Blockchain Infrastructure

What are Zero-Knowledge Proofs

December 28, 2023

Through techniques like ZK rollups, multiple transactions are bundled into a single proof, streamlining the verification process. This compact form of verification reduces computational requirements and enhances the network’s overall scalability. By processing larger volumes of transactions more efficiently, zero-knowledge proofs boost blockchain network throughput without compromising security or decentralisation. Zero-knowledge proofs (ZKPs) are cryptographic tools that work like magic tricks, allowing one party to prove they know something without revealing the actual details. They maintain confidentiality while confirming specific information and have a key role in web3. This article will explain what they are, how they work, their use cases in web3, and a deep dive into how zero-knowledge proofs improve blockchain scalability.

Definition of zero-knowledge proofs

Zero-knowledge proofs, often referred to as ZKPs, are a clever way to prove something without revealing any details about it. Imagine being able to show you know a secret password without actually saying what the password is. That’s the magic of ZKPs – they allow one party to confirm they have certain information without giving away the information itself.

In every zero-knowledge proof, there’s a prover and a verifier. The prover wants to show the verifier that they know something without disclosing what it is. They do this by demonstrating knowledge of some facts that only the rightful owner of the information would know. It’s like solving a puzzle without showing the solution.

They can be used for a variety of purposes. Still, their main applications include improving data security, scalability, and privacy in blockchain transactions, safeguarding sensitive information in industries like healthcare and finance, and enabling secure authentication without unnecessary exposure to personal details.

How zero-knowledge proofs work (in simple terms)

While relatively simple at the surface, understanding the intricacies of zero-knowledge proofs can be complex. To explain how they work we will use a simple analogy:

A scientist claims to have discovered a complex mathematical proof for a groundbreaking theory. Verifying this proof conventionally requires extensive computational resources and time. Alternatively, using a zero-knowledge proof, the scientist can demonstrate the proof’s validity without divulging the entire process, significantly reducing the time needed for verification while ensuring the credibility of the discovery.

In essence, the zero-knowledge proof is a distilled version of the proof containing only the details necessary to prove its validity. When using zero-knowledge proofs in blockchain for improved scalability and privacy it works in similar ways. To explain how this works, consider the following scenario:

A validator has verified and put together a block of transactions that produces a certain hash value. To verify this hash (and thus the transactions inside the block), someone could verify this hash by following the same energy- and time-consuming process of recreating this block. However, another option would be for the validator to provide a brief zero-knowledge proof to make it easy to verify the validity of this block without revealing the details. This proof is called a Zero-Knowledge Succinct Non-Interactive Argument, widely known as a ZK-SNARK.

Similar to the mathematical proof example, the validity of a statement can be verified quickly without revealing the underlying details of the statement.

Use cases of zero-knowledge proofs in Web3

Zero-knowledge proofs have a variety of use cases within the web3 space, with some of the main ones being:

  • Enhancing privacy
  • Improving scalability
  • Enabling regulatory compliance
  • Secure authentication 

Let’s look at each of these in more detail and how methods using zero-knowledge proofs differ from traditional methods.

Using zero-knowledge proofs for enhanced privacy

Zero-knowledge proofs can enhance privacy within web3 by concealing transaction details, such as sender addresses, transaction amounts, and contract terms. Unlike traditional blockchain transactions that are transparent and visible to all, zero-knowledge proofs enable confidential transactions. 

This heightened level of confidentiality ensures that sensitive data remains protected within decentralised systems. Moreover, zero-knowledge proofs facilitate private interactions, allowing users to engage in transactions and collaborations while maintaining their privacy. This advantage is particularly beneficial in business environments where discretion and confidentiality are paramount.

Zero-knowledge proofs surpass traditional methods by offering a higher level of confidentiality. By concealing transaction details and protecting sensitive data within decentralised systems, zero-knowledge proofs address concerns related to data breaches and unauthorised access. Additionally, their ability to enable private interactions ensures that users can engage securely in web3 environments without compromising their privacy. Another thing that sets them apart from existing privacy solutions is their ability to offer increased privacy with similar levels of security as their non-private counterparts.

Using zero-knowledge proofs for greater scalability

Zero-knowledge proofs are increasingly used in layer 2 scaling solutions as well as modern blockchain protocols for their ability to improve blockchain scalability. 

They achieve this by optimising data processing and reducing blockchain congestion. 

Compared to traditional methods, zero-knowledge proofs offer an optimised approach to data processing, reducing computational overhead and enhancing efficiency. This streamlined verification process improves scalability by enabling the processing of larger transaction volumes without congesting the blockchain network.

Using zero-knowledge proofs for better regulatory compliance

Zero-knowledge proofs can be useful in ensuring compliance with data regulations. They provide a more secure way to handle user data while keeping it private. By hiding sensitive bits, zero-knowledge proofs balance showing what’s needed and keeping things secret. This helps decentralised systems follow the rules without giving away personal details. They check data without revealing everything, keeping user info safe from breaches and hacks which happen regularly.

In a nutshell, zero-knowledge proofs are a clever way to aid in sticking to complex privacy rules while still being open. They make sure user data stays safe in decentralised systems, meeting rules and keeping trust and privacy intact in the web3 world.

Using zero-knowledge proofs for secure authentication

Zero-knowledge proofs offer a secure method for verifying identities or approving actions without revealing unnecessary personal information. They function by allowing individuals to prove specific credentials without disclosing the exact details. 

In scenarios where secure interactions are vital, like proving age without revealing the birthdate or approving a transaction without disclosing account specifics, zero-knowledge proofs enable individuals to authenticate themselves or authorise actions while keeping sensitive information private. Amid B2B collaborations, where confidentiality is paramount, zero-knowledge proofs ensure secure interactions by permitting verifications without unnecessary exposure of private details, establishing trust without compromising confidentiality.

Overall, they serve as a discreet way for parties to validate identities or approve transactions securely. They enable necessary verifications while protecting sensitive information and ensuring trusted and confidential interactions, particularly vital in B2B environments where secure collaborations rely on maintaining confidentiality.

Deep dive: Blockchain scalability with ZK Rollups

Let’s take a deeper dive into one of the most prominent applications of zero-knowledge proofs in web3. Scalability is a challenge as old as blockchain, and with an ever-increasing adoption of blockchain technology, there is also a constant need for increased scalability. ZK Rollups emerged as a potential solution for this challenge.

How ZK Rollups work

ZK Rollups function by grouping multiple user transactions off-chain and then submitting these bundled transactions as a single transaction to the main blockchain. Alongside this batched transaction, a succinct proof, derived from zero-knowledge proofs, is added to validate the correctness of these bundled transactions. To be specific, a ZK rollup follows these steps:

  1. Transaction bundling: Initially, numerous individual user transactions occur off-chain, grouped or bundled into a single package.
  1. On-chain submission: This bundled package is then submitted as a single transaction to the main blockchain. Rather than posting each transaction separately on the main chain, ZK Rollups compress these transactions into a single entry.
  1. Accompanying zero-knowledge proof: Alongside this single transaction, a concise proof is included. This proof is derived using zero-knowledge techniques, ensuring that it confirms the validity of all the transactions within the bundle without disclosing the specific details of each transaction.
  1. Verification process: On the main chain, validators or smart contracts verify this bundled transaction using the accompanying proof. The proof allows for a swift verification process without unravelling the details of each transaction within the bundle.
  1. Final confirmation: Once verified, the bundled transactions are confirmed on the main chain. The main chain acknowledges the validity of these transactions, thereby updating the blockchain’s state.

This method significantly reduces the amount of data that needs to be processed and stored on the main blockchain. At the same time, it maintains the ability to verify the accuracy and integrity of these transactions. It optimises blockchain scalability by condensing multiple transactions into a single entry and facilitating a more efficient verification process using the accompanying zero-knowledge proof.

Zero Knowledge transaction process model

To make this even more clear, the above image visualises these steps.

The benefits of ZK Rollups

The efficiency of ZK Rollups lies in their ability to maintain security guarantees of the underlying blockchain while vastly improving its scalability. Users benefit from reduced transaction fees and faster transaction finality, making ZK Rollups a promising avenue for scaling Ethereum and other blockchain networks. This technique optimises the blockchain’s capacity to handle a higher volume of transactions, paving the way for broader adoption and enhanced usability of dApps.

As the development and adoption of ZK Rollups continue to evolve, ongoing research and advancements aim to further enhance their efficiency and usability. The synergy between ZK Rollups and zero-knowledge proofs showcases a promising path towards resolving scalability issues faced by blockchain networks. It offers a scalable solution without compromising the foundational principles of security and decentralisation.

In summary, ZK Rollups represent a significant leap forward in addressing the scalability concerns of blockchain networks. By leveraging the power of zero-knowledge proofs, they pave the way for a more scalable, efficient, and user-friendly blockchain ecosystem, laying the groundwork for a future where decentralised applications can operate at scale without compromising on security.

Conclusion

Zero-knowledge proofs are complex mathematical proofs that effectively allow parties to prove information without divulging the details. They can be used in web3 to improve scalability, increase privacy, boost compliance, and allow for better authentication. They are the cornerstone to the future of web3 and will be central in existing and future web3 use cases.

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