How Zero-Knowledge Proofs (ZKPs) Are Changing the Game for the Future of Privacy in Blockchain
Introduction
Privacy is now a necessity; it is no longer a bonus. When blockchain ledgers are visible, there is a fundamental problem for users and businesses: how to keep private information safe on a public system?
ZKPs, or Zero-Knowledge Proofs, are a way of proving something is true and not saying why it is true.
Imagine being able to prove who you are, without showing your passport. Sounds like magic, right? Well, it’s actually mathematics, more specifically, cryptography.
This article will explain, in order, how ZKPs work, why they matter for privacy on blockchains and how they are enabling the next step to build trust in the digital economy.
What Privacy Means in Blockchain
Blockchain is based upon the idea of openness, and that openness generates trust because you can see everything in public. On the downside of openness, you can see every transaction, every address, and every balance.
For individuals, that means privacy of finances; for organizations, that means whether their trade secrets remain secret, their employees are behaving, or if their consumers' data are private.
So the question becomes, is openness possible without sacrificing privacy? ZKPs provide a clever way of being able to demonstrate validity without releasing the data you would normally rely on for validity.
What Are ZKPs, or Zero-Knowledge Proofs?
When one party (the prover) convinces another party (the verifier) they know a secret is called a Zero-Knowledge Proof (ZKP). You can make a box in front of me and open it to show you have a key, but you don’t have to show me the key.
Example: "Colorblind Friend"
Imagine your colorblind friend wants evidence you can tell a red marble apart from a green one. You show both marbles, put them behind your back, switch them out, and ask which one is which.
Your friend understands you can separate for sure the red and green marbles if you continually get the correct answer even though they have no idea what color it is you are showing.
That is the essence of ZKP: proof without showing.
How ZKPs Work
A ZKP can be broken down into three primary steps to help organize the thought process:
- Promise: The prover makes a cryptographic promise about some data/information (it's "secret").
- Challenge: The verifier is asking for evidence of some specific proof that shows knowledge or proof about that secret.
- Answer: The prover correctly answers the challenge without ever revealing the actual data.
The "magic" comes from cryptography, using complex mathematical puzzles to verify that the verifier is safely only assured of the truth and has no chance of guessing.
In a blockchain, with smart contracts, those proofs are happening automatically. The smart contract, nodes, or other element does not "see" the private data or other potential information in real time.
Main Types of ZKPs
Interactive Proof
This is characterized by the prover and verifier communicating with each other.
Non-Interactive Proof
This means that the proof is all that is required, and no communication takes place. Great for automation using blockchain.
- zk-SNARK (zero-knowledge succinct non-interactive argument of knowledge)
- zk-SNARKs are considered fast, efficient, small, and usable in real time on the blockchain. However, they require a trusted setup.
- zk-STARK (zero-knowledge scalable transparent argument of knowledge)
- zk-STARKs don't require a trusted setup as zk-SNARKs do, but they typically require significantly more processing power.
ZKPs in Blockchain
While blockchains function excellently in a model that is open and transparent, not every person would like the world to know what they did with their money. ZKPs help fill that gap by keeping information about the users private on a public ledger.
Use Cases
Private Voting
An election on the blockchain can be both open and verifiable while keeping the content of each vote private. ZKPs mean only valid votes are counted—without disclosing who voted for whom. This makes DAOs, cooperatives, and national elections secure and anonymous.
Decentralized Identity Verification
In Web3, users often have to prove their eligibility. For example, they need to prove that they are over 18 or that they have specific credentials. ZKPs allow them to prove that they are eligible without sharing the underlying data, which could revolutionize DeFi onboarding and KYC processes.
Private Transactions
Zcash and Aztec use ZKPs to share privately, for example, the sender, receiver, and amount transacted are hidden, but the transaction itself is still provable. This is like using the blockchain with bank-level privacy.
Examples of ZKP in the Real World
Ethereum’s Aztec Protocol
Aztec is a privacy-first payment system, launched in 2022, that uses ZKPs to encrypt transaction data, while allowing for the payment to be validated—all of which allow for privacy for Ethereum users when doing day-to-day things with cryptocurrency.
Zcash
Did anyone introduce zk-SNARKs (or zero-knowledge proofs) before Zcash? Zcash allows users to click transactions transparent or shielded.
Polygon zkEVM
The most recent tool in combining zk-rollups with Ethereum compatibility. As mentioned earlier, we can scale when watching information stay private along the way—this is a huge leap towards mainstream adoption of ZK.
But to be private requires a level of accountability, and authorities have a real dilemma of figuring out how to follow transactions that they can’t see.
The Future of ZKPs
The power of Zero-knowledge proofs well surpasses payments.
Think of smart contracts that are completely private, where the logic and data are hidden, but the end result is provably correct.
We can envision using ZKPs for:
- Private business deals
- Sealed-bid auctions
- Private DAOs
As technology continues to evolve, we will probably see a whole ecosystem of trustless, private decentralized applications.
Problems Ahead
ZKPs clearly show promise, but there are significant challenges.
- High computational cost: The act of building proofs can take an immense amount of resources.
- Scalability: Current infrastructure cannot scale to perform vast operations.
- Regulatory uncertainty: All regulators want to see a data set but also want to be able to keep the data private.
The entire industry is focused on making proofs faster and cheaper to create, whether that is through hardware acceleration or hybrid cryptographic methods.
Finding a Balance Between Privacy and Openness
It’s all about balance and refining transparency with ZKPs.
ZKPs don’t conceal it all; they only reveal what’s necessary. Trust is based on math, not viewability.
This could pivot how we understand digital privacy for banking, government, and data ownership.
The Path to Widespread Use
In order for ZKPs to be mainstream, we need a few critical components:
- Better developer tooling (e.g. zk-SDKs)
- Educational efforts to raise awareness
- Scalable infrastructures to lower costs
Ultimately, the challenge is more than just cryptography, but also the community's sense of understanding and acceptance of blockchain privacy.
Conclusion
Zero-Knowledge Proofs are changing the meaning of privacy in blockchain technology.
They allow for trust without exposing the data itself, offering individuals and companies the ability to interact trustfully in decentralized ecosystems.
As ZK tech continues to iterate, it is going to change the way we trust in the digital world, enabling privacy and transparency to coexist.
This article is contributed by an external writer: Razel Jade Hijastro.
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