ZEC price increases 20% in one day as Zcash developers reveal transition to proof-of-stake

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Zcash (ZEC) is up nearly 20% in the past 24 hours, aided by the euphoria surrounding the crucial transition of its core protocol from Proof-of-Work (PoW) to Proof-of-Stake (PoS).

ZEC price hit an intraday high of $ 188.80 on Binance after rising more than 27% for two days in a row. The upward move in the cryptocurrency also erased a large portion of the losses it suffered in the wake of a downward retracement in the crypto market earlier this week.

ZEC price soared after the cryptocurrency’s lead developer Electric Coin Company (ECC) announced that it would switch the Zcash protocol from PoW to PoS within the next three years. The nonprofit stated that the upgrade would limit downward pressure on ZEC price by removing miners who “instantly liquidate” the token for Bitcoin or Fiat.

“This shift will also add value to ZEC through capabilities that include revenue generation through staking and a possible path to on-chain governance mechanisms for ZEC Hodlers,” added Josh Swihart, senior vice president of growth at ECC :

“Moving to proof-of-stake offers other benefits, including reducing the ZEC’s energy footprint, providing a possible path to on-chain governance mechanisms, and supporting interoperability by addressing finality issues, among other things Proof-of-work transactions are tackled for reasons. “

ZEC / USDT daily price chart. Source: TradingView

ZEC cops collect at the PoS FOMO

Unlike PoW, PoS mechanisms allow a person to mine or validate block transactions based on the number of underlying tokens they hold / use. In return, the so-called “Validator” receives rewards in the form of income.

Ethereum, the leading smart contract platform by market capitalization, has also initiated the transition from PoW to PoS after introducing a dedicated smart contract. In response, users blocked around 8.33 million Ether (ETH) tokens in what is known as the Ethereum 2.0 address, effectively pushing them out of the active offer.

ETH / USD weekly price chart. Source: TradingView

ECC’s announcement promised that users could put some of their ZEC holdings in a dedicated Zcash smart contract to become validators on their blockchain. As a result, more ZECs may go out of circulation due to lock-up periods compared to its Bitcoin-like fixed offer of 21 million tokens.

Barry Silbert, the founder and CEO of Digital Currency Group – a venture capital firm, tweeted Saturday that he would buy “more” Zcash tokens, citing their supply cap. His tweet coincided with a sudden ZEC price surge against the US dollar and Bitcoin (BTC).

Still, some analysts argued that after implementing PoS, Zcash would not have an offer cap.

For example, on-chain analyst Willy Woo stated in his response to Silber’s tweet that if Zcash could “decide to extend developer tax” and “if it can switch to PoS and shut down miners,” then he is confident that the cryptocurrency has no maximum offer.

“And,” added Woo, “that ignores the 2018 inflation bug and assumes we could actually review the offer,” referring to Zcash’s infamous vulnerability that could have generated infinite ZEC tokens.

Related: Zcash vulnerability that allows unlimited ZEC counterfeiting, fixed and disclosed

Minutes after Woo’s comments on ZEC’s dubious supply, Silbert tweeted:

Turning zone

ZEC’s recent upside pushed it into a turning zone known for its records in capping cryptocurrency rallies.

In particular, the trading range, which is defined from $ 170 to $ 205 (the reddened area in the graph below), has previously offered traders opportunities to sell. More recently, ZEC price fell after entering the aforementioned range while eyeing longer declines towards the purple uptrendline.

ZEC / USDT three-day price chart. Source: TradingView

A clear breakout trend can occur after the ZEC closes above the turning zone accompanied by rising trading volumes targeting the Fibonacci retracement levels at $ 247 and $ 316. Conversely, a critical close below $ 170 could risk pushing the ZEC towards $ 136.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, you should do your own research when making a decision.