Category: Cryptocurrency News

After all, few know Bitcoin better than him.

An early and active participant on Bitcoin message boards, Wilcox frequently communicated and collaborated directly with the pseudonymous founder of Bitcoin, Satoshi Nakomoto. In fact, he authored the very first blog post on bitcoin, which Satoshi linked to on the original Bitcoin.org website. That is the ultimate seal of approval when it comes to crypto.

However, in an interview with Forbes, Wilcox made it clear that for as far as Bitcoin has come it is far from a fully-formed project in many areas.

For starters, the pseudonymous nature of the blockchain, which hackers and criminals are slowly finding out is not nearly as private as they hoped, was not the desired end state. As Wilcox tells it, “The fact is, like, to basically 100% of all the early bitcoiners, including Satoshi and Hal (Finney) and Nick (Szabo) and Adam (Back), and everyone…Privacy was like the main value proposition.”

If nothing else, it was clear that it deserved central billing alongside independence from central banks, the more common narrative of Bitcoin’s origin story.

The proposed solution back in 2010 was something called zk-snarks (Succinct Non-Interactive Argument of Knowledge). In short, zk-snarks can be used in a blockchain to hide not only the identities of the sender and receiver, but transaction amounts as well. Total privacy.

Back when Satoshi was actively developing bitcoin he had hoped to integrate zk-snarks into the network. However, by the time he stepped away in 2011 the technology was not advanced enough to install without slowing Bitcoin down (it is already slow even by crypto standards) or burdening it with too much data.

Wilcox was part of a team of scientists in 2012 who presented a proposal to integrate zk-snarks on top of Bitcoin at a conference in San Jose, but the core developers told them that the technology had to be proven on another blockchain before receiving serious consideration.

So that is exactly what Wilcox did – and a couple of years later Zcash was born.

It is also clear in his writings that Satoshi knew that bitcoin, if successful, would have a very large carbon footprint, something that my colleague Chris Helman pointed out in a recent article for Forbes, “It’s the same situation as gold and gold mining. The marginal cost of gold mining tends to stay near the price of gold. Gold mining is a waste, but that waste is far less than the utility of having gold available as a medium of exchange. I think the case will be the same for bitcoin. The utility of the exchanges made possible by bitcoin will far exceed the cost of electricity used.”

It is on this point that Wilcox wants to use Zcash to move crypto forward, starting today. In a forthcoming blog post shared exclusively with Forbes, he is advocating for Zcash to move away from the same energy-intensive ‘proof-of-work’ consensus mechanism as Bitcoin to a more eco-friendly ‘proof-of stake’ approach.

The implications of such a transition could be huge. Zcash is a close cousin of Bitcoin, its code is actually based on Bitcoin, and if successful it could open the door to Bitcoin possibly eschewing mining as well.

So what exactly is ‘proof-of-stake’? Rather than operating millions of dollars worth of energy-consuming computing hardware racing to solve complicated math problems in exchange for freshly-minted bitcoin, nodes on the network post holdings as collateral at risk of forfeiture should they act dishonorably. Proof-of-stake is lighter, faster, and in the words of Wilcox even more secure than proof-of-work.

“I think proof-of-work has some security flaws, as has been demonstrated by the 51% attacks that have occurred (when a miner controls a majority of computing power on the network and can steal tokens). And I think proof-of-stake can provide a much more powerful kind of security and at lower cost.”

He also pointed out that under proof-of-work setups users have little recourse if the network gets attacked. However, on a proof-of-stake network the bad actors can be identified and have their tokens revoked so that the rest of the network can go on operating as usual. In fact, this is similar to an argument offered by Ethereum creator Vitalik Buterin, which is also going through an arduous transition from proof-of-work to proof-of-stake, to justify the switch.

When asked why he is advocating for the transition now, Wilcox points to a few key reasons, most notably that the proof-of-stake is ‘proven’ and no longer experimental. As evidence he points to the successful launch of networks such as Algorand, Cardano, Cosmos, and Tezos.

In fact, environmental concerns do not seem to be a leading justification for the shift, but rather his belief that proof-of-stake is the better all-around approach moving forward. He also recognizes that right or wrong, people are increasingly worried about crypto’s carbon footprint. Switching to proof-of-stake in his mind is then a win for everyone.

That said, while Zcash is based on Bitcoin and shares many of the same characteristics, down to its hard limit of 21 million units, the two networks are in different universes from adoption and scale points of view. ZEC (Zcash’s native token) is currently priced at $111.55, while bitcoin is nearly 350x bigger at $38,709. Bitcoin processes around 250,000 transactions per day, while Zcash hovers around 4,000. Additionally, the bitcoin network’s hashrate of 102,631,000,000,000,000,000 hashes per second is orders of magnitude bigger than Zcash’s 4,992,000,000.

That said, Zcash has tripled Bitcoin’s returns to investors year to date.

So even if Zcash makes a successful transition, that does not mean that bitcoin could simply follow the same path. Plus, bitcoin’s community has historically been resistant to major change, understandable given its focus on security, and the necessity of proof-of-work has become a hardened part of its ideology.

A final reason why things are moving forward now is because as Wilcox tells it, we are entering an inflection point when it comes to protecting our privacy from governments and corporations alike, “We’re both simultaneously seeing mega corporations and governments seizing more and more control over everyone, both in the east and the west…And we’re simultaneously seeing people worldwide becoming more aware and valuing their privacy more, their autonomy, their human relationships.”

He also believes that the stakes are being raised when it comes to central bank digital currencies (CBDCs) and fears of surveillance capitalism. That said, Wilcox would not be opposed to collaborating with banks around the world if they wanted to integrate Zcash and  zk-snarks, saying “We definitely could help them come up with improved or variants, zero knowledge proof that would serve their purposes. But we would do so only if that one they would feed back into ZEC, which is the engine of our mission, our mission is to empower and free everyone in the world.”