Zerocoin emerged as a response to the transparency of the blockchain, particularly in relation to Bitcoin transactions where privacy can be compromised if strict rules are not followed.
To address this issue, third-party coin mixing services arose, aiming to obscure the trail of cryptocurrency transactions. In May 2013, Matthew D. Green, Ian Miers, and Christina Garman proposed the Zerocoin protocol, which allowed users to transition from relying on mixing services to a cryptocurrency where transactions could be anonymized. The concept behind Zerocoin involved destroying a coin and then minting an equal amount, effectively erasing its transaction history.
Initially, there were plans to integrate the Zerocoin protocol into the Bitcoin network. However, it was not accepted by the Bitcoin community.
Undeterred, the original developers of the Zerocoin protocol launched it as an independent cryptocurrency in September 2016, naming it Zcoin (XZC). Zcoin utilized the Zerocoin protocol and employed a Proof-of-Work mechanism with a memory-intensive Merkle tree proof algorithm, enabling regular users to mine and utilize the coin.
Unfortunately, in April 2018, a cryptographic flaw was discovered in the Zerocoin protocol, resulting in a significant decline in Zcoin’s value. The flaw allowed attackers to destroy the coins owned by other users and create new coins while stealing existing ones.
Efforts have since been made to address the flaw, and now transactions utilizing the Zerocoin feature draw from an escrow pool. After undergoing the Zerocoin protocol, each coin’s transaction history is erased, and new coins are returned to the users in the escrow pool without any previous history. These transactions are verified through zero-knowledge proofs, which validate statements without revealing specific details about previous queries.
If you desire complete control over your financial data, you may consider exploring Zcoin or other privacy coins employing the Zerocoin protocol. However, it’s essential to bear in mind that privacy coins, including those utilizing Zerocoin, are relatively new and may possess undiscovered flaws.