In the cryptocurrency space, three coins dominate the headlines in the general media: Bitcoin, Ethereum, and Ripple. However, Blockchain analysts know that there are other promising digital currencies gaining ground to challenge the top tokens. After all, crypto innovation did not stop with Satoshi’s white paper.
One such cryptocurrency is Zcash (ZEC), which has numerous benefits over some of the top coins.
Zcash IRAs – Invest in the Premier Privacy Coin
Blockchain’s decentralization unleashes enormous potential for people to exercise greater control over their own money. However, one concern that remains with Bitcoin is privacy, so some digital currencies have set out to make privacy a central feature of their blockchain algorithm. Established in 2016, Zcash is one of the leading privacy coins on the market today.
Designed by the nation’s top cryptographers from leading research institutions, Zcash uses a zero-knowledge proof algorithm to encode users’ identities for every transaction. This makes the cryptocurrency an attractive option for applications where sensitive data is stored (such as personal medical information). Many analysts see long-term potential for Zcash, and the IRS allows you to purchase Zcash as an asset for your IRA!
What Are the Pros and Cons of Zcash?
Why would cryptocurrency investors choose to invest in Zcash over other coins? Let’s look at the pros and cons of Zcash as an alternative investment.
Benefits of Zcash
The features that give ZEC an edge over other alternative assets include:
- Solid protocol foundation. Zcash is built on the zk-SNARK algorithm. A form of zero-knowledge cryptography, this algorithm can provide proof that parties possess certain information without divulging that information itself.
- Privacy and anonymity. Bitcoin is decentralized but not private. Zcash, on the other hand, allows for full anonymity during a transaction, allowing for “good people to transact safely over digital mediums.”
- Optional public or private addresses. For parties that want to remain fully transparent during an exchange of assets, Zcash gives users the choice to make a transaction fully public (for auditing purposes, as an example).
- Seamless international transactions. Zcash is not beholden to governments or financial institutions. This means that transaction fees, exchange rates, and intermediary costs do not hinder money transfers across borders.
- Eliminates the “middle man.” Like many cryptocurrencies, Zcash provides a monetary exchange system that does not rely on trust of corruptible governments and financial institutions.
- Encryption security. Zcash is a decentralized international network, which means that there are no single points of failure that could be used to hack or manipulate it. To learn more about crypto security, read this guide.
- Built by leading scientists. Zcash was designed by cryptographers from MIT, Johns Hopkins, and other top universities.
Things to Consider With Zcash
Zcash is a promising coin amid a tight field of cryptocurrencies. While it is one of the top cryptos focused specifically on privacy, it is not currently in the top 10 list of tokens by market cap. As of February 2019, Zcash had a market capitalization of over $325 million.
Privacy coins like Zcash offer a way for an exchange of money to occur without a corruptible institution monitoring these transactions. For this reason, though, there is a risk that governments may curb the use of privacy coins. If they are used for illicit transactions, for instance, they will continue to draw the attention of regulators.
Does Zcash Have Long-Term Potential?
While Bitcoin currently dominates the market, there is a competitive race among alt-coins to overtake the #1 cryptocurrency. Some alt-coins are carving out a niche for themselves in the process. Zcash is one of these cryptocurrencies, and its prospects look bright for the following reasons:
- Value of privacy. Given the recent scandals about how leading technology companies mismanage users’ data, privacy is becoming an increasingly important value in the digital age. Zcash’s zero-knowledge cryptography allows people to keep data about their transactions private, without large entities knowing about their spending habits.
- Adoption momentum. Zcash is already being used by leading apps and exchanges (such as Circle and Gemini), and the protocol is being incorporated into blockchains run by leading financial institutions (e.g., JP Morgan’s Quorum).
- Competitive. Zcash is currently one of the leading privacy cryptocurrencies by market capitalization. The leader in this niche, Monero, has had persistent problems with cryptojacking, making Zcash an attractive alternative.
Zcash, like other solid tokens, survived the 2018 volatility rollercoaster. But the cryptocurrency space as a whole is still a nascent industry, so while investment in Zcash has significant upside, it still comes with risk (as is the case with any other digital currencies).
Zcash is the first cryptocurrency to have widespread adoption of the zk-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) protocol. This full privacy encryption is one of the key technologies behind Zcash and the main reason many cryptocurrency investors transact with this coin. The zk-SNARK zero-knowledge proof does not reveal any information beyond the validity of the transaction. In basic terms, the technology allows the transaction to be “proven” without any information about the transaction being revealed at all– in fact, not even the transaction number is revealed (only that it exists).
Update. Recent developments for Zcash include:
- Nov 2018. Zcash has been listed on Coinbase, one of the most popular cryptocurrency exchanges. Like most newly-added coins, the roll-out happened in several stages, with full trading available in the final stage.
- Mar 2019. Analysts predict that early- to mid-2019 is perhaps “the best time to accumulate on Zcash (ZEC)” due to upcoming technical upgrades later in the year that will introduce harmony mining and halving of mining block rewards (i.e., both lowering inflation).
- Apr 2019. Zcash creators invest in Bolt, a new protocol running on top of Zcash that allows coins to scale in a similar way that the Lightning Network does for Bitcoin. This will facilitate micropayments using Zcash.
- Sep 2019. Zcash creators, ECC (Zerocoin Electric Coin Company) announce that Zcash is compliant with all FATF recommendations.
- June 2020. Chainalysis adds support for Zcash to their Chainalysis Reactor and KYT (Know Your Transaction) technologies.
- March 2021. ECC announces that Zcash is now wholly owned by Bootstrap, a new non-profit organization.
How Do I Buy Zcash for My IRA?
To own crypto in your retirement account, you must rollover to a Self-Directed IRA.
Self-Directed Crypto IRAs
Self-Directed IRAs are a type of individual retirement account that allows you to hold a greater variety of alternative investments than in a standard type of IRA. The benefits of a Self-Directed IRA include:
- Tax-free growth. With a Self-Directed Roth IRA, any gains that you make from cryptocurrency investments will not be taxed upon distribution.
- Alternative assets. Cryptocurrency is one asset among many that can be held in a Self-Directed IRA. Others include precious metals, certain types of real estate, and more.
- Greater freedom of choice. You make all the investment decisions about your Self-Directed IRA, offering you unprecedented control over your retirement assets.
- No capital gains tax. Outside of an IRA, trading cryptocurrencies results in capital gains (or losses), which incur taxes for every transaction. This is not the case when trading digital currencies in a Self-Directed IRA, where taxes are assessed as income on either the distribution (Traditional IRA) or contribution (Roth IRA). For any trades performed within the umbrella of the IRA, no tax is charged at all.
There are some things to keep in mind about Self-Directed IRAs:
- Slower transactions. Like any retirement account, you have to work with a custodian to trade assets in a Self-Directed IRA. If you want to day-trade cryptocurrencies, an IRA may not be the right vehicle for this. For example, some custodians offer a solution with cold storage, but the downside of this benefit is that crypto transactions may take one or more days to be processed.
- Responsibility for compliance. Not all types of alternative assets are allowed in a Self-Directed IRA (e.g., life insurance and antiques are prohibited). It is the investor’s responsibility to follow all IRS regulations for IRAs. This is especially so with Self-Directed IRAs, which allow a greater range of alternative investments to be held. Because the IRS has classified cryptocurrency as personal property for taxation purposes, it is permitted within a Self-Directed IRA.
Click the link to learn more about Self-Directed IRAs and cryptocurrency.
Zcash in Your IRA Today!
Does a Zcash IRA sound right for you? If so, request a free info guide to Digital IRAs here. Rollover from your current qualified retirement account to a Zcash IRA today!
There is some paperwork required for the crypto IRA rollover process. Some companies specialize in crypto IRAs, but not all of them offer Zcash in an IRA. BitIRA is a cryptocurrency retirement services specialist that does offer Zcash IRAs, among other types of digital currencies in an IRA.
To learn if you qualify for a Zcash IRA, call (800) 299-1567! You can also get your Free Info Guide to Digital IRAs here.