Why Zero Knowledge Proofs (ZKP) Are the Future of Blockchain Privacy

As with many technologies, zero knowledge proofs (ZKPs) are easy to understand at a high level but hard to master on a fundamental one. It’s a bit like knowing that 2 + 2 = 4 yet struggling to explain how you know it to be true. A cryptography degree is not required to talk ZKPs mercifully: a basic grounding in blockchain and a casual interest in privacy should be more than enough to sustain you.
As you’re going to discover, ZKPs are good for a lot of things, but they’re particularly good when it comes to keeping secrets while speaking truth. It is this superpower that makes them one of the most versatile tools in web3 today and one of the most exciting innovations since Nakamoto consensus.

The Origins of ZKPs

Like many technologies that are now synonymous with blockchain, such as encryption, zero-knowledge proofs predate Bitcoin. The technology was introduced by Shafi Goldwasser, Silvio Micali, and Charles Rackoff in the 1980s. Their seminal paper, titled “The Knowledge Complexity of Interactive Proof Systems,” was published in 1985, laying out the basic concept of ZKPs and setting the stage for decades of iteration.
The trio were renowned computer scientists and cryptographers whose contributions to the fields of theoretical computer science and cryptography are well documented. Their work on zero-knowledge proofs has had a profound impact on the development of cryptographic protocols and their practical implementation. But what are ZKPs exactly, and why have they become so trendy in blockchain circles in recent years?

Know Your Zero-Knowledge Proofs

Zero-knowledge proofs are cryptographic protocols that allow one party, known as the prover, to demonstrate to another party, the verifier, that a particular statement is true – without revealing any additional information beyond the validity of that statement. In other words, zero-knowledge proofs allow a prover to convince a verifier of the truth of a claim without disclosing any details about how they arrived at that knowledge.

On the face of it, this sounds like a fairly benign capability with only niche applications. In fact, the utility of this simple ability is wide-ranging and its applications are vast. Zero-knowledge proofs have become an essential tool in cryptography, where they are utilized in areas such as secure authentication, identity systems, and privacy preservation.

The key characteristic of a zero-knowledge proof is that it provides convincing evidence to the verifier without revealing any information that could be used to reconstruct the proof. The verifier gains confidence that the statement is true, but learns nothing about the underlying data or the steps taken to prove it. This property ensures privacy and confidentiality, making ZKPs valuable for sensitive transactions.

One of the challenges when dealing with abstract concepts is visualizing them. Thankfully, we have a number of popular models to call upon that help to bring ZKPs to life. In the “Ali Baba’s Cave” scenario, Alice wants to prove to Bob that she knows the secret passphrase to open a hidden cave without revealing the passphrase itself. By using a zero-knowledge proof, Alice can convince Bob of her knowledge of the passphrase without giving any clues that could aid Bob in guessing the passphrase himself.

Proofs in Action

The potential applications for ZKPs are vast, particularly within a crypto context where they are an integral component of layer-two networks such as zkSync and Polygon zkEVM. These chains provide the most visible manifestation of ZKPs in action, supplying proof of the validity of transactions committed in batches to the Ethereum parent chain. As cryptography developers are discovering, however, use cases for zero-knowledge proofs are virtually unlimited.

In the context of authentication, zero-knowledge proofs can be employed without revealing sensitive information. For instance, an individual can prove their age to access age-restricted content without disclosing their exact date of birth. Similarly, zk proofs can be employed to demonstrate that an individual possesses the credentials required for accessing a resource, such as entering a building or accessing online services.

Zero-knowledge proofs can also be applied in electronic voting systems to ensure the integrity and privacy of votes. Voters can prove that their votes are valid without revealing their actual choices. ZKPs can further be used to verify the correctness of a password without transmitting or storing the actual password. This enhances security by minimizing the exposure of sensitive information.

Zk proofs can even facilitate compliance audits without revealing sensitive information. Companies can prove regulatory compliance with regulations without exposing confidential data. One example of this is Proof of Reserves, in which crypto exchanges demonstrate they have enough funds to cover liabilities.

All of these use cases share this much in common: privacy preservation. It’s no surprise, therefore, that one of the most compelling applications for zero-knowledge proofs is in supporting private transactions. Popularized by Zcash and since iterated upon by numerous subsequent projects, ZKPs in this context allow users to prove that their transaction is valid without revealing the sender, recipient, or transaction amount.

The evolution of this technology for supporting private transactions is embodied by layer1 Namada, where ZKPs enable shielded transactions for any type of asset. As a result, not only can fungible tokens such as ETH or USDT be transferred privately onchain, but so can NFTs, with inter-chain transfers supported. Non-zk privacy technologies tend to result in higher network fees or slower confirmation times. Namada’s unique implementation of a MASP circuit for shielded transactions neatly overcomes this.

Despite being comparatively old in tech terms, zero-knowledge proofs are an innovation whose best years still lie ahead. ZKPs provide a powerful tool for enhancing security and privacy in various applications, enabling trust and authentication without compromising sensitive information. It is this unique characteristic that makes them so versatile and increasingly ubiquitous in crypto. Don’t fade ZKPs.