📕 Better than Yesterday with BSCStation #16: An Intro to Zero-Knowledge Proofs (ZKP)
Trust is the backbone of Blockchain and ZK would help secure user identity and data, so that they can authenticate themselves in a trustless world.
ZK is anticipated as one of the technologies that will undoubtedly change Web3. When it comes to ensuring the privacy, security and integrity of blockchain applications ZK looks quite promising.
In today’s world, privacy is the main point of concern. An individual won’t want to reveal his complete identity to get a small job done, but at the same time, the verifier also needs the information to confirm if things are fine to proceed. The answer to this scenario is Zero Knowledge.
How Does Zero-Knowledge Proof Work?
Zero-knowledge proof is a method by which one party (the prover) can prove to another party (the verifier) that a statement is true without revealing any additional information. This is particularly useful when the information is sensitive and the prover doesn’t want the verifier to have access to it.
The prover provides a mathematical proof only they can generate and the verifier can use this proof to verify the truth of the statement. However, they cannot use the proof to reconstruct the original information.
Why Use Zero-Knowledge Proofs?
The popularity of zero-knowledge proofs in blockchain and crypto is driven by the increasing demand for privacy and security in digital transactions. With the rise of blockchain technology and cryptocurrency, there is a growing need for a way to verify transactions without revealing sensitive information — a need ZKPs can meet.
Zero-knowledge proofs have attracted greater attention and interest in recent years, with many protocols utilizing ZKPs having been launched and major blockchains having built zero-knowledge roll-ups. A clear sign of zero-knowledge proofs’ popularity was seen at the DevCon 2022 conference, where over 20% of all talks were about this technology.
Use Cases For Zero-Knowledge Proofs
Zero-knowledge proofs have many use cases, some of which have already been realized; others are expected to become a reality in the future. Some major ZKP use cases include:
Digital identity verification
Zero-knowledge proofs can be used to verify the identities of users without revealing any sensitive personal information. This can be useful in applications such as digital voting systems, where the identities of voters must be verified without compromising their anonymity.
Privacy-preserving transactions
One of the most popular use cases for zero-knowledge proofs in crypto is to enable privacy-preserving transactions. For example, Manta Network’s MantaPay decentralized application (DApp) uses ZKPs to enable users to make transactions on the decentralized exchange (DEX) without revealing their identities or transaction details. This allows users to maintain their privacy while still being able to use the platform for transactions.
Shielded transactions
Zcash is a cryptocurrency that uses zero-knowledge proofs to enable shielded transactions. In such transactions, sender and recipient addresses, as well as transaction amounts, are obscured from the public blockchain, providing added privacy for users.
Tokenization and ownership verification
Zero-knowledge proofs can also be used to tokenize assets and verify their proof of ownership. For example, a property can be tokenized and any party can verify its ownership without publicly revealing any other information.
Global compliance
Some countries have strict regulations regarding the collection and sharing of financial information, which can be difficult for decentralized platforms to comply with. Zero-knowledge proofs can be used to share the required information with regulators while keeping it private from other parties.
This can help bridge the gap between decentralized platforms and traditional financial institutions, making it easier for DeFi to comply with regulations in various jurisdictions.
Limitations of Zero-Knowledge Proofs
Zero-knowledge proofs represent a unique method of verifying the truth of information while preserving privacy, but they don’t provide a 100% guarantee. While the probability of verification when the prover is lying is negligible, users should be aware that ZKPs are not bullet-proof.
Conclusion
Data privacy and security are important subjects, and the zero-knowledge proof method has much to offer the discussion. To see a greater number of use cases and general adoption of this verification process, we first need to resolve the problem of scalability. The blockchain industry is already struggling with network congestion. Prolonging the verification process on the blockchain would only aggravate the problem.