin – which also has a total supply of 21 million that is expected to be mined completely in 2032. The Zcash network uses the zk-SNARKs algorithm, which stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge. Privacy was a key concern in the development of Zcash, and it allows users to send information between one another without revealing any identifying information on the blockchain – not even a wallet address.

Advantages of bitcoin

Many of the advantages of bitcoin are in line with the advantages of cryptocurrencies as a whole – they are decentralized, easily transferable, and so on. But because it is the original and by far the most popular cryptocurrency, it also has unique privileges not granted to newer or lesser-known counterparts.

For starters, it has far greater liquidity than many of its peers, so users can retain much of its value after it has been converted to fiat money. It is also a more widely accepted form of payment than other cryptocurrencies – and this trend is only expected to continue. The built-in scarcity of 21 million coins is also likely to support long-term value against fiat money and more abundant forms of crypto. The quantity limit means you cannot create new bitcoin at will, which is a leading cause of inflation for traditional currencies.

Advantages of Ethereum

The biggest advantage of Ethereum is its programmability. This allows the network to be used for much more than just digital payments, also serving as a marketplace for financial services, games, decentralized applications (DApps), and more. The network is also immune to any third-party intervention.

Certain flaws within the Ethereum network (the slower speed of its proof-of-work mechanism and scalability limitations) have led to the advent of many competitors and of Ethereum 2.0 – a planned upgrade by the Ethereum Foundation specifically designed to improve on these performance issues.

Advantages of Zcash

The primary benefit of the Zcash network has to do with its increased focus on privacy. The network truly does preserve anonymity, allowing users to send and receive funds such that the only information the public can see is the date and time of the transaction.

Zcash is also able to be mined using less power than more robust, challenging networks, which makes it a more realistic avenue for smaller-scale miners.

Investing in each

Bitcoin, Ethereum, and Zcash are all popular investment and mining options, especially amid economic uncertainty as we are experiencing right now. The stability they can offer also makes them popular diversification vehicles in portfolios.

Bitcoin and Ethereum currently rank 1 and 2 respectively in terms of market cap, while Zcash is a bit lower at 44 at the time of writing. While all three are fairly volatile, this does mean there is potential for high highs when the crypto market is thriving as it has been throughout much of 2020.

Bitcoin price

Bitcoin underwent its third halving in May of 2020. Its price steadily increased in the months following the event before skyrocketing in late autumn and eventually surpassing $40,000 for the first time ever.

bitcoin price chart from january 22 2020 to january 22 2021

Ethereum price

Ethereum is backed by an increasingly large number of influential figures in the market, with many businesses beginning to accept payments of ETH. Its creators hope it will eventually replace internet third parties like Google and Facebook in order to provide users with complete, secure control over all of their data. Like bitcoin, Ethereum has also been increasing in price over the past year with a sharp spike over the course of the past couple months.

ethereum price chart from january 22 2020 to january 22 2021

It should be noted that a recent DAG size increase has now rendered GPUs with 4GB of VRAM or less obsolete when it comes to mining ETH.

Zcash price

The first halving of Zcash took place in November of 2020 and the price has increased since – but it has been a bit more up and down than bitcoin and Ethereum.

zcash price chart from january 22 2020 to january 22 2021

Zcash has long been criticized for its high inflation rate, which indicated the circulating supply of the coin increased at a much higher annual rate than most other cryptocurrencies. The halving was expected to help this some, and inflation has increased by almost 1% in a couple months since the event. The halving also brought an end to the “founder’s reward” and replaced it with a community-approved fund that aims to benefit the long-term development of the network.

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Date Published

01/29/2021

Author

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