Zcash, a prominent privacy coin, has announced plans to reduce its rapid inflation rate. Currently, the coin is experiencing inflation at a rate of 0.1% per day. This may not sound like much, but the rate compounds dramatically over the course of a year, and in absolute terms, the network is issuing miners $400,000 worth of ZEC tokens on a daily basis—quite a substantial amount.
Inflation is an issue because it drives down the value of each ZEC token significantly, and now the coin’s development community is planning to do something about the problem. Zooko Wilcox, the CEO of Zcash, has highlighted the proposed changes on Twitter:
As expected, the github thread about radically revamping Zcash mining is heating up. https://t.co/vUoILxwQX0 It’s important, because at today’s prices there is more than $400K/day of new Zcash issuance: https://t.co/D7imLPsfse pic.twitter.com/tThFy53LRF
— zooko (@zooko) January 2, 2019
If the proposal succeeds, a new feature called Harmony Mining will be included in Zcash’s Blossom upgrade in October, and it will change the way that tokens are distributed to miners. Basically, Harmony Mining will use two different proof-of-work consensus algorithms, ensuring that everyone is able to mine on the Zcash network.
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This will be true whether miners use standard GPUs or specialized ASIC devices. According to Nathan Wilcox, who opened the issue on GitHub, Harmony Mining will spread issued tokens and political influence “among distinct kinds of stakeholders”—that is, among GPU and ASIC owners.
The divide between ASICs and GPUs is currently a problem for Zcash: WhatToMine’s statistics indicate that Zcash is currently the 18th most mineable cryptocurrency for ASIC owners when measured by 24-hour profitability. By contrast, the coin doesn’t even make the list for GPU owners. Whether Harmony Mining is a foolproof way to solve the inflation problem is unclear, but it seems promising.
That said, every cryptocurrency faces some degree of inflation. Bitcoin and Ethereum also suffer from the problem, although their inflation rates are much lower than Zcash’s — about 0.01% daily rather than 0.1% daily. Meanwhile, Steem has embraced inflation, deliberately beginning with a high inflation rate in order to reduce it later. Hopefully, the fact that the issue is common across cryptocurrencies will give Zcash sufficient time to fix the problem.
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