Imagine a cryptocurrency that combines privacy and stability into a stablecoin protocol that is untraceable and secure. This is where Zephyr Protocol comes in!
Zephyr Protocol, is a cryptocurrency protocol aiming to combine the principles of privacy and stability to form a secure, untraceable, and over-collateralised stablecoin protocol.
The Zephyr protocol can best be described as a mix between Djed’s stablecoin and Monero’s network, but built around a network of three coins rather than just one.
So, how does Zephyr Protocol work exactly? And what are the tokenomics of the ZEPH token?
What is Zephyr Protocol?
The Zephyr Protocol was founded by Bitspark and their founders George Harrap and Maxine Ryan, with the network itself going live in 2023.
Zephyr Protocol was created by integrating a proven stablecoin solution, Djed, with a modified version of the Monero codebase.
So we all know what’s going on here, Monero is a privacy-focused cryptocurrency which is notoriously difficult to hack or trace. Its code is the foundation from which Zephyr was built.
Whereas Djed is a stablecoin created by Cardano’s IOHK, Emurgo, and the Ergo Foundation and brings its over-collateralised algorithmic stablecoin mechanism to enable the creation of a truly private stablecoin.
At its core, the Zephyr Protocol can be broken down into three distinct cryptocurrencies, those being ZEPH, ZephUSD or ZSD, and ZephRSV or ZRS.
To summarise quickly, ZEPH is the main cryptocurrency of the ecosystem, while ZephUSD is the private stablecoin backed by ZEPH, and ZRS represents equity in the protocol’s reserve.
Though I will come back to that in a bit more detail, as first, it’s probably more helpful to explain how the network itself works.
How Does Zephyr Work?
Zephyr is a RandomX Proof-of-Work network which, practically speaking, is very similar to Monero, which shouldn’t be a surprise as this is where the network originally sourced its code for the project.
To explain briefly, Proof-of-Work is a consensus mechanism where miners compete to solve a complex puzzle to receive the crypto reward.
However, it is the RandomX part that requires a bit of an explanation.
RandomX is a Proof-of-Work algorithm developed by Monero and is based on the execution of random code and other memory-heavy techniques to discourage the use of specialised hardware, such as ASIC machines, from mining their projects.
This essentially keeps the network at a place where consumer-grade electronics can be used to participate, which ultimately keeps the network more decentralised as more people can participate in its security.
What Makes Zephyr Unique?
Aside from being the first privacy-focused stablecoin protocol, what really gets people’s attention is the three cryptocurrencies that are found on the project – the ZEPH, ZSD, and ZRS coins I mentioned earlier.
At the heart of the Zephyr Protocol is the ZEPH base currency.
ZEPH forms the primary medium of exchange within the Zephyr ecosystem, serving as the layer linking the ZephUSD stablecoin and the ZephRSV reserve coin.
ZEPH is essentially the currency that keeps the network moving, and users who wish to enter the stablecoin system can do so by depositing ZEPH into the protocol and minting ZephUSD in return.
To explain how this works, the value of ZEPH serves as the underlying collateral, giving ZephUSD its value and stability.
The backing of ZephUSD is over-collateralised by ZEPH in the reserve and not to an algorithm, safeguarding the stability and value of the network.
Over-collateralised means there is always more in reserve than available to be minted as stablecoins.
The ratio is currently set at 400%, meaning there is always 4x more in reserve than can be minted as stablecoins.
For example, if there are $100 worth of ZephUSD in circulation, there must be at least $400 worth of ZEPH held in reserve.
This is also how Zephyr aims to prevent a ‘death spiral’ by ensuring no additional ZEPH is created to maintain its peg.
But practically speaking, what makes Zephyr unique for its users is giving the end user the possibility of how they would like to store their funds on the Zephyr network.
A potential investor could keep their money in ZEPH if they plan to use the network, ZephUSD if they want to guarantee the value of their asset in the future, or ZephRSV if they want to earn from network fees that build up as profit in the reserve.
ZEPH Tokenomics
Every 2 minutes a new block is created and added to the Zephyr blockchain, and each time that occurs a proportion of any network fees on the block being added is given out to the network. Shared 75% as a mining reward, 20% towards the reserve reward, and 5% for the governance reward.
In total, there will only ever be 18.4 million ZEPH tokens, well, kind of, at least before the pre-tail emission cap.
To explain, there will only be 18.4 million ZEPH tokens initially.
Once they reach this number a small amount will be continued to be produced at a steady rate afterwards in very small quantities to ensure the miners still host the network.
This is in contrast to the Bitcoin network, where after all 21 million BTC tokens are mined the miners will need to rely on transaction fees alone.
Zephyr is different, it combines two known, tested, working ideas in Djed and Monero and crafts them into its own unique creation, giving you a familiar feeling but in a novel product.
In short, Zephyr is a cryptocurrency project for stablecoins, designed to be fast, low cost, and with an emphasis on privacy.
Assuming Zephyr can continue to break the algorithmic stablecoin curse, and survives any potential mishaps in management, I believe it is likely Zephyr’s best days still lay ahead.
Though, as always, nothing is ever guaranteed in crypto, of course.
If you like the article on Zephyr Protocol I believe you will like the article on Oasis Protocol too!
How to create a Zephyr wallet
Step 1: Visit the Zephyr Wallet website https://wallet.zephyrprotocol.com/ and give your wallet a Name and a Password and then click Create.
Step 2: Next, save the wallet access keys on your device WalletName.keys file
Step 3: Confirm by ticking the purple box
Step 4: Save your secret phrase
Step 5: Re-enter wallet Name and Password and hit the Submit button
To support the blog, consider donation ZEPH, ZephUSD, ZephRSV here: ZEPHYR3398N1EpbYcsdzcN9C9GKgiL3NZD5mpeWN9mZH9HRUPxUbt8xbzjTUfgjqB3AncYQyQbtHMeeKSKNQutBGY7NAQL15ZQo4b