Company: ZCSH
Filing Date: 2025-03-07
Form Type: 10-K
Source: 0000950170-25-035469
Chunk: 65

Company: Grayscale Zcash Trust (ZEC)
Filing Date: 2025-03-07
Form: 10-K
Item: Item 1
Chunk 65
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 on November 18, 2020 established a development fund along with 5 other minor Zcash Improvement Proposals. The most recent upgrade, “NU5”, occurred May 31, 2022 and is intended to further the development of zero-knowledge proof cryptography and bolster the Zcash Network’s privacy enhancing features.

On November 19, 2021, the Electric Coin Company announced its intention to support a shift from Proof-of-Work to Proof-of-Stake consensus mechanisms underlying the Zcash Network. While full details about this change have not been crystallized, this shift would transfer the duties of securing the network from miners to stakers, who dedicate ZEC, rather than specialized hardware, to validate network transactions. It is projected this transition will take approximately three years to implement.

The release of updates to the Zcash Network’s source code does not guarantee that the updates will be automatically adopted. Users and miners must accept any changes made to the Zcash source code by downloading the proposed modification of the Zcash Network’s source code. A modification of the Zcash Network’s source code is effective only with respect to the Zcash users and miners that download it. If a modification is accepted by only a percentage of users and miners, a division in the Zcash Network will occur such that one network will run the pre-modification source code and the other network will run the modified source code. Such a division is known as a “fork.” See “Item 1A. Risk Factors—Risk Factors Related to Digital Assets—A temporary or permanent “fork” or a “clone” could adversely affect the value of the Shares.” Consequently, as a practical matter, a modification to the source code becomes part of the Zcash Network only if accepted by participants collectively having most of the processing power on the Zcash Network.

Forms of Attack Against the Zcash Network 

All networked systems are vulnerable to various kinds of attacks. As with any computer network, the Zcash Network contains certain flaws. For example, the Zcash Network is currently vulnerable to a “51% attack” where, if a mining pool were to gain control of more than 50% of the hash rate for a digital asset, a malicious actor would be able to gain full control of the network and the ability to manipulate the Zcash Blockchain.

In addition, many digital asset networks have been subjected to a number of denial of service attacks, which has led to temporary delays in block creation and the transfer of digital assets. Any similar attacks on the Zcash Network that