HyperZcashization

By: Sixten Hodler

(Vaks, 2019)

HyperZcashization is a Zcash induced fiat currency demonetization. HyperZcashization is the voluntary transition from inferior and inflationary currencies to a superior and encrypted cybercoin; its adoption is a series of individual acts of entrepreneurship. The process of HyperZcashization is inexorable because the state cannot ban Zcash, i.e., restrict competition. Zcash don’t care about borders. As long as there is at least one person able to send and receive packets in a given country, the fiat currency of that country will eventually fall victim to HyperZcashization. Moreover, HyperZcashization does not depend on monetary and fiscal mismanagement — the exchange rates of fiat currencies can remain stable relative to each other — HyperZcashization will pulverize all of the exchange rates. Simultaneously. PERIOD.

The Privacy Narrative
“The multitude will certainly be seized by the common affection, and be governed by it in all their actions.”
— David Hume, 1742, On the Rise and Progress of the Arts and Sciences

Narratives are the most powerful force in the universe. In 2017, scalability was on the tip of everyone’s tongue. So powerful was this narrative that XRP, a centralized shitcoin, outperformed just about every asset ever within a 12-month period. Even bitcoin, in an attempt to appease the narrative, broke itself apart — with the dominant faction choosing to become an ICO for the lightning network.

We can see the power of narratives throughout history. After WWI and heading into the 1920s, people falsely expected consumer prices to fall back down to the pre-war era. Due to economic ignorance, the masses did not blame the government for an inflated money supply when prices failed to revert. Instead, people were paranoid about the profiteer lurking in the shadows while waiting to extract surplus value at every chance. Henry Hazlitt (1920) found this so curious that he mocked it:
“The butcher is amazed at the profiteering of the man who sells him shoes; the shoe salesman is astounded at the effrontery of the theatre ticket speculator; the theatre ticket speculator is staggered at the high-handedness of his landlord; the landlord raises his hands to high heaven at the demands of his coal man, and the coal man collapses at the prices of the butcher.”

So paranoid was everyone about the profiteer that commerce came to a halt and, in a self-fulfilling prophecy, prices temporarily fell during the recession of 1920–1921. The following Ngrams chart shows just how pervasive the profiteer was in the minds of men, women, and genderfluids alike.[1]

Profiteer Ngram Counts

However, unlike the profiteer narrative that was a relatively short-lived mania, the privacy narrative has been building a solid foundation for quite some time. As more people become aware of how visible they are online, the more privacy will become valuable. The following Ngrams chart shows just how persistent the growth in privacy has been over the past century.

Privacy Ngram Counts

The scaling narrative in the cybercoin space ultimately rose out of a fundamental problem — adoption was outpacing throughput at given block size limits. Likewise, the upcoming privacy narrative in the cybercoin space will rise out of a fundamental problem — a lot of people still on the sidelines are unwilling to live in a glass house. The signature scheme used in bitcoin is ECDSA, which uses cleartext as opposed to ciphertext. In other words, bitcoin is a fully transparent blockchain, which poses many problems, chief among them is that it is missing a crucial component of money: fungibility.

1 bitcoin ≠ 1 bitcoin
Fungibility means that each unit of a good is perfectly interchangeable. This is impossible to achieve for a completely non-private blockchain like bitcoin — virgin coins are inevitably worth more than coins with a transaction history since the latter may have been used illicitly at one point (Back, 2018). The current “solution” used by bitcoiners is to use a new address per transaction and to constantly mix coins in pools. While these steps add noise, which makes it harder for the plebeians to map the blockchain, they are useless against machine learning algorithms designed specifically to subtract noise. Moreover, the blockchain is permanent, which means that even if entities currently do not have the tools to map out the entire chain, they eventually will. Today, the blockchain may only be 86% mapped. Tomorrow, 100% (Chainalysis Team, 2018).

Satoshi Nakamoto had no choice but to use the ECDSA signature scheme because, until recently, the only alternative would have been to use RSA. The problem with RSA is that it would make transactions several orders of magnitude larger. This means that, instead of the bitcoin blockchain being 220 gigabytes today, it would be at least several terabytes, significantly hurting decentralization and therefore security. Moreover, it is unknown whether the market would have trusted the supply auditability of an encrypted cybercoin at the time — bitcoin was new and experimental enough to begin with.

Satoshi (2010) addressed the use of ECDSA early on, as he was repeatedly asked to include a memo field for transactions:
“I very much wanted to find some way to include a short message, but the problem is, the whole world would be able to see the message. As much as you may keep reminding people that the message is completely non-private, it would be an accident waiting to happen.

Unfortunately, ECDSA can only sign signatures, it can’t encrypt messages, and we need the small size of ECDSA. RSA can encrypt messages, but it’s many times bigger than ECDSA.”[2]

1 Zcash = 1 Zcash
It wasn’t until several years later, in 2014, that a bunch of absolute gangsters came up with a feasible alternative to RSA: zk-SNARKs (Ben-Sasson, et al., 2014). Not only are zk-SNARKs significantly smaller than RSA, they are also state of the art zero-knowledge proofs. This means that transaction amounts, sender addresses, and recipient addresses remain hidden to third-party onlookers. Zcash was the first to implement zk-SNARKs when it launched in late 2016, originally using an intricate trusted setup (The Ceremony, 2017). And yes, Zcash also has the memo field that people were bugging Satoshi about early on (Wilcox & Peterson, 2016).

It is thanks to zk-SNARKs that Zcash contains the crucial fungibility characteristic of money not present in previous cybercoins. Although there are a number of other cybercoins that claim to be fungible, they are either phony, too heavy, or are missing one of the other characteristics of money. For example, it could be argued that the grin cybercoin lacks durability because previous transactions get deleted; only a portion of the blockchain history survives over time. Not only does that make a memo field impossible, it also makes it impossible to selectively disclose a historical transaction.

Cybercoin Moneyness

HTTPS > HTTP
HyperZcashization is inevitable for the same reason that the rise of HTTPS was inevitable. When it comes to HTTP, data (such as usernames, passwords, credit card numbers, etc.) are sent unencrypted (cleartext) over the internet, which allows for man-in-the-middle attacks. This is completely unacceptable. Only a fool would give his, her, or xyr information away over an HTTP website.

Throughout the 1990s, as the internet was being commercialized, people realized this was a major issue, and so came the development of HTTPS, which allows data to travel encrypted (ciphertext). In the early days, there was some political backlash against HTTPS, with some fearing that it would aid terrorism. Today, not only is HTTPS ubiquitous, it is required by law for banks, financial institutions, social networks, and e-commerce sites. Interestingly, one of the main reasons HTTPS didn’t become ubiquitous even faster is because, initially, HTTPS was significantly heavier. However, as time went on, the speed and throughput of the internet improved and HTTPS became lighter, which made it more feasible at scale.

The good news is that bitcoin is immutable. The bad news is that bitcoin is immutable. In other words, a decentralized system inevitably accumulates inertia and ossifies. The larger and older the system, the more inertia and ossification. This would be perfectly fine if bitcoin was good enough. Unfortunately, it is not good enough. Bitcoin is a beta product — it is HTTP. Zcash is HTTPS. In a nutshell, Zcash is bitcoin but:
• adds encrypted transactions (for privacy)
• adds encrypted memo field (for sending love notes)
• adds viewing key (for selective disclosure)
• uses a memory-oriented mining algorithm (avoids competition with SHA-256)
• has faster & bigger blocks (quicker confirmations & more throughput)

Selective Disclosure
“Cypherpunks seek to put into place structures which will allow people to preserve their privacy if they choose. No one will be forced to use pseudonyms or post anonymously. But it should be a matter of choice how much information a person chooses to reveal about himself when he communicates.”
— Hal Finney, 1993, Why Remailers II

The underlying point of Zcash is not that everything should be private. Rather, individuals should have control over how much they reveal, and to whom. In other words, Zcash provides users with the power to select which portion of their transaction history, if any, they disclose to various actors.

The importance of selective disclosure may be demonstrated with the following real world example. Consider Stefan Molyneux, a YouTube philosopher turned alt-right cheerleader. The transaction history of his bitcoin donation address is open for all to see. There are some terrible disadvantages to this. For one, people can know he has been sent several million dollars worth of bitcoin at current prices — something he may not want the world to know. On the one hand, if people think he continues to hold the cybercoin, then he becomes a target for marketers and perhaps even more nefarious forces that may bother him or his loved ones. On the other hand, if people think he sold the bulk at much lower prices, they may think he is foolish. Not only is his subsequent transaction history exposed, so are the addresses and the transaction histories of his donors — all of which can be mapped.

The right to privacy will continue to be under constant threat. For example, Australia, historically a testnet for the FVEY, recently passed an ambiguous but downright disgusting anti-encryption law that requires tech companies to provide backdoors so that the government can slide into all the DMs (Mcguirk & Bajak, 2018). More recently, India has been heading in the same direction (Murgia, 2019). Perhaps the most egregious violation of privacy is yet to come via the “social credit” rating system that the Chinese state plans to roll out in 2020 — in no small part thanks to extracting data from private companies like Alibaba (Hatton, 2015).

If you’re still having trouble deciding what side of the privacy debate you’re on, consider the following:

HyperZcashization
Money is ultimately a measuring stick — a benchmark with which to represent value. Therefore, the potential market capitalization of money is the total market capitalization of everything, including all goods, services, stocks, bonds, commodities, derivatives, and real estate (physical and digital). Although the actual amount is unknown, it is estimated that the total value of all money and markets globally amounts to roughly $1.8 quadrillion (Desjardins, 2017). Thus, we arrive at a potential value of Zcash at $86 million per cybercoin.

$1,810,300,000,000,000 ÷ 21,000,000 Zcash = $86,204,762

Please note that this is an extremely conservative figure. For one, the $1.8 quadrillion does not explicitly include labor, oil, and other important inputs that are only partially captured by stock markets. Moreover, it is possible that many private keys will be lost over time as the plebeians onboard, potentially amounting to 4 million departed Zcash cybercoins (Roberts & Rapp, 2017). This would put the value of 1 Zcash at over $100 million. Furthermore, it is very likely that the value of assets, including many digital assets that do not yet exist, will be substantially higher in the future. Lastly, history suggests that fiat inflation will continue during the process of HyperZcashization. The long-term value of Zcash in terms of the USD shitcoin is precisely $∞ per cybercoin.

In the 1990s, we did not know for sure whether the internet would continue to grow. However, if it did, then the rise of HTTPS was logically inevitable. The same is true for the cybercoin market and Zcash. It might make sense just to get some in case it catches on. Henceforth, if enough people think the same way, that becomes a self-fulfilling prophecy.

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Works Cited

Back, A. (2018, 8 20). Twitter. Retrieved from https://twitter.com/adam3us/status/1031570649628770305

Ben-Sasson, E., Chiesa, A., Garman, C., Green, M., Miers, I., Tromer, E., & Virza, M. (2014). Zerocash: Decentralized Anonymous Payments from Bitcoin. IEEE Symposium on Security & Privacy. Oakland. Retrieved from http://zerocash-project.org/media/pdf/zerocash-extended-20140518.pdf

Chainalysis Team. (2018, 12 19). Mapping The Universe Of Bitcoin’s 460 Million Addresses. Retrieved from Chainalysis: https://blog.chainalysis.com/reports/bitcoin-addresses

Desjardins, J. (2017, 10 26). All of the World’s Money and Markets in One Visualization. Retrieved from The Money Project: http://money.visualcapitalist.com/worlds-money-markets-one-visualization-2017/

Google. (n.d.). Profiteer / Privacy. Retrieved from Ngram Viewer: https://bit.ly/2nez8BN / https://bit.ly/2lJPHFh

Hatton, C. (2015, 10 26). China ‘social credit’: Beijing sets up huge system. Retrieved from BBC: https://www.bbc.com/news/world-asia-china-34592186

Hazlitt, H. (1920, 3 21). PROFITEERS AS “PUBLIC BENEFACTORS”. New York Times. Retrieved from https://www.nytimes.com/1920/03/21/archives/profiteers-as-public-benefactors-rash-apologist-says-the-greedy.html

Mcguirk, R., & Bajak, F. (2018, 12 7). Australia anti-encryption law rushed to passage. Retrieved from Phys.org: https://phys.org/news/2018-12-australia-anti-encryption-law-passage.html

Murgia, M. (2019, 1 16). WhatsApp to push back against Indian crackdown on encryption. Retrieved from Financial Times: https://www.ft.com/content/8adc2b8c-1a4a-11e9-9e64-d150b3105d21

Nakamoto, S. (2010, 1 28). A newb’s test — anyone want to buy a picture for $1? Retrieved from bitcointalk.org: https://bitcointalk.org/index.php?topic=25.msg159#msg159

Roberts, J. J., & Rapp, N. (2017, 11 25). Exclusive: Nearly 4 Million Bitcoins Lost Forever, New Study Says. Retrieved from Fortune: http://fortune.com/2017/11/25/lost-bitcoins/

Vaks, Y. (2019). ZE-tardigrades chilling. Retrieved from yonatvaks.com: https://www.yonatvaks.com/

Wilcox, Z. (2017, 7 14). The Ceremony. (M. Webster, M. Kielty, & M. Peck, Interviewers) Radiolab. WNYC Studios. Retrieved from https://www.wnycstudios.org/story/ceremony

Wilcox, Z., & Peterson, P. (2016, 12 5). The Encrypted Memo Field. Retrieved from Z.cash: https://z.cash/blog/encrypted-memo-field/

[1] The idea that these narratives spread like a virus, i.e., go viral, isn’t just a metaphor. In fact, they can be modeled using the epidemiological SIR model. The single most important factor in virality is the contagion rate — the rate at which susceptible people are exposed to and infected by an idea — both in absolute terms and relative to the recovery rate.

[2] More posts from Satoshi on this topic may be found here:
https://bitcointalk.org/index.php?topic=25.msg173#msg173
https://bitcointalk.org/index.php?topic=30.msg1169#msg1169 https://bitcointalk.org/index.php?topic=1032.msg13221#msg13221
https://bitcointalk.org/index.php?topic=1545.msg18250#msg18250

by: Sixten Hodler

Originally Published here