Tai Zen: What’s up guys This is Tai Zen and with me today I have the Honorable, Grandmaster, Legendary LeonFu.com, the great Oracle of Cryptocurrency. And we’re broadcasting here from Atlanta, Georgia, one of the biggest cities in the Southeast of the United States of America. And in this module 3, we want to talk about the overview of the top Privacy coins real quick.
In module number 2 about the Privacy coins one-on-one we talked about the Privacy coin bucket and the 3 buckets that are inside the 3 sub-buckets inside the Privacy coin bucket. And this video we’re going to talk about the overview of the top Privacy coins and what you should pay attention to and what the differences are between them.
If you’ll notice, we took out one of the modules, it was 6 before and now we combine it to 5 because it would better to combine them so it made more sense and float easier. So let’s go ahead and get started, real quick or Sponsorship Disclaimer here.
This video has been sponsored by a Privacy coin project to provide an independent third-party review of the major Privacy coin projects currently active to educate the public about the importance of financial privacy. So the origin of most Privacy coins come from 2 categories or 2 places, you want to talk about that?
Leon Fu: So, all of the Privacy projects fall in one of these 2 categories at the moment. Of course, this all can change. They either start off with the Bitcoin codebase and then they add privacy features to that codebase and that’s what we mean and that in computers terms, we call that a fork or you take the existing codebase and you start as a new branch.
And then they started adding different privacy features when we explained the last of the buckets, the different technologies, that’s what they’re doing. But there’s a very notable project that came out a few years ago, it’s called CryptoNote and CryptoNote actually is a research project and white paper.
So, there’s a bunch of these Privacy projects that started out with the software codebase, and there’re Zcoin, Dash, Shadow Cash, and Zclassic and then there’s also multiple forks of Zclassic and Zclassic is an example of them. So what’s the advantage if you start with the Bitcoin codebase is because, you’re very similar to Bitcoins it’s easy for everyone to adopt your coin because it’s very similar to Bitcoin, which there’s a huge codebase already there.
That means exchanges can list you very easily, mining pools, wallet makers can integrate you and it’s easy to support because Bitcoin is so widely understood.
Tai Zen: In case you’re new to a Cryptocurrency is mining pools are the computers and the people who volunteer their computers to process all the transactions in the network and secure the network.
Leon Fu: Disadvantages like it’s hard to know if the developers have a deep understanding of the Cryptography of the math of the code, even if they haven’t built it if they just simply took someone else’s code and they’re just hacking it to add these privacy features. It’s not very clear if they actually know what they’re doing.
And that creates technical risks, there’s no guarantee because they don’t have a deep understanding of the math and the Cryptography behind it and that creates a risk to the project as an investment because somebody might just come along and hack the whole thing. And so that’s a big disadvantage.
Tai Zen: If someone takes the Bitcoin software and they put a security feature on top of it, that would be like when you go to the automotive dealerships and like the trucking companies, they would go and buy the chassis from Ford Motor Company.
Leon Fu: A better analogy I think would be like if you bought a sports car and you rip the engine out and drop the new engine in. Now to let’s say increase the horsepower, but you don’t know if they actually got the suspension and all the other things correct to match what this new engine does.
Leon Fu: He’s arguing that unless you’ve rebuilt the whole thing, basically if we’re using cars as an analogy, it would be the equivalent of let’s strip the whole car down to its component parts and put it all back together again. And if you can do that, you can prove to everyone you actually know how this thing works.
You can replicate it and you can pull it up quickly at each component because you basically took it all apart and put it all back together and that’s what he’s doing with Ethereum Classic. He hired a bunch of developers to do exactly that.
Take apart the existing codebase and understand it and then rebuild Ethereum client from scratch in a brand new mind and a different language. It gives your team credibility that you have the technical know-how because you rebuilt the entire thing from scratch.
Tai Zen: Now what’s your personal opinion, your software developer. What’s your personal opinion?
Leon Fu: I agree with his point as a software engineer, that’s definitely true. I don’t know if I completely agree if that’s necessary from investment investors. We’re not engineers because I would argue like something like Dogecoin built themselves up to a $20 million market cap from nothing.
Tai Zen: Charles Hoskinson is one of the former co-founders of Ethereum, not the founder. Talk about CryptoNote and its philosophy here.
Leon Fu: CryptoNote saw the privacy problems Bitcoin had that we had covered in the last video. It was a research project, a set out to try to fix those problems to try to make the currency fungible, which we defined in the last video. And they’re doing that by removing the transaction history behind each coin.
An open-source, how it works is a white paper that you can download for free off their website and so they also created a reference implementation that if you’re a software engineer, you can go and read it to see if it actually does what they say it does.
Tai Zen: So when you say that it’s open-source, it can be inspected others for flaws, why is that important?
Leon Fu: Well, basically it’s a security guarantee. As anyone who understands technology can go validate that what you’re saying is true. And it’s also important because especially for security and privacy, it’s also to make sure that you are actually doing what you say you’re doing.
But open source means it’s on Github, which is a website for software developers that they can go and download. If you go on the Bitcoin website, you can go download the entire source code.
Tai Zen: So Cryptonote has financial privacy, is a linkable untraceable transaction. So that means that you cannot go back and see where the transactions came from or where it’s going. Now the fair proof of work, it can be mined on an average PC.
That means that the technology can be done on an average PC, you don’t have to have a whole mining company. So it’s adaptive to changing market conditions, which is important. As markets change, you can adjust the parameters of the software.
So no double-spending, it means that once you send the tokens to another recipient, you cannot copy and paste it and send it again to someone else and cheat the system.
Leon Fu: The community called it the test net. It’s reset every few months to make sure people don’t start trading this thing. It’s meant as a reference, as a guide to us as a demonstration.
Tai Zen: So building a Cryptocurrency from scratch. Talk about the advantages and disadvantages.
Leon Fu: So if you do that, if your team build something from scratch, you obviously you understand it because you built it yourself. So it proves that at least you understand it at the level that you’ve done. Monero is an example of a Privacy note based on the CryptoNote.
What happens is it’s a brand new codebase, it is not from a Bitcoin’s codebase at all. There’re reasons people don’t do this, you are not compatible with any of the existing infrastructure, mainly for Bitcoin because Bitcoin is 80% to 90% of the entire value of a Cryptocurrency world period at this moment.
So there’s a huge amount of infrastructure, there’s a huge amount of changes, mining pools, wallet services. So if you have your own codebase, it’s very difficult for those services to adopt you, to integrate your project, your coin. We’re using Monero as an example, Jaxx & Exodus are 2 very popular wallets and they have had trouble integrating Monero.
In fact, Jaxx put it out a tweet, I remember a few months ago, they were just spending too much time on it and they had to put it on hold. They want to integrate it because it’s so popular, but there are having a really hard time and to this day. After 2 years, Moreno has been out, there are still no third party wallets even to this day.
They did put out a web wallet and because it’s a web wallet and it has all the vulnerabilities of any web wallet and there have been reports on the forums about people losing their Monero. So it’s a lot more work for exchanges to support, and as we mentioned here, there’s a huge codebase of Bitcoin that would be easily adaptable for the coins that are based on Bitcoins codebase.
Tai Zen: I’m going to talk real quick about the team members of the Cryptonote, they have Johannes Meier, he’s the chief Cryptographer, Maurice Planck to Cryptographer. You don’t have to memorize all of these people what their roles are.
But what’s important here is that we put a question mark here because there’s not a lot of information on there, we try to research and find them and it’s not easily found. So because it’s a Privacy coin project, I’m not even sure if those are their real names, it was hard to find them.
Now a few things that you guys want to know about CryptoNote is that they have a foundation, it was announced on July 14, 2014, their mission and their philosophy is to unite and facilitate the community to standardize and develop CryptoNote technology and to promote the Crypto notice the next generation Crypto platform. And they say that there’s more information coming soon about the foundation.
I put a question mark here because it’s not very clear, I tried to look for more information, but none of the links work to any of the names of the people that are on the board or any of it. And then I put a red arrow there because in the light-colored texts right there, it says that they’ll be announced in late 2015 and it’s already 2017, 2 years later and we still haven’t heard much from the foundation.
There’re components of CryptoNote as well as other components, there’s the Cryptonote technology that we just discussed and there’s a CryptoNote form that you can go in, there’s not a lot of activity there. And then what’s interesting is that they have the Cryptonote starter, which allows you to create your own Cryptocurrency in 10 minutes.
Now, this is basically how the new Cryptocurrencies are created. The first CryptoNote, Privacy coin was actually called Bytecoin and CryptoNote was originally just a white paper you said and then the first CryptoNote base currency was released in July of 2012 and it’s called Bytecoin, and it’s created in close cooperation with the CryptoNote team. So Bytecoin was the first and original implementation or creation of the CryptoNote white paper.
Now let’s talk about the CryptoNote family tree where it starts here. The first coin that was Cryptocurrency that was created was called Bytecoin and from here, it forked out all these other ones. For example like DashCoin, Boolberry, DarkNetCoin, DigitalNote, Monero, PebbleCoin, Fandomcoin.
And then they’ve got a bunch of other minor ones called DoctorByte, Infinium. Now the reason why we’re not going to talk about over 95% of these is that most of them are dead. These died out, their software has no development, for a privacy coin, security is utmost important.
And we’re not going to talk about any software or any Privacy coins that have not had their software updated in the last year or so, and some of these haven’t been updated in 1 year and a half, 2 years, 3 years. So that’s not very safe, we would never recommend any of those to you guys. And these are so small, it’s worth a mention and it’s not even worth researching.
But there are 2 that did survive from all this family tree and that’s Bilberry and Monero, and we’re going to focus on Monero most. Now before we go in and focus on the Monero and some of the other major Privacy coins, talk about the difference between a feature versus a platform.
Leon Fu: So a feature is a coin or a project that’s based around doing 1 or 2 or a few things very well. And a Bitcoin, of course, is the biggest and most valuable Cryptocurrency. Like we’ve mentioned, it’s between 80 and 90% of the entire value of this space.
And Monero is basically like Bitcoin, it’s as of right now, it does 1 thing very well, it’s focused on doing Privacy extremely well. So it relies on projects, there are a few projects that are built on top of Bitcoin, to extend what Bitcoin is able to do.
Things like Counterparty, Omni, Rootstock or a few of them and there are dozens of projects. I think there are over 10,000 repositories on Github with people trying to build various things, using Bitcoin as a base.
Tai Zen: So Github is for the audience here, for people that are not software people. That’s where all the software code, it’s like a library.
So you were saying that or there are over 10,000 software projects going on Github, where it’s being built on top of just Bitcoin. So what’s a platform?
Leon Fu: Platform-based project are things where they are trying to create a toolset so that you can build within the coin within the Project, not above it like Bitcoin, but within it, within the side of it. And the biggest one right now, which is the second most valuable Cryptocurrency after Bitcoin, it’s at about $2 billion.
Remember we said Bitcoin was 88$, to 90%, the other 10% is Ethereum. And Ethereum supports smart contracts and it allows people to build within the Ethereum of an ecosystem. It’s like building inside the box and built on top of the box.
Tai Zen: So, where should you focus your attention now? Because we’ve talked a lot about Privacy coins and the question that investors always ask us is where should they put their attention on? So, we will only focus on the leading Privacy coins, sometimes we call it the major Privacy coins versus the minor Privacy coins.
The reason why we focus on the major ones are the leading ones, or there are too many minor Privacy coins with insignificant features and they don’t have a large enough community behind them yet. So the major Privacy coins are the ones that include like Dash, Monero, ZCash, and Shadow Cash or the Shadow project.
Just a quick reminder before we dive into a Dash right here, I just want to show everyone Dash performance in 2016, it made over 500% profit and made five times Your Money. So, that’s in the dark arrow in the light area with the light text, it made over close to 2000% profit or 20 times Your Money in 15 months and it’s gone up even higher in 2017. So talk about some of the Dash factors.
Leon Fu: The project was started in January 2014. The supply is going to be 22 million coins, currently, there’re about 7 million Dashes circulating. And I believe the block rewards are 3.6 coins every 2 and a half minutes.
And it’s a decreasing 7% per year and right now it’s currently trading at around $70 a with half a billion dollars in market value at the moment. So some unique things they have is they have some very interesting governance features, they have a built-in treasury where some of the mining rewards go to the development team to help fund the development.
So what’s unique about this is as the price goes up in Dash, the development community have more and more funds, to help hire more, do whatever they are going to do.
Tai Zen: And funding is one of the most important features or aspects that you need to consider when you invest in any Cryptocurrency, not just Privacy coins but any Cryptocurrency.
Leon Fu: So you mentioned Bitcoin had a funding problem cause all the developers a bitcoins weren’t getting paid. And blockchain came in and like a VC back then, so a lot of the Bitcoin developers unless they owned a lot of Bitcoins, they were working, they were volunteers.
Tai Zen: So this is one of the unique things about Dash is because they have a built-in funding system where they don’t have to go out and beg for money or ask for sponsorships or ask for money. But that’s also a thing that other people complain about too.
There are people that favorite and there are people that do not favor, obviously we favor it because we believe that without funding, you can’t grow.
Leon Fu: That’s right. Everyone has to come from somewhere, working for free. People can only do that for so long.
Tai Zen: Their stomach starts getting hungry and it’s just rolling and then you need food. Some of the problems that NXT has was that it was a very good ideological project, but there was no funding. So nobody wants to run over there and work on it.
So, let’s talk about team makeup. Started by Evan Duffield, and his background experience of each player, you go read about it and then you talked about, you went to the Miami Bitcoin conference.
Leon Fu: I watched Ryan Taylor, which we’ll have a photo of him later. He spoke there, he is the director of finance and he says Dash right now, they started out as a Privacy project, but now they’re focused on mass adoption. And they’re going to do that with superior user experiences, consumer services such as Debit cards and ATM and a lot of community building.
Dash was one of the Bitcoin-based coins, it was built on top of Bitcoin or a fork of Bitcoin. And so, therefore, there’s plenty of wallets mobile on your phone, on the web, on the desktop, etc.
This is unusual, not very few coins actually have support from hardware wallets such as treasure, keep key ledger nano and we advocate you, if you have any significant amount of Cryptocurrencies, you try to store as much as you can on one of these devices on a hardware wallet.
Tai Zen: Especially if you have more than 1 month’s worth of income, you definitely need to keep it on 1 of the hardware wallets. Do not keep it on your phone or your laptop.
Leon Fu: So right now it’s at number 3 after Bitcoin and Ethereum and recently I would say this year it’s blown past Litecoin, Ripple, and Monero. So that you have no problems getting in or getting out at this moment, so it’s a meteoric rise.
It started at less than a year ago at $10, as of now it’s $70, and it’s doing its moonshot. Dash was started in 2015 and it was one of the first Privacy projects. So remember we talked about mixing was the first method that came along because it was simple and obvious to do.
Dash tried to build, mixing as a service that was within the currency itself rather than having to go to a third party and mixer. It originally was known as X11 coins because the proof of work, the algorithm mining miners used, used 11 different algorithms instead of just SHA256 and this was to provide a basic resistance because they didn’t want to concentrate the mining power, into these huge pools. That was their attempt that I believe and that’s the history.
Tai Zen: So basically what they’re doing is they’re using the Xcoin, these 11 algorithms so that an individual can process and secure the network and not just companies only. Next, we want to talk about the rebranding of Dash, Dash was rebranded less than 2 months later.
Leon Fu: As DarkCoin, we remember it’s started out as X11, and then a couple of months they said, hey, this is not really a good name because they were still Privacy focused at the time. So they’re rebranded, they’re focused on Privacy.
Tai Zen: And that was not a good idea. The name DarkCoin just has a very negative and dark connotation to it, which you don’t want. So you said they wanted to focus on Privacy.
Leon Fu: They wanted to focus on private and that was the logo, there’s a symbol there as DarkCoin. And so about last in 2015 of March, they decided that they were not going to focus solely on Privacy so they rebranded again and this time as Dash and that the new name change took effect in March of 2015.
They wanted to focus on mass adoption, they want it to get everybody to use a Cryptocurrencies, not just nerds and geeks. That’s why they pivoted away from just solely focusing on Privacy to trying to address some of the issues in Bitcoin that’s preventing Bitcoin from being used by everyone.
So, they still have Privacy, there’s still the Privacy feature that was originally there was called the Darksend, that was also rebranded, now it’s called Private send. I’ve watched him speak, he was the last speaker of that conference and I did what I felt was an excellent speech, talk about why Bitcoin hasn’t gotten mass adoption and what Dash was going to do to solve those problems.
And it’s about 20 minutes, you can find it on youtube if you just search there. Now it’s focused on mass adoption is their primary focus.
Tai Zen: So, when we talked about mass adoption, they’re talking about, getting many consumer foci features such as atm, instant payments, user interface designs, and debit card. But you said that their main thing that he stressed the most was getting grandma can use a Cryptocurrency.
Let’s talk about Monero in 2016, they had over 3,000% gains in the first 9 months, that’s 30 times Your Money. That is definitely life-changing when you guys hear us talk about life-changing money, you put $1,000 in this and it turns into $30,000 in 9 months, that’s life-changing.
That can be a down payment for your house, that can buy you a house, that can pay for your college, that can do a lot of things, pay for your wedding. And in the light arrow in the light techs here, it went up 37 times if you just wait another 4 months.
Definitely, life-changing profits are available in the Privacy coin sector guys. So let’s talk about some of the Monero facts.
Leon Fu: So the project was started, a couple of years after 1 or 2 years after the Bytecoin, a coin came out in April of 2014, there’s expected to be 18 million coins. Right now there’s 14 million circulating, there are 8 coins with 2-minute blocks and reducing eventually that’s going to go down over time to just 0.3 Monero every 2 minutes.
Tai Zen: And what that means is that there are eight coins, 8 Monero coins are minted, 8 minted every 2 minutes.
Leon Fu: It’s $15 where over 200 million market cap and as of now, the leading Privacy coin bucket as measured by market cap that’s solely focused on privacy. Now Dash does at this time of this video Dash is bigger, but they’re no longer full focus solely on privacy.
So it’s a community funded project, as from my understanding that it was a bunch of guys that got together and decided to because there were some issues with the way a Bytecoin was distributed and they wanted to start a new project, a new currency that they believed it was fairer.
Tai Zen: So you talked about the team makeup.
Leon Fu: So, there’s this character, called Fluffypony. That’s his handle goes by that on online, on his twitter and social media, his real name is Ricardos Spagni. Once again, these are Privacy projects, many of the developers seem to want to wish to remain anonymous.
So there are many contributors we don’t know the identities of all of them. But for those that want to reveal themselves, you can go to that website to find out who they are.
They are really focused on trying to do Privacy better, they’re one of these projects that it’s focused on a feature, they want to be the best at what they do. And so that seems to be what the team and the communities focused on.
Tai Zen: Now, you and I both know that no matter how good your software is, it doesn’t grow, it doesn’t make money unless there are people using it. We’re investors so we want to invest in software that people are actually going to use. So what’s their strategy?
Leon Fu: We can make money as they develop their technology and as a perfect their technology, we will make money like in the short term, you will make money. But once you get to a certain point, you need to get users.
Those vertical rises because of adoption because a group of people decided they were going to in mass, technology can only get you so far. But the reason Monero exploded is that they actually did get adoption, they got adoption from the dark markets.
Tai Zen: These are places on the Internet where they sell illegal stuff such as drugs, guns, things like that.
Leon Fu: So AlphaBay is right now, I believe they’ll leading dark market and Monero is accepted as payment on that market. Now we don’t advocate any activity but there are people that do that, and that’s the reason for the rise here.
So CryptoNote was really groundbreaking, it was really a way to address, using ring signatures one of the technologies we described to make linkable payments so I pay you and you pay someone else, no one can follow that coin through the blockchain as they can with Bitcoin.
It was based on the white paper in 2012 and the reference implementation was for educational purposes, you can go on their website and take a look at it. And it was a first Crypto, the actual Crypto meant to be distributed to use this reference implementation for ring signatures. And that’s when Monero came out a few years later building on top of the coin base of Bytecoin.
Tai Zen: So now, Monero is a fork or a clone of Bytecoins is officially started in April 2012. These are a good explanation of the ring signatures.
Leon Fu: So they exploded in price in 2016 when the Dark market Oasis came out and started accepting it as payment. Now, this wasn’t just a currency that Privacy or Cryptographers or academia was just playing around with, people were using it to actually buy stuff and in this case, buying drugs on these Dark market places.
And there’s at the same conference in Miami I ran into a big investor in Marinara, he was a hedge fund manager and he told me that 10% of all the drugs being purchased on these dark markets were using Monero as a currency.
Tai Zen: You want to talk about the exits game?
Leon Fu: The owners of Oasis, I believe it was, received a lot of Monero is actually bought it or was given the law of Monero and then they announced that they were going to accept it as payment on their markets.
That was the first rise that you saw on that chart when once this dark market picked it up, that’s when you had this explosion to $13 here, or pass $13 up to like $15. But then, the owners of Oasis decided they were just going to take the money and run.
Tai Zen: So they basically, they were offered a bunch of Monero tokens from the Monero team. And once they loaded that up, they announced that they were going to accept it on their dark market.
So they were willing to accept it. So people started rushing in to buy it so they can buy the tokens so that they can use it to buy the illegal stuff on the dark markets.
Leon Fu You can see it started out at 50 cents. So as news got out, rumors started getting out that a darknet was going to pick it up. Then the news came out, then it went crazy.
Tai Zen: But what happened was the owners of the dark market, they sold all their tokens into the rally here and then they just shut down their website and just left. And everybody that deposited funds into their dark market took off.
So this will be the equivalent of saying, for example, eBay or Amazon, taking everybody’s money and shutting down their business and then gone. But what’s interesting is that this was supposed to die out when it crashed.
Leon Fu: Yes, this was the crash that happened after that exit scam and this should have been the end Monero. Privacy is beyond just buying drugs.
We covered that in the first video that the news when this caused everyone to start looking at this and despite the exit scam, people realize that hey this is more valuable as Privacy then just using it to buy drugs. It’s valuable because you can use it to buy drugs, you can’t use it to buy drugs anymore, that should have been dead, that should have been the end of it.
Tai Zen: This is an important note to make, the distinction to make. The darknet businesses that announced that they were accepting Monero as a currency on their business and their market, the business was a scam, but the technology behind Monero is not a scam.
Just because of someone roofs off their customers for their currency, it does not mean that the currency is bad or it’s a scam. So we just want to make that very clear that Monero the currency the Cryptocurrency is not a scam. Their technology is doing what they claim for it to do, it’s just the business that decided to accept it, ran off with everyone’s money.
Leon Fu: If I or we realize the value of Privacy, we would buy because we understood that down here when I was saying you can buy drugs with Monero and then people in the world said you can’t anymore, it should go right back to where it was.
Obviously, if some people start buying drugs with it, then it’s now a lot more valuable. But, once they couldn’t buy drugs with it because of the scam, they said if it’s still valuable.
Tai Zen: There are people, like for example, we live in the United States but the same pharmaceutical drugs that are being sold in the US, they’re cheaper in another country, the same drugs that may be sold for $30 a pill here. Like I remember when I first had to take some heart medication and for example, like Lipitor, which is the number one selling a pharmaceutical drug in the world at the time before they had Generic, they were selling it for close to $30 a bill.
So in order to take 30 day supply of it, that costs $300 in US dollars. So at the same time, there were countries out there that was selling it much cheaper, like in Mexico and Canada and other countries.
The problem is you can’t buy it with the US dollars, but if you go into the Darknet markets and you find a reputable source that supplies it, you can actually buy it with Bitcoin, Monero, and Dash or with some of the other coins and save you some money, as long as it was from a reputable source. So talk about the fairness Monero.
Leon Fu: Monero was started with the question the audience might have is why doesn’t everyone just use Bytecoin? That was the first one, in the Crypto community, they were not happy. There was some controversy, and this is all documented on the forms as to the issues where it was said that most of the coins were mined by a small group of people and many people were not happy with the initial distribution, they didn’t feel it was fair.
Maybe they were accusations saying the miners mind a bunch of coins before releasing it to the public, so it didn’t give the community a chance to mind those coins. So that wasn’t fair.
And I don’t want to judge whether or not it was fair, I provided a link here that you guys can go read it and follow the thread and you can judge whether or not it’s fair. But regardless of whether or not it was fair, Monero has as blown by Bytecoin, and is now the leading Cryptonote base.
Tai Zen: Next we want to talk about ZCash and here’s Zcash is a price chart from 2016. If you look really closely, it shows that it’s at 5 Bitcoins and it dropped all the way down to 1/3 of a Bitcoin here.
But if you go back to the history previous to that and look at the rest of it, at one point it was traded at 3200 Bitcoins per ZCash token, and what you saw earlier at 5 Bitcoins is way down here and you can’t even see it. To explain this phenomenon, why is this crazy chart like this?
Leon Fu: ZCash was very unusual because it started trading from day 1 when it’s released and most coins are not like that. Most coins they launch and the exchanges don’t pick up the coin until there’s a big community and enough people want to trade it.
And it’s very rare that a coin trades on a major exchange on the minute it’s released. And so that’s kind of like why we see this activity. So ZCash was actually started when the network launched, they did something called a slow start, which means they didn’t want the early miners, the miners that could get a jump on the network right away.
Tai Zen: They already have hundreds of computers.
Leon Fu: They already have hundreds of computers to go on block zero, getting all the coins. So what they did, their strategy was to do what they call a slow start. Where a very small amount of ZCash was mined per block for the first month.
In the first month or so, I forgot exactly how many blocks. And the idea was that this would give all the miners time to set up their hardware to make sure all the setup was correct and the software was correct and they could start mining without having all of the coins go to 1 miner that was ready. That was the goal that they didn’t want a large, entity controlling a large amount of the outstanding ZCash.
And then a month later after the slow start period over, it would start at 50 ZCash every 10 minutes. So that’s the reason that the price was that highest because there was almost no supply. There are not that many Bitcoins that were traded at that amount, but even if a fraction of the Bitcoin is traded at that price, then you get these huge spikes.
Tai Zen: Change is going to mark that on a price chart.
Leon Fu: But very few things, maybe somebody who was buying it just for fun or something like that.
Tai Zen: Because we were sitting there watching it as it happened live when it got released and there’s no way somebody’s going to pay $2,000 or $3,000 for 1 Zcash.
Leon Fu: No one actually did that.
Tai Zen: So let’s jump to some ZCash facts here.
Leon Fu: So the project started out as research, as a project in some universities, mainly John Hopkins, MIT, and a few others. So it was an academic project, to begin with, a science project that was started at a university.
The network as we said was launched in October 2016. It is based on Bitcoin and so, therefore, they’re issuing the same amount of coins, as Bitcoin is going to have the same issuance rate as Bitcoin.
Currently, as there are 800,000 coins at the moment that in circulation and as I said the number of coins is going to match Bitcoin. Currently trading at $38, which with about 800,000, it’s $35 million, give or take. That’s the current market value.
Tai Zen: So let’s talk about the funding availability because it’s important that if a Cryptocurrency is going to succeed, it needs money to develop the software.
Leon Fu: So ZCash has very strong funding community, lots of support from a lot of people in the universities.
Tai Zen: A very few that actually got released from the very beginning and no one suspected that it was a scam coin or fraud. This is one of the few that I’ve seen where it was born without anyone suspecting that it was a scam.
Leon Fu: Because we had big-name universities behind it, we have credible professors, very credible investors backing the project. Most well known that is Fred Ersham, he is a co-founder of Coinbase. Erik Voorhees was the founder of Shapeshift, which is a very popular instant exchange.
Barry Silbert is a very big investor in the space, he runs Digital Currency Group. Roger Ver, he was from Bitcoin and almost from the beginning, he’s also known as Bitcoin Jesus because when Bitcoin was at $1, he was standing on the street corner giving it out to people.
And in addition to these investors, 20% of the mining reports are going back to the ZCash community, to the developers. So not only did I have all these big-name developers who are invested, we don’t know the exact amount, but it’s in the millions of dollars, 20% of all the new ZCash being minted are going to the development community.
So they are extremely well funded. So even if the market cap isn’t that high, they got a lot of money.
Tai Zen: So talk about the team makeup.
Leon Fu: So like we said, it began at John Hopkins University and MIT, Zooko is the founder.
Tai Zen: MIT is the most prestigious technical university in America. It’s located in the city of Boston, which is in the state of Massachusetts and that’s what it stands for Massachusetts Institute of Technology and it’s about maybe a couple, 2 or 3 hours from the city of New York City.
Leon Fu: It’s a very technology-focused, they’re not really doing any marketing or trying to get users or get merchants to adopt them or trying to get people to buy drugs with it or anything like that.
It’s very focused on the science, the technology to improve the way Privacy has done and the near term goals are the technology because it was using very cutting edge Cryptography known as Zcash SNARKs, which we covered in a previous video.
So 2014 is when it began, so it was in development for 2 years before they launched the network. It was to implement zero-knowledge proofs as a way to obfuscate the details of every transaction.
Tai Zen: In case you’re new to Cryptocurrencies, obfuscate simply means to make unclear, unintelligent or unrecognizable.
Leon Fu: So this idea of zero-knowledge proofs, it’s the idea that I could prove to you something is true without actually telling you what it is that I’m trying to prove. But for the fact that it’s true.
Tai Zen: And the main thing that they’re trying to prove is that it was not double spend, simultaneous at the same time, but the transaction, the financial transaction is private. No one can see where it’s coming from, where it’s going, how much the quantity is.
But at the same time simultaneously to that, it can prove that it was not double spent, meaning that you didn’t copy and paste the same coin and send it to 10 different people.
Leon Fu: And I haven’t seen a good explanation of zero-knowledge proofs to a common person, people may ask how is that possible, how can you prove that without actually telling me anything.
As I said, this is a very cutting edge, I don’t think there’s a really good real-world example of how you can do that. So like we said, academics, Cryptographers, researchers, software engineers, it’s the biggest group of nerds that in any of these projects right now.
Tai Zen: I want to point out from an investor’s perspective, just because it’s well funded from individual investors and VC groups of venture capitalists groups and the network itself also gives the development team money and they got the smartest people on the planet working on this, that doesn’t always necessarily translate to a good investment.
Leon Fu: All these other is important, but it’s not a guarantee, this does not mean ZCashes is a sure thing by no means.
Tai Zen: And we’ll talk more about that in the upcoming videos. So you said that it uses cutting edge Cryptography that’s not yet well known and it’s only understood by a very small handful of people.
Leon Fu: Very technical people can actually even explain how this black box works.
Tai Zen: Because in the last video we talked about the 3 technologies, the ring signatures, the mixing and then the zero-knowledge proofs that the Zcash SNARKs and you said that there’s a lot of people out in the world that can understand the ring signatures and the mixing technology.
Leon Fu: If you’re reasonably technical, you have a little bit of technical background, you understand how computers work or your age, even you’re like me, you’re a software engineer and you write code. It’s easy to understand ring signatures and mixing it, it’s mentally easy to understand.
I haven’t seen a good explanation of how zero-knowledge proofs can do that, I don’t understand it. But this will change as time goes by, as the knowledge will spread and people can verify it and not only more people can verify, more people can explain it, but at this time it’s very hard to relate to it.
Tai Zen: Now you say that the downside with the ZCash is that it requires trusting the team, the people.
Leon Fu: Because of this technology, they had to create what seems to me like a private key, but then it was split up into multiple pieces where each team member had a piece of the key. So no one individual could steal the entire key, it was generated and then distributed among a group of people.
And those pieces were called shards, and they said that these shards were “toxic waste” because it can destroy the network if the pieces came together and then people could then break the black box and hack it. Nobody would ever know it because it’s a black box, and no one can even see it.
So it does require trust and they have this thing called a ceremony where they spent a lot of money, they’re very well funded. I think it was half a million or more dollars to go through this and to document like what actually happened. But that requires trust because looking at these videos, how do they actually did that or was this just a big show.
So that’s in this blog that they go into details about that, so there’s a lot of critics. And a big part of Cryptocurrencies is you don’t have to trust anyone, you can just trust the code and in this case, I would say a major downside is you can’t do this even by their own admission.
You have to trust that they actually destroyed these toxic waste, as they call it. And they put on there’s lots of documentation, there’s people vouching for it and very respected people in the community that said that they actually did that. But like I said that’s still trusted.
Tai Zen: You said the cruise don’t like the fact that 20% of the new coins are minted go towards the development team.
Leon Fu: People argue that’s a centralized coin is controlled by this entity.
Tai Zen: You and I from an investor’s perspective, we look at it, that’s a good thing because they need money to develop the software.
Leon Fu: This is a governance issue, and we can talk about that there are many ways to get money without skim off the top. Basically, it’s like if I’m writing this piece of software and I’m hard-coding the software to pay me, 20% of all the new coins.
Tai Zen: Here we have a chart of Shadow Cash in 2016, if you’ll notice Shadow cash started out down here, at the very bottom here around 25,000 Satoshi, and in 9 months it grew over 2,000% in profit, that’s 22 times your money. So let’s go look at some of the Shadow cash facts here.
Leon Fu: So Shadow Cash began as a community project in 2014. There were no investors, there was no ICO, there were no venture capitalist or anything like that. It was a group of guys who came together and decided to start this project.
At the moment there are 6.4 million coins in circulation, block rewards are about 1/4 every minute, there’s about 324 SDC per Shadow Cash and it’s about a 2% inflation rate. It’s currently trading plus or minus $2, and it’s still much smaller than Zcash, Monero or Dash. But at 14 million, it’s notable, it’s definitely in the top 30 or so.
Tai Zen: What I want to mention to add to that is that Shadow Cash is not a minor Privacy coin, but it’s not also a major Privacy coin. It’s kind of like lingering right in the middle if there was such thing, if it was anything between a major and a minor, it would be like the kind of like in between and that’s the reason why we’re mentioning here.
Leon Fu: Right now, community-based projects, we don’t know of any funding source of it for the moment.
Tai Zen: Earlier you mentioned about the difference between Privacy coin that focuses on a feature only or a Privacy coin that focuses on a platform. And you’ll notice that when you go to their website, they say that it’s the Shadow project, not just a Privacy coin, but the Shadow project. The team members are mostly anonymous at this point, when we started the research into the Privacy coin a bucket, we couldn’t find anybody, they’re all nicknames and handles online.
Recently we found 1 video, the guys he claimed his name is Rhino and he’s supposed to be the lead developer for the project and that was the only social media like Youtube, there’s like a video of him and he claims he’s from South Africa and that’s like the only member that has revealed themselves at that moment. So talk about some of the Shadow Cash.
Leon Fu: So it’s notable here because it is a Bitcoin, it was built on top of the Bitcoin codebase. What’s unusual about it is it uses ring signatures, very similar to the way Monero does its privacy. But it’s built on top of the Bitcoin codebase rather than a new codebase that Monero did, which came from Bytecoin and CryptoNote.
So you were talking about the platform, their roadmap includes something called a marketplace, besides just the currency. They also want to build what seems like an eBay at this time but privacy-focused, that protects your Privacy. Also encrypted messaging, for you communicate between one another.
Tai Zen: Their roadmap indicates that they’re focusing on an entire project where whether you want Privacy or not, it’s already built into the system.
Leon Fu: From the ground up that it’s going to be focused on privacy. So it seems like they’re going for mass adoption for, but for the folks that are concerned about their privacy in business.
So the plan to adopt for how to get people to use it, it sounds to me like it’s similar to Dash in that way that they’re trying to get everyone to be able to use this rather than saying ZCash or Monero that’s really focused on 1 feature at this time.
It’s easily supported and fairly widely traded now because it’s derived from Bitcoin, so it can take advantage of all the infrastructure that will compatible with the exchanges the wallet services, the mining pool. And it’s definitely a lot smaller than Dash, Monero, ZCash at the moment. They don’t have the funding or the community of any of those 3 at the moment.
Tai Zen: Talk about how some of the technologies, sometimes investors tend to think that hey if it’s a big project already, that’s the one to go after. But we want the ones that will have the potential to grow.
Leon Fu: Monero sat around where Shadow Cash right now for over 1 year, and it was at $10 million, $20 million, $30 million, back to $10 million, back and forth market cap and then finally it just exploded.
And the same thing with Dash, Dash just sat between $10 to $50 million for 2 years before it started to run this year. So it’s no guarantee that just because they’re big at the moment that they stay big.
Tai Zen: So, now that’s one of the last quote-unquote major Privacy coins that we’re going to cover in some detail. Now we’re going to cover some of the minor or the miscellaneous Privacy coins and before I covered that, I want to just define what we consider as an investor to be a miscellaneous or a Privacy coin.
The reasons why we don’t go in-depth about the miscellaneous Privacy coins or the minor Privacy coins is that there’s such a small market cap, it has small trading volume.
We want it so that if somebody wants to invest at least 1 Bitcoin into the Privacy coin, they can do it without moving the price of that currency. So a lot of these miscellaneous Privacy coins that we’re going to run through just really quick.
Leon Fu: If you bought 1 Bitcoin, you’d move the price up 10% or 20% just from your own buy.
Tai Zen: And you don’t want to do that. The low liquidity, that means that there’s not a lot of volumes, so if you want to invest 5 or 10 or 20 Bitcoins into it, it’s not really possible. So we don’t want to go in-depth about it and mislead anyone and make them think that this is worth investing in because there’s not enough volume.
And because its low liquidity, and because there are limited exchanges, the trader and carrier, and the low liquidity also causes wide spreads and the difference between what somebody offers it for and what someone is willing to pay for, it could be a lot wider than what you want. So that’s the reason why we’re just going to fly to this very briefly.
The first miscellaneous Privacy coin that we want to mention is Bytecoin because it was the original Cryptocurrency that implemented the CryptoNote protocol and it was held back by the perception of unfair distribution. The community felt that 80% of it was in the hands of a very small group of people. It was surpassed by Monero, which forked it and implemented and more transparent distribution and fairer.
So that’s why Monero had more adoption. So miscellaneous Privacy coin number two is Zcoin, it’s another Privacy coin project using the zero-knowledge proof to maintain Privacy like ZCash. So it’s a fork or a clone or a copy of it, it uses very similar technologies, but may different tradeoffs compared to Zcash.
Leon Fu: Not hiding transaction amounts so that you could account for all the coins to make sure nothing was being produced.
Tai Zen: Because one of the concerns that the community has in ZCashes because it’s in a black box and not too many people know about it, that there’s a potential that a hacker can create counterfeit coins and then introduce it into the network and no one would ever know about it.
Whereas Zcoin is trying to make it so that it’s transparent in the quantity, not the sender or the receiver, but the number of coins it’s in the network so that everyone can check it. So a miscellaneous Privacy coin number three is Komodo, it’s also another fork of ZCash and is looking to develop a decentralized trading platform and uses a delayed proof of work. Do you want to talk about that real quick?
Leon Fu: It’s just a technical feature where it can allow to use, I believe, the idea so that it can use Bitcoins security because Bitcoin has the most amount of hashing and minors with it and then leverage that to secure its own network.
That’s what they’re trying to do here. The reason it’s notable here is that they recently raised quite a good amount of funding, $2.6 million in funding.
Tai Zen: So miscellaneous primacy coin number four is Navcoin, Nav stands for Navajo. Navajo is a native American tribe in America, Indian tribe.
They were the indigenous people that were here before the Europeans came, and they’re attempting to do mixing with Masternodes similar to Dash, but with different technology.
Leon Fu: And they don’t call it Master knows, they call it something else. But the idea is that these nodes do the Privacy, do the mixing and the way they do it is interesting.
Tai Zen: So miscellaneous Privacy coin number five is BoolBerry, BoolBerry sounds more like a fashion name than it does a Privacy coin name. But it’s another CryptoNote coin base in the CryptoNote technology uses their own proof of work algorithm and they have pruning to optimize the blockchain size.
Leon Fu: So a lot of these projects, the problem is the bloat. Bitcoin’s blockchain is over 100 gigabytes, no one’s running a full node now because it’s just going to eat up your entire computer space unless you’re a minor, you have some reason to.
These miscellaneous, they are focusing on features or taking an existing project and trying to improve it and trying to do things that they think are valuable.
Tai Zen: So let’s quickly summarize what we covered in this video here. There are 2 types of Cryptocurrencies, ones that come from Bitcoin and ones that come from CryptoNote.
There are 4 major Privacy projects out on the market right now that is worth looking at, that’s Dash, Monero, ZCash, and Shadow Cash and we mentioned that Shadow Cash is not a big player or a major player like the other 3, but it appears that they are on the verge of it.
Each project has a unique story behind it, there are dozens of Privacy coin projects currently on the market. The focus on the Privacy, major Privacy coins or the soon to be major Privacy coins such as the Shadow Cash project here.
The Privacy coins is too small or insignificant right now at the moment, there’s just not enough trading volume, one of the main criteria that we look at before we consider investing into a Cryptocurrency or a Privacy coin is that you should be able to buy at least 1 Bitcoin a bit without moving the price of it.
That way everyone around the world can benefit from it. If we talk about a Cryptocurrency where you could only buy 1 or 2 tokens or a fraction of a Bitcoin, it doesn’t apply to all our audience. So we want to make sure that we talk about things that our audience can look at an investment safely.
Leon Fu: Also we don’t want to manipulate the market. Because if we talk about there’s so little liquidity and a bunch of you guys go and buy it, it makes us look bad because we have no intention of pumping everything. Even if we say don’t buy it, some people are going to do that and that’s gonna affect the market.
Tai Zen: So when I give you guys a quick teaser of what’s upcoming in the next video. In the first video, we paid the case then the argument for why Privacy is important and the second video we explain the technology behind it. And now we made an investment case for why you might want to consider invest into Privacy coins and look at the Privacy coin bucket.
And now in the upcoming video we’re going to do a fundamental analysis of the major Privacy coins and what’s behind it and that’s what you’ll do and then I’ll do a technical analysis of the major Privacy coins in what we can project out which the potential profit targets and projections for the major Privacy coins are and what we can expect the price to reach to or do a best of doing it.
So thanks for watching these series of videos guys and we’ll look forward to seeing you guys again in the next video. If you have friends, families, or colleagues or coworkers that are interested in clean life-changing profits in Cryptocurrency investing, make sure that you guys share this video with them.
And if you have friends or family or anyone that are interested in looking at the Privacy coin bucket of Cryptocurrencies, make sure you share this video with them as well. So thanks for watching this video and we’ll see you guys in the next video.