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Comment by drakaal | Hacker News Reader

In order for this scheme to work ZeroCoins would have to have the same computational creation requirements as a bit coin. This would mean that there would always be fewer zero coins than bit coins and those coins would have to be mined.

If the zero coins were not the same difficulty to create then you could just create zero coins and trade them for bit coins anytime you wanted.

This seems like a huge flaw in the system.

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No, ZeroCoins are computationally easy to create. The concept is that you easily create a zerocoin, and then 'buy' it using bitcoins. When you buy the zerocoin, you create a bitcoin transaction, so you have to spend the corrosponding amount of bitcoins. When you want to redeem a zerocoin, you have to prove that you bought one. In this way, zerocoins are a lot like gold notes. They are cheap to create, but have value becuase they can be exchanged with gold/bitcoins, which have value and are hard to create. Unlike goldnotes however, zerocoins should be impossible to forge.

So you counterfeit the Zero Coin and trade them for Bit Coins and the system breaks.

I am not buying that they are impossible to forge. Especially if they are computationally easy to create.

On what basis are you claiming that they are not impossible to forge? You can check the crypto yourself:

http://spar.isi.jhu.edu/~mgreen/ZerocoinOakland.pdf

Things which are computationally easy to create are possible to brute force. Bit Coin only works because it is computationally hard to create them. At some point (50 years from now) Bit coins will not be as impossible to compute as they are now, but the exponential increase in difficulty to compute new ones will limit the likelihood that the advances in technology will catch the computational requirement.

It doesn't matter that the Zero Coin is computationally easy to create, because the Zero Coin doesn't have any value until it's embedded in a Mint transaction in the block chain. Mint transactions will only be accepted by the network if an equivalent value in Bitcoin is burned in the same transaction.

What stops me from 'minting' zerocoins by selling them to myself? exchanged with gold? what?

When you Mint a zerocoin, you spend a BTC. When you redeem a zerocoin, you receive a BTC. The collective of miners verifies that you don't get rich doing so.

But how do you know I just dont "sell it" to a btc address I already own? Or maybe I dont understand what you mean by spend BTC? Paid to who? The person "minting" coins, which is not a POW system?

The Mint transaction, which becomes part of the block chain, establishes consent that the given bitcoin address owns one BTC less and that simultaneously the given Zerocoin becomes valid.

Minting takes place within the block chain, unlike Dollar exchanges on MtGox, which are not directly visible as such in the block chain.

You are paying the bitcoin to whowever redeams the zerocoin. Until someone redeems the zerocoin, no one has the bitcoin that was used to mint it.

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