Company: ZCSH
Filing Date: 2025-03-07
Form Type: 10-K
Source: 0000950170-25-035469
Chunk: 62

Company: Grayscale Zcash Trust (ZEC)
Filing Date: 2025-03-07
Form: 10-K
Item: Item 1
Chunk 62
---
 information without revealing that information by encrypting certain aspects of the transaction. Ordinarily, if a blockchain’s transaction data is encrypted, nodes in the blockchain cannot determine whether senders really held the tokens they sent, whether they previously sent it to someone else or whether they never had it in the first place. The encrypted data becomes unverifiable by network nodes.

With ZEC, a particular type of zero-knowledge proof called zk-SNARKs solves this problem. In a ZEC shielded transaction, the sender provides a string of data that makes up the “zero-knowledge proof” and encrypted transaction data, which proves properties of the encrypted data cryptographically, including that the sender could not have generated a specific string unless the sender had ownership over the private key and unless the input and output values were equal. The proof also guarantees creation of a unique nullifier which is used to mark tokens as spent, when they are, in fact spent. In other words, zero-knowledge proofs allow verifiability without compromising confidentiality.

Some ZEC transactions are conducted “off-blockchain” and are therefore not recorded in the Zcash Blockchain. These “off-blockchain transactions” involve the transfer of control over, or ownership of, a specific digital wallet holding ZEC or the reallocation of ownership of certain ZEC in a pooled-ownership digital wallet, such as a digital wallet owned by a Digital Asset Trading Platform. 

8 

In contrast to on-blockchain transactions, which are publicly recorded on the Zcash Blockchain, information and data regarding off-blockchain transactions are generally not publicly available. Therefore, off-blockchain transactions are not truly ZEC transactions in that they do not involve the transfer of transaction data on the Zcash Network and do not reflect a movement of ZEC between addresses recorded in the Zcash Blockchain. For these reasons, off-blockchain transactions are subject to risks as any such transfer of ZEC ownership is not protected by the protocol behind the Zcash Network or recorded in, and validated through, the blockchain mechanism.

Creation of New ZEC

Initial Creation of ZEC

The initial creation of ZEC as part of the first Zcash Network block, or genesis block, was conducted on October 28, 2016. All additional ZEC have been, and will be, created through the mining process. In order to minimize the impact of any unforeseen problems during the launch of the Zcash Network, the amount of ZEC created each time a block was mined started at zero and gradually increased to 12