Understanding Blockchain

Hi, Before explaining what zero-knowledge proofs are used for and how they will change blockchain, I will briefly explain what blockchain is and how it works. This will be a general example.

Many transactions we perform on the internet are actually controlled by intermediary institutions. Banks, notaries, or government agencies oversee these processes. For example, when person A wants to transfer money via EFT to person B's bank account, a third party verifies A's account, B's account, and other details.

Blockchain eliminates these intermediaries and enables transactions to be verified in a completely decentralized manner. It can be defined as an immutable and distributed digital ledger consisting of interconnected blocks. Each block contains a set of data and is mathematically linked to the previous block through cryptographic hash functions.

Transactions in blockchain are verified through a consensus mechanism, primarily using Proof of Work (PoW) and Proof of Stake (PoS) methods. However, blockchain is not just for cryptocurrencies; it is also used in smart contracts, decentralized finance (DeFi), supply chain management, identity verification, and even voting systems. Due to its transparency, immutability, and security features, blockchain provides a much more reliable structure compared to centralized systems.

Zero-Knowledge Proofs (ZKPs)

Security and privacy in the digital world are becoming increasingly important. In everyday life, we constantly have to verify information: entering a password to log in to a website, showing proof of income to get a bank loan, or providing identification when taking an exam. However, in these processes, we often reveal more information than necessary.

Zero-Knowledge Proofs (ZKPs) allow us to prove something without revealing any additional information. In other words, we can demonstrate that we know something without disclosing the actual content.

A Simple Example

Suppose you want to register at a gym, and they require proof that you are over 18. Normally, you would show your ID card, which contains not only your age but also your full name, place of birth, and other personal details. However, the gym only needs to know whether you are over 18. ZKPs allow you to prove this without revealing your exact age or any other personal information.

This technology is revolutionizing blockchain and digital security because it enhances authentication processes while preserving privacy. In traditional systems, verification is usually handled by a central authority. For example, when applying for a loan, you typically share your entire financial history. But with ZKPs, you can prove that your credit score meets the requirement without revealing any other financial details.

The Three Core Principles of ZKPs

• Completeness: If the prover has the correct information, the verifier should be able to confirm it.
• Soundness: If the prover is lying, the verifier should be able to detect it.
• Zero-Knowledge: The verifier becomes convinced that the prover's claim is true but does not learn any extra information.

Two Main Types of ZKPs

1. Interactive ZKP: The prover and verifier engage in continuous communication. The verifier asks random questions to test whether the prover really possesses the correct information. However, this approach is impractical for many real-world applications because it requires ongoing interaction.
2. Non-Interactive ZKP: The prover generates a single proof that can be verified by anyone at any time. This method is widely used in blockchain technology.

Among non-interactive ZKPs, the two most popular approaches are:

• ZK-SNARKs: Produces small, fast-verifiable proofs but requires a trusted setup phase.
• ZK-STARKs: Generates larger proofs but does not require a trusted setup, making it more transparent.

How ZKPs Enhance Blockchain Technology

Blockchains operate on a public ledger where all transactions are visible. However, in some cases, users may want to keep their transactions private. ZKPs solve this issue by allowing private verification.

Key Use Cases of ZKPs in Blockchain

Scalability Solutions:

• zk-Rollups: Used in blockchains like Ethereum, zk-Rollups aggregate hundreds of transactions into a single ZKP, making the network faster and reducing transaction costs.
• Mina Protocol: Uses a lightweight blockchain where the entire chain is verified with a single ZKP, making it only a few kilobytes in size.(I will also post a blog about Mina soon.)

Privacy Solutions:

• Zcash: A cryptocurrency that encrypts transactions, hiding both sender and receiver identities using ZKPs.
• Aztec Network: Enables private transactions on Ethereum.

Identity Verification:

• zk-KYC: Allows banks to verify a user's eligibility without revealing their full financial history.
• zk-Login: Enables users to log in using decentralized identity verification instead of centralized systems.

Zero-Knowledge Proofs are a game-changing innovation for privacy, security, and scalability in the digital world, particularly in blockchain technology. As we continue to see more applications and improvements in this field, ZKPs will play a crucial role in shaping the future of digital privacy and security.

ZK is the end game.