Summary

Zero-knowledge proof (ZKP) is a cryptographic technique that allows verifying the authenticity of a piece of information without revealing the information itself. The technology is increasingly important for improving the privacy and security of blockchain, cryptocurrencies and decentralized finance (DeFi).

Many DeFi projects have applied ZKP to services such as lending and trading to provide users with better privacy and security. Many Layer 1 blockchains are adding ZKP-based rollups or the Zero-Knowledge Ethereum Virtual Machine (zkEVM). As the adoption rate of zero-knowledge proof applications increases, it is expected to play an increasingly important role in the blockchain and Web3 fields.

How Zero-Knowledge Proofs Work

Zero-knowledge proof methods allow one party (the prover) to prove to another party (the verifier) ​​the truth of a statement without revealing any additional information. This is especially useful when there is sensitive information and the prover does not want the verifier to have access to the information.

The prover only needs to provide a mathematical proof that it can generate, and the verifier can use this proof to verify the truth of the statement, but cannot use this proof to reconstruct the original information.

Suppose a tunnel has two entrances A and B. There is a locked door, coded to block the only path, preventing people from going from one end of the tunnel to the other (from A to B). You know the password and want to sell it to X who wants to enter the tunnel.

You want her to pay before she gets the password, but she wants you to prove that you really know the password first. In this case, she can stand in front of the tunnel and watch you walk in one of the entrances and come out the other. This way, she can be sure that you really know the password.

Why use zero-knowledge proofs?

Zero-knowledge proofs have gained traction in the blockchain and cryptocurrency space because of the growing need for privacy and security in digital transactions. With the rise of blockchain technology and cryptocurrencies, people increasingly need a way to verify transactions without revealing sensitive information, and ZKP can meet this demand.

In recent years, zero-knowledge proofs have attracted more attention and interest, many protocols using ZKPs have been launched, and mainstream blockchains have developed zero-knowledge rollups. At the 2022 Developer Conference (DevCon), more than 20% of the discussions revolved around zero-knowledge proof technology, indicating that the technology is very popular.

key development

A key development in zero-knowledge proofs is the increasing use of a specific type of ZKP - succinct non-interactive zero-knowledge proofs (zk-SNARKs). zk-SNARKs have been widely used in various DeFi apps, such as private token transactions and shielded lending. Another major development in zero-knowledge proofs is a greater focus on scalability and performance through zero-knowledge rollups (zkRoll-up).

zk-SNARK

A succinct non-interactive zero-knowledge proof (zk-SNARK) is a specific type of zero-knowledge proof that allows a statement to be verified without revealing any information about the statement itself.

zk-SNARKs have been used in applications such as Zcash and JP Morgan Chase's blockchain-based payment system. Additionally, it is used to securely authenticate the client to the server.

zkRoll-up

zkRoll-up is a blockchain network expansion solution, which can aggregate a batch of multiple transactions into a larger single transaction, and then record it on the blockchain. For example, BNB Chain launched the zkBNB testnet based on the zkRoll-up architecture in 2022 .

zkBNB can bundle hundreds of transactions into a batch of off-chain transactions and generate a cryptographic proof to prove the validity of all transactions. zkRoll-up strikes a certain balance between scalability and security, and is suitable for large-scale, low-latency settings.

Use Cases for Zero-Knowledge Proofs

There are many use cases for zero-knowledge proofs, some of which have already been realized, while others are expected to become a reality in the future. Some of the main use cases for ZKPs include:

digital identity authentication

Zero-knowledge proofs can be used to authenticate users without revealing any sensitive personal information. This could be useful in applications such as digital voting systems that require verification of voter identity without compromising voter anonymity.

Privacy-preserving transactions

Achieving privacy-preserving transactions is one of the popular use cases of zero-knowledge proofs in the cryptocurrency space. For example, Manta Network’s MantaPay decentralized application (DApp) uses ZKP to enable users to transact on a decentralized exchange (DEX) without revealing their identity or transaction details. This way, users can still use the platform for transactions while maintaining their privacy.

shielded transactions

Zcash is a cryptocurrency that uses zero-knowledge proofs to enable shielded transactions. In such transactions, the sender and receiver addresses and transaction amount can be shielded from the public blockchain, improving the privacy of user transactions.

Tokenization and Verification of Ownership

Zero-knowledge proofs can also be used to tokenize assets and verify their proof of ownership. For example, a piece of property could be tokenized and any party could verify its ownership without publicly revealing any other information.

Comply with global regulations

Some countries have strict regulations regarding the collection and sharing of financial information, and decentralized platforms may have difficulty complying with these regulations. Zero-knowledge proofs can be used to share required information with regulators while keeping it secret from other parties.

This will help bridge the gap between decentralized platforms and traditional financial institutions, making it easier for DeFi to comply with regulations in various jurisdictions.

The future of zero-knowledge proofs in the blockchain space

Future zero-knowledge proofs may bring new technological innovations. Some noteworthy future developments related to ZKPs include:

Cross-chain privacy layer

As the blockchain and DeFi ecosystem continues to grow and evolve, there is an increasing need for interoperability between different blockchain networks. A cross-chain privacy layer will allow people to transact across different blockchain networks while protecting the privacy of all parties involved.

zk-STARK

Another area of ​​concern is the increased use of zk-STARKs (Zero-Knowledge Scalable Transparent Arguments of Knowledge), a newer form of zero-knowledge proofs considered more secure and efficient than zk-SNARKs. Another advantage of zk-STARK over zk-SNARK is that it can be verified faster and does not require a trusted setup.

User Friendly Toolkit

Zero-knowledge proof techniques can be complex, and not all development teams have expertise in this particular field of cryptography. A user-friendly ZKP toolkit can help bridge this gap, making it easier for developers from different backgrounds to use the technology.

Limitations of Zero-Knowledge Proofs

Zero-knowledge proofs provide a unique method of verifying the authenticity of information while preserving privacy, but such verification is not 100% accurate. While the probability of verification is negligible when the prover is lying, users should be aware that ZKPs are not 100% reliable.

In addition, the algorithms used in zero-knowledge proofs consume a lot of computing resources. Computational intensiveness is essential in some types of ZKPs because they require many interactions between verifiers and provers. In other types of ZKP, these algorithms are very computationally intensive, which may limit the application of ZKP.

epilogue

Zero-knowledge proofs are rapidly gaining attention due to their unique privacy-preserving properties and scaling potential. With the increasing application of this technology in the field of blockchain, cryptocurrency and DeFi, it may bring more innovative services, which will greatly benefit users. Zero-knowledge proofs are expected to play a key role in creating a safer, more private, and more efficient DApp ecosystem.