Key Points
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Zcash is surging, and it also has an important set of governance votes coming up.
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The votes won’t affect the coin’s maximum supply, but they could change how quickly that supply is distributed.
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The chain might also be getting a lot more responsive soon.
- 10 stocks we like better than Zcash ›
With the price of the privacy coin Zcash (CRYPTO: ZEC) flying by 143% in the 30-day period ending on Sept. 10, its holders are voting on some of the most important issues that can affect an investment thesis for buying a cryptocurrency. Specifically, they’re weighing in on the policies that control how many new coins the network issues, and how fast that issuance occurs; the voting closes on Sept. 14, and five questions are on the ballot.
So does it make sense to buy the coin in advance of that date, or not?
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The vote could reset how Zcash issues new coins
In short, the issues being voted on will determine the contents of Network Upgrade 7 (NU7), the chain’s next major upgrade package. Three of the five questions posed to holders directly affect what gives the coin value, so the stakes are fairly high.
Question one is the biggest, as it could dramatically alter how new ZEC is produced through time.
Today, much like with Bitcoin, the reward given to the coin’s miners is calibrated to halve approximately every four years in an event called the halving. The alternative being evaluated is whether instead to control the rate of new issuance with a gradually decreasing curve with no sudden steps like what would occur with a halving.
While the maximum possible supply of Zcash would remain the same at 21 million, removing the halving mechanism would mean departing from the well-trodden path of Bitcoin-like market cycles based around the halving and its impact on supply. That could lead to less volatility due to the absence of supply shocks.
Question two looks at another important supply control mechanism, when ZEC that was removed from circulation starts flowing back into mining rewards. Voters are choosing among three options: recycling as soon as possible, in February 2027 if the first question passes; February 2027, regardless of the first question’s outcome; or February 2031. If voters pick the later date, it’ll constrain supply a bit more in the meantime.
Question four determines whether to cut the mandated gap time between the chain’s blocks from 75 seconds to 25 seconds. If it’s approved, the network will become a lot faster on paper.
The other two questions pertain to retiring an obsolete transaction format and handling features that miss the Sept. 30 deadline. Those are less relevant to Zcash investors.
When would any of this affect the coin’s price?
These polls will determine NU7’s scope, and Zcash’s developers will have until Sept. 30 to finish up whatever features the vote approves. A 143% month is not a reason to rush in, nor is it a reason to stay away. Zcash is an asset to hold for years, so one month of price action should not decide the position in either direction.
Buying it before Sept. 14 is perfectly fine; the capstone of the supply policy, the hard limit to the total possible supply, will remain intact. Buying much later than that is also fine, because there is no single moment to catch.
So buy Zcash if you want exposure to the growth of privacy technology that shares some of Bitcoin’s best qualities. The votes are worth paying close attention to, but they’re not really worth rushing into an investment.
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Alex Carchidi has positions in Bitcoin and Zcash. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.
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