[ad_1]
Remember when cryptocurrency exchanges were heavily armed in the delisting of private coins like zcash (ZEC) in order to protect their fragile banking alliances?
But cryptography continues to move and today ZEC makes its debut within the vibrant decentralized exchange ecosystem (DEX) in the form of WZEC (WZEC). Announced Wednesday, WZEC is the first asset launched by “Wrapped”, a partnership between Ethereum Tokensoft tokenizers and qualifying depositary Anchorage, with over-the-counter (OTC) liquidity provided by CMS Holdings.
Wrapping is the act of taking a blockchain asset like bitcoin and issuing an equivalent representation on another blockchain like Ethereum. Wrapped bitcoin (WBTC), for example, is an ERC-20 token supported on a 1: 1 basis with bitcoin held in reserve by the qualified custodian BitGo Trust.
Similarly, wrapped zcash is a 1: 1 representation of zcash on Ethereum held in custody by Anchorage. Wrapped tokens provide a large amount of liquidity to DEXs and give otherwise quiet assets the ability to unleash the wilderness of decentralized finance (DeFi).
Read more: Wrapped Bitcoin sees record $ 57.1 million in tokens minted by CoinList for customers
“I am thrilled that there is such an interest and that people can, and do, innovate and deploy extensions on Zcash without the knowledge or approval of Electric Coin Company,” Zooko Wilcox-O’Hearn, founder of Zcash and Electric Coin Company CEO told CoinDesk in a direct message.
“I also agree that it’s great for people to have more alternatives to centralized exchanges (CEXs) and how CEXs have to meet the arbitrary demands of their banks,” he added.
Tokenized ZEC
Today zcash can be used in two ways: transparent or shielded. Shielding crypto wallets that transact allows for a degree of privacy not found on the public Bitcoin blockchain by default, for example. It’s ZEC’s shielding capabilities that make regulators nervous, somewhat narrowing the scope of this clever use of technology.
The wrapped version of zcash on Ethereum “truly brings the best of both worlds,” said Mason Borda, CEO of Tokensoft.
“Obviously Zcash allows secure transactions, so now zcash holders can have assets in a secure pool and wrap a portion of these assets to use on Ethereum, while maintaining their privacy,” Borda said. “They would like to use their zcash, but they don’t want to reveal how much they have. They just want the information to be private. “
Wrapping zcash on the Tokensoft platform for use on Ethereum also makes the shielded version of the coins more palatable to regulators, Borda believes. This is because it involves a customer knowledge process (KYC) performed upstream, he said, and the ZEC owner must also meet Anchorage’s compliance as a qualified custodian.
Read more: Nearly $ 100 million in Bitcoin was transferred to Ethereum in July, led by retail traders
“Wrapping up the zcash and putting it on the Ethereum tracks opens the door for these jurisdictions to support this asset,” Borda said. “So it’s a big deal. It will open zcash to every other market out there that is currently concerned about more privacy and secure transactions. “
But doesn’t loading lots of KYC and compliance around zcash defeat the purpose of privacy coins in the first place?
“The goal with zcash has never been to protect themselves from authorities, regulators or financial providers,” said Diogo Monica, co-founder and president of Anchorage. “The shielding of zcash came in response to the fact that bitcoin is a pseudonym. So who you are protecting yourself is the general public and the internet in general. And therefore the fact that we use the ERC-1404 standard allows us to ensure on-chain that we have the advantages of regulation with the advantages of the anonymity of zcash on-chain. “
ZEC lite
Tokensoft developed the ERC-1404 standard for SEC registered assets on Ethereum, a simplification system that also involves Anchorage as a custodian.
The ERC-1404 is basically a smart contract model with built-in compliance functions, including investor whitelisting so regulators know exactly who everyone is.
“There are some things we’re shutting down, but other things we’re leaving,” Borda said of WZEC’s ERC-1404 debut. “The main difference is that the whitelist is disabled, so the tokens are ERC-20 compatible and freely transferable.”
Read more: Gemini, the regulated US exchange, now offers reserved Zcash withdrawals
For its part, Anchorage became a qualified custodian in the state of South Dakota in July 2019, following the crypto custodian BitGo, which got the green light from state regulators in 2018.
“This is what Anchorage was built for,” Monica said. “Anchorage was created to use private keys securely for active participation in the blockchain. Our technology allows us to have better liquidity and public verifiability of every single asset we have on the platform. Plus, our platform allows us to simply add more included assets in the near future. “
CMS Holdings, the institutional crypto firm founded by Bobby Cho of Cumberland and former Circle trader Dan Matuszewski, praised the new partnership.
“Wrapped is the best packaging I’ve ever wrapped in,” Matuszewski joked via email.
