What Is a Zero-Knowledge Proof in Blockchain?

The zero-knowledge proof (ZKP) is a concept that has gained a lot of attention in the world of blockchain technology. Zero-Knowledge Proofs were first introduced in 1985 by MIT researchers Shafi Goldwasser, Silvio Micali, and Charles Rackoff in their paper titled "The Knowledge Complexity of Interactive Proof-Systems." ZKPs were once seen as just a theory, but they have changed a lot in recent years, especially with the development of blockchain technology.

Zcash was the first company to put zero-knowledge proofs (ZKPs) into action on the blockchain in 2016. It used zk-SNARKs, which stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, which allowed for private transactions. Since that time, ZKPs have been used in many ways in blockchain and other domains.

In this guide we have covered what zero-knowledge proofs are, explored how they work, and provided examples of their benefits and applications.

What Is a Zero-Knowledge Proof?

A zero-knowledge proof is a cryptographic method that allows one person (the prover) to show another person (the verifier) that a statement is true without giving away any details other than the fact that it is true. To put it more simply, it's like showing that you know a secret without giving it out. 

A zero-knowledge proof must satisfy three basic conditions in order to be accepted:

Completeness: Someone who is honest will be able to convince someone who is honest that the statement is true.

Soundness: If the statement is not true, no dishonest prover will convince an honest verifier that it is true.

Zero-Knowledge: The verifier does not learn anything about the actual information, only whether the statement is valid.

ZKPs are very important for making blockchain systems more private and trustworthy because they let transactions be verified without showing private information.

Zero-Knowledge vs. Zero Trust

Zero-knowledge and zero trust are terms commonly associated with security, but they relate to different concepts:

Zero-Knowledge: Focuses on proving something without revealing the actual data. For example, in a blockchain environment, a user can show that they have enough money for a transaction without disclosing their account balance.

Zero Trust: A security framework that does not automatically trust any user or system, whether they are inside or outside the network. It requires regular verification for access.

Basically, zero-knowledge proof is a method, while zero trust is an approach. Both can work together to improve the security of blockchain networks by providing privacy as well as strict restrictions on access.

How Do Zero-Knowledge Proofs Work?

Zero-knowledge proofs (ZKPs) work such as a cryptographic handshake between two parties: the prover and the verifier. ZKPs allow the prover to show that they have certain information or specific characteristics without sharing the actual data with the verifier. Here’s an understanding of how they work:

1. Interactive Zero-Knowledge Proofs:

The proofs include several rounds of interaction between the prover and the verifier.

The prover gives answers to the questions from the verifier, showing their knowledge one step at a time.

This step-by-step method creates trust without requiring the prover to share sensitive details.

Example: A prover is trying to show that they know a password without actually showing it. The verifier can ask for certain changes to the password, like a hash or a specific part, and the prover answers every question precisely.

2. Non-Interactive Zero-Knowledge Proofs (NIZKs):

NIZKs, unlike interactive methods, do not require the prover and verifier to interact directly.

The prover provides a single cryptographic proof, which the verifier can independently validate anytime it is convenient.

This technique is more efficient and appropriate for blockchain, where scalability and simple verification are important.

Common techniques in NIZKs are zk-SNARKs, which stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, and zk-STARKs, meaning Zero-Knowledge Scalable Transparent Argument of Knowledge. These protocols were created for blockchain applications, offering smaller proof sizes and less computational demands.

3. Mathematical Foundations

ZKPs use complicated mathematical concepts like polynomial commitments, elliptic curves, and cryptographic hash functions to provide security and efficiency.

To keep the proof system strong against fraud, the zero-knowledge, soundness, and completeness principles are carefully followed.

4. Practical Workflow

Setup Phase: Parameters are created for the cryptographic system, usually requiring a trusted setup for particular protocols such as zk-SNARKs.

Proof Generation: The prover uses the information they want to show they know to build a proof.

Verification: The verifier uses cryptographic techniques to check the proof's validity without looking at the data itself.

Zero-Knowledge Proof Example

Without examples, zero-knowledge proofs can be hard to understand. Here are three examples that show how they work in the real world and with blockchain:

1. The Colorblind Friend Problem

Imagine this: you have two balls that show the same to a colorblind friend, but you can tell that one is red and the other is green. To show they are different without showing their colors, you can have your friend hide them behind their back, either swap them or keep them the same, and then reveal them to you again. If you can figure out if they were swapped multiple times, your friend believes you can tell them apart without knowing their real colors.

2. Proving Ownership of a Password

Imagine you need to show that you know the password to a secure system without actually giving it away. The verifier could send you a task that needs you to use a hash function on the password or figure out a puzzle that you can only do if you know the right password. Your correct answers to these questions show that you know what you're talking about without giving away the password.

3. Cryptocurrency Transaction

With blockchain, you may need to show that you have enough money for a deal without showing how much money you have in your account. With a ZKP algorithm like zk-SNARKs, you can make a proof that fulfills the needs of the transaction without giving out any additional account information.

Types of Zero-Knowledge Proofs

Zero-knowledge proofs fall into two main categories:

1. Interactive Proofs

Require constant communication between prover and verifier.

Ideal for situations where real-time interaction is possible.

Example Use Case: A prover shows they know a confidential document in real-time to a verifier by answering questions about its content correctly, without showing the actual document.

2. Non-Interactive Proofs

Does not need direct interaction.

They can be validated without an internet connection, which makes them perfect for blockchain applications.

Example Use Case: zk-SNARKs allow a user to show they own digital assets on a blockchain without showing transaction details, keeping their information private.

Among these categories, zk-SNARKs and zk-STARKs (Zero-Knowledge Scalable Transparent Argument of Knowledge) stand out as important developments. zk-STARKs offer better scalability and transparency as they do not require an authorized setup, which is necessary in zk-SNARKs. Protocols such as PLONK and Bulletproofs provide more options and improved efficiency in different situations:

PLONK: PLONK is ideal for general-purpose calculations since it streamlines proof creation and lowers the need for a trusted setup.

Bulletproofs: Used for private deals, particularly in cryptocurrency systems, and makes proofs quick and easy.

Zero-Knowledge Proof Use Cases

Zero-knowledge proofs can be used in many sectors, including blockchain and more:

Cryptocurrencies
Privacy-focused cryptocurrencies such as Zcash use zk-SNARKs to allow protected transactions, which helps keep user identities private.

Identity Verification
ZKPs help users show their identity or credentials while keeping personal information private, improving privacy in decentralized identity systems.

Secure Voting
Set up secure and private voting systems that ensure transparency and protect voter identities.

Supply Chain Management
Check that products are real or meet standards without revealing confidential information.

DeFi and Smart Contracts
Improve privacy in decentralized finance by hiding transaction details while still allowing for audits.

Authentication Systems
Enable secure login techniques that allow users to verify their identity without sending passwords.

Benefits of Zero-Knowledge Proofs

Zero-knowledge proofs, or ZKPs, have a lot of important benefits that make blockchain systems better. In the first place, they improve privacy by letting users prove control or review information without showing the actual data. This protects privacy, which is very important when sensitive data like personal information or deal details needs to stay secret. ZKPs let individuals and businesses talk to each other in a secure and confidential way, which lowers the risk of sharing private information.

When it comes to scalability, ZKPs help the blockchain work better by reducing the amount of data that needs to be handled or shared. This lowers the amount of data that needs to be stored, which speeds up transactions and becomes more useful as blockchain networks grow. Using ZKPs lets blockchain systems keep high efficiency and low delay while they grow.

ZKPs increase security by preventing unauthorized access to sensitive data, all while keeping the information unaltered. This offers better protection against attacks, making sure that only authorized people can access important information. ZKPs also help with compliance and auditability by keeping verifying processes safe and private. ZKPs make it easier to follow the rules because they let you verify transactions or identities without giving out all the information. 

Finally, ZKPs lower the need for trust by allowing verification without relying on trust. Blockchain systems operate without needing centralized intermediaries. This creates a decentralized environment where verification happens through cryptographic proofs, making the process transparent and fair.

Conclusion

Zero-knowledge proofs are a significant development in the fields of cryptography and blockchain technology. ZKPs let decentralized systems maintain a balance between being transparent and keeping information private via secure verification. ZKPs have several uses that can change everything from cryptocurrencies to supply chains and identity systems.

As blockchain technology grows, zero-knowledge proofs will play a key role in shaping the future of secure and efficient digital ecosystems. Whether you’re a developer, entrepreneur, or enthusiast, recognizing ZKPs is important to getting around the growing blockchain world.