Incentives Drive Innovation

Incentives Drive Innovation

Last week I felt as if a time machine had taken me back to the late 90’s. That’s when I was involved with an internet start-up and got to watch endless dotcoms pop up like critters in an out-of-control game of whack-a-mole. With each IPO the hype and valuations grew greater and more ridiculous. A company that was almost literally an idea on a napkin would be valued in the billions of dollars. Something similar appears to be happening lately with cryptocurrencies, and ZCash is the latest darling of the genre. On the day of its release ZCash soared in value, due both to its extremely limited initial supply as well as its promise of a truly private cryptocurrency. Time will tell if its stratospheric valuation will hold long-term.

The ZCash Block Reward

ZCash does show a lot of potential, particularly in the area of privacy. Other cryptocurrencies will be well-served to study its attempt to be a truly anonymous digital currency. That’s not to say ZCash is beyond criticism, and in fact there are some aspects of the cryptocurrency that arouse questions, such as its trusted setup. However, in this article I want to focus on one aspect of ZCash that has courted controversy: its innovative block reward structure.

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