Zero Knowledge is the next generation technology that preserves privacy and enables high-performance Layer 2 solutions to exist. Big things are happening and this technology although not so new has the potential to reshape industries.
Kacper Tomasiak
SoMe & Content Assistant at Swapped.com
Zero Knowledge has become a hot topic, and many projects seem to be shifting their priorities to align with this narrative. Although the concept dates back to research from the 1980s, key crypto players acknowledge that it could change blockchain technology forever. What is it about, and how can it reshape the meaning of privacy in the digital world? Time to check out this new paradigm together.
Understanding Zero Knowledge
Zero knowledge is about the privacy of data. Think about proving your identity, but without revealing personal information.
What is a Zero Knowledge proof?
The concept of zero knowledge operates around zero knowledge proofs (ZKPs). The idea? To allow one party called “the prover” to prove to another party called “the verifier” that the information is true while preserving confidential information. Sounds too good to be true? After all, it's the technology of tomorrow.
What Zero Knowledge offers
ZK is simple in theory and much more complex in practice. The obvious advantages are easily visible, and there are key features you should be aware of.
Completeness
If the statement is true, an honest prover will always convince the verifier.
Soundness
If the statement is false, a dishonest prover will almost never be able to convince a verifier.
Zero Knowledge
If the statement is true, the verifier learns no other information about the secret except that the statement itself is correct.
There are 3 key rules that define the concept and technology of Zero Knowledge.
Everyday analogy
To further simplify the concept, see this example. In this case you are the prover and your friend is the verifier.
Imagine that a friend locks his safe and leaves the room. You then proceed to open the safe and show him the result (the proof). In this case, your friend knows you have access to the safe, but no information was shared. In essence, you display an ability to perform an action (open the safe) without revealing the secret (the combination).
The history of Zero Knowledge
There’s no point in discussing how game-changing this technology is without learning the historical context first.
Early research
The idea behind zero knowledge originated in the 1980s and materialized through the revolutionizing research of Shafi Goldwasser, Silvio Micali, and Charles Rackoff. Their work introduced a new way of proving a statement is true without revealing the secret information. This became the foundation for modern-day blockchains implementing zero knowledge.
Evolution
After the concept was established, more application ideas began to emerge. These included key government infrastructure like secure identification or electronic voting. As technology continues to evolve, we’re now in a phase where crypto is paving the way for new trends and ideas to be tested and implemented in the future.
Milestones so far
Only two key ZK components exist—zkSNARKs and zkSTARKs. What’s the difference?
Zero Knowledge Succinct Non-Interactive Argument of Knowledge (zkSNARK in short) utilizes shorter proof sizes and verifies them faster. The downside is that it requires a so-called “trusted setup” where parameters have to be generated at the start. If the details are ever revealed, the entire system is de facto insecure.
Zero Knowledge Scalable Transparent Argument of Knowledge (zkSTARK in short) removes the need for a trusted setup. Not only does it do that, but it is also more quantum-resistant. Regrettably, the proof sizes are larger.
Both zkSNARKs and zkSTARKs are key approaches to the topic of Zero Knowledge.
The need for Layer 2 solutions
With the rise of Ethereum’s popularity, issues like lack of scalability and astronomically high fees have become clear. This is when Layer 2 solutions enter the blockchain scene.
Scalability issues on Ethereum
Thanks to smart contracts and the flexibility they offered, Ethereum has become the second-largest cryptocurrency. As demand increased, so did the problems. During peak times Ethereum gas fees were as high as a few hundred dollars per transaction. The throughput wasn’t the best either—it was, in fact, very limited for highly demanding applications, which caused network congestion multiple times.
What are Layer 2 solutions?
Layer 2 solutions are other layers built on top of the Ethereum mainnet. Their purpose is to process most of the transactions off-chain and instead submit them periodically to the main chain as the final result.
Rollups and their uses
Rollups are Layer 2 solutions that bundle hundreds or thousands of transactions and create a single proof, which is then uploaded on-chain. This approach drastically decreases the data Ethereum has to deal with, resulting in lower gas fees and faster transactions.
Here are sidechains, Optimistic rollups and ZK rollups compared side by side.
What are ZK rollups?
Zero-knowledge rollups are where the dots connect. Here, Zero Knowledge is used in practice to create the next generation of cutting-edge solutions.
Definition of ZK rollups
ZK rollups are a type of Layer 2 scaling solution that utilizes zero-knowledge proofs to verify the validity of a batch of transactions. In contrast to other rollups, which may be prone to failure, ZK rollups provide mathematical certainty that the transactions in the bundle are legitimate. The way this is done is by generating a cryptographic proof like a zkSNARK for verification purposes.
Contrast with Optimistic rollups
Contrary to ZK rollups, Optimistic rollups assume all off-chain transactions in a batch are valid, which intrinsically makes them less secure. On the other hand, ZK rollups generate a validity proof for each transaction batch, allowing nearly no fraudulent transactions. Additionally, transaction finality is much faster with ZK rollups because of cryptographic proofs.
How ZK rollups work
ZK rollups are the most unique of all Layer 2 solutions. See why.
The process
Processing transactions can be divided into three main steps. The first one is transaction batching. Here, a specialized off-chain aggregator called a sequencer collects user transactions. The next step is proof generation. This is when a prover takes the batched transactions and confirms the validity of these transactions with a proof. At last, the proof is submitted to the main chain—in this case, Ethereum.
Verification
On the Ethereum mainnet, a smart contract verifies the proof. If it turns out valid, Ethereum acknowledges the new state of the L2. If the proof is invalid, the contract rejects the batch and maintains the old state.
The good and the bad
As innovative as Zero Knowledge is, it possesses pros and cons in equal proportion.
Privacy
Zero knowledge hides sensitive details like transaction amounts and user identities. This is a wonderful way to preserve privacy in this digital economy, especially for the individuals and enterprises who need it.
Security
Zero knowledge used in ZK rollups requires proof for every state transition, making it nearly impossible to include invalid transactions.
Scalability
Thanks to transaction batching and off-chain computations, ZK rollups can handle thousands of transactions per second while simultaneously being affordable to use.
Complexity
The skill set needed to truly get a grasp of ZK solutions and be able to develop these technologies far exceeds typical Ethereum developers. The learning curve is steep, and many mistakes will be made along the way.
Resource consumption
While verification of ZK proofs is fast and cheap, the hardware needed to generate such proofs is powerful and expensive.
Uncertain regulation
Regulatory frameworks for cryptocurrencies still remain unclear in most countries, rendering privacy-focused coins risky and prone to crackdowns.
Additional questions
Zero knowledge and ZK rollups are a complex topic, so here are the answers to the most important questions.
Are zero-knowledge proofs 100% secure?
Zero-knowledge proofs are extremely advanced and secure when implemented correctly, but nothing can be 100% guaranteed. Most mistakes are human error, such as implementation bugs or bad implementation of trusted setup for zkSNARKs, which can lead to proofs being forged. Additionally, cryptographic breakthroughs, specifically in mathematics or quantum computing, could challenge Zero Knowledge and its technology.
What is the difference between zkSNARKs and zkSTARKs?
Both zkSNARKs and zkSTARKs are key approaches to the topic of Zero Knowledge. The former requires a trusted setup phase and has compact proofs. The latter is transparent and doesn’t have any secret keys, has larger proof sizes, and is often considered more scalable for large proofs.
What do ZK provers do?
A ZK prover is responsible for generating a proof that they possess knowledge of some information without revealing the information itself. The proof's goal is to convince the verifier of the prover's genuine intentions.
What do ZK verifiers do?
A ZK verifier is the party that checks the validity of the proof provided by the prover. The verifier scans the proof and examines whether it meets certain criteria. During the process, no secret data is shared.
Future outlook
The technology of zero knowledge represents the next step towards progress. Having a privacy-focused technology, which can not only be used in blockchains but also has many real-world use cases, is crucial for building new innovative products.
The future remains bright, but there are obvious challenges on the horizon, such as complexity or the regulatory landscape. As more projects utilizing ZK emerge, zero-knowledge proofs are destined to play an essential role in shaping the future.
Resources
If you're interested in diving deeper and expanding your knowledge of Zero Knowledge, here are some suggestions:
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