TLDR: Zero-Knowledge proofs (ZK-proofs) involve complex algorithms to prove something is true without revealing underlying information that verifies the assertion. To make a determination of truth, ZK-proofs take data as inputs and return either “true” or “false” without divulging sensitive details or disclosing how that assertion was proven to be true.
If that blew your mind, not to worry. Let's break it down.
There are many instances in which verifying information with a ZK-proof would make life easier and more secure. But let's start with a simplified version:
Assertion: Nina has a dog named Ace.
Traditional Web2 proofs (examples of underlying data, or “inputs” that would prove the above assertion):
While the above evidence would certainly validate the assertion that Nina has a dog named Ace, a ZK-proof would simply produce the output, "true." That way, the person verifying the assertion doesn't need to see Nina's family Instagram photos, the town in which Ace is registered, or the adoption data which might include personally identifying information (PII) about Nina that she doesn't want to share (for instance, her birthday or social security number).
Result: ZK-Proofs use algorithms to prove that Nina has a dog named Ace, without revealing the underlying evidence, or “inputs” needed to prove the truth of that statement. They allow third parties to verify information while protecting private details.
“It’s like proving a secret without revealing how you found out or why it’s true,” said Vivian Ford, Head of Community at Aleo, a layer-one blockchain that’s employing zero-knowledge proofs to bring privacy to the web.
Imagine being able to prove your voter registration without having to provide physical documentation. Or perhaps you’re trying to apply for a loan, and you want to attest your financial standing and eligibility without relinquishing your entire financial portfolio and personal data. ZK-proofs are making these types of verification processes possible, notwithstanding a host of other applications and use cases.
ZK-Proofs were first introduced in a 1985 paper “The knowledge complexity of interactive proof systems”, written by MIT mathematicians. Akin to basic cryptography principles, ZK-technology has been abstracted and scaled through the blockchain. The Ethereum Foundation has since championed ZK-proofs, calling them a "breakthrough" technology that promise to improve security of information for individuals.
In 2017, ING Bank began to employ ZK-proofs to improve data privacy for its clients while simultaneously meeting regulatory and KYC (know-your-customer) requirements. The solutions ING named — “zero-knowledge range proof (ZKRP)” and “zero-knowledge set membership (ZKSM)” — enable numerical and other non-numerical information (think location, names etc.) to be validated within a certain range without offering up the exact number or piece of information.
For instance, with ZKRP, a loan applicant could prove that their net assets fall within a certain range without revealing the exact value. Taking this a step further with ZKSM, a client looking to set up a checking account could verify that they live within the United States, without disclosing their exact location.
As the above applications illustrate, ZK-Proofs offer key solutions for ensuring digital privacy. “When you think about it, anything you do, you can think of a reason why having privacy would be beneficial,” says Ford.
ZK-proofs rest on simple principles of data privacy, verification and increased efficiency. Here are some use cases:
Authentication: ZK-proofs can facilitate authentication for users and platforms, allowing people to gain entry to digital platforms and services without having to surrender personal information such as name, birthdate, social security number or address.
ZK-Rollups: ZK-rollups are layer-2 solutions used to increase scalability and privacy on Ethereum by consolidating, or “batching” transactions together. Thanks to ZK-proofs, the blockchain (Ethereum) can become more efficient as it is able to algorithmically prove and validate a change to the network, allowing more transactions to occur in bulk. Read more about ZK-Rollups here.
KYC: In traditional finance and DeFi, ZK-proofs can help verify factors integral to someone’s financial identity without “baring it all.”
Anonymous payments: Unlike traditional payment structures, which are visible to numerous parties, ZK-proof blockchain technology can validate transactions without needing to validate the underlying transaction data.
NFTs: ZK-proofs can help maintain privacy in NFT purchasing and ownership.
Voting: ZK-proofs could potentially improve accuracy in tracking and registering voting rights, without disclosing one’s vote, party or personal identification. Read more on the potential implications of voting on-chain here.
Now you might be wondering, “isn’t privacy on the blockchain antithetical to transparency?” In short, yes. ZK-proofs make it so that each transaction on Bitcoin and Ethereum is no longer visible to everyone, which is otherwise an intrinsic feature of the blockchain.This is one critique of ZK-proofs, yet it is largely a fallacy. Instead of trading transparency for privacy, or vice-versa, ZK-proofs enable user privacy while reinforcing transparency. They do so by verifying the occurrence of transactions on the blockchain, without exposing each data-layer of the transaction itself.
Another critique of ZK-proofs is the cost of hardware and verification. As you can imagine, ZKPs require tremendous computational power, and therefore energy, to run algorithms. Not to mention, the hardware to perform these computations are specialized, and therefore exorbitant.
One final issue, according to Ford, is the lack of accessible, user-ready platforms. Like many new ideas in Web3, “hype followed quicker than builders could build”, laments Ford. Many people are pushing back on ZK-proof technology saying, “show us what you got.”
Despite hype cycles propelling ZK-proofs forward, we are a long way off from ubiquitous understanding of them. In fact, most people will inevitably benefit from zero-knowledge proofs without knowing they are embedded in the technology at all. That said, they are an integral part of the evolution of blockchain technology and proof that privacy and transparency walk a fine line in web3.
Where you can go to learn more about ZK-Proofs:
Isabel Doonan is the CEO and cofounder of Girls Gotta Eth and Sacreage, a Web3 startup working to expand tooling for crypto philanthropy. With a background in Fintech and ESG, she is deeply passionate about the intersection of blockchain and climate funding, as she works to build a better, more equitable future in which everyone can participate in philanthropy.
This article and all the information in it does not constitute financial advice. If you don’t want to invest money or time in Web3, you don’t have to. As always: Do your own research.