What are zero-knowledge proofs (ZKP)?

Zero-knowledge proofs allow you to prove information without disclosing it, providing high levels of data protection and security.

In this article you will learn what zero-knowledge proofs are, how they work, what advantages and areas of application they have, and what challenges and limitations they pose.

Definition and functionality of zero-knowledge proof

Zero-knowledge proofs are cryptographic methods that make it possible to verify the truth of a statement without revealing the underlying information.

What does zero-knowledge proof mean?

A zero-knowledge proof (ZKP) is a procedure in which one party (the prover) proves to another party (the verifier) ​​that they know certain information without disclosing this information themselves. This is to protect privacy while ensuring authenticity.

How does a zero-knowledge proof work?

The process of a zero-knowledge proof typically includes the following steps:

Verification without disclosure: The prover’s answers allow the examiner to verify the accuracy of the statement without obtaining the actual information.

Determination of the statement: The prover wants to prove to the examiner that he has certain information.

Interactive communication: The prover and the examiner engage in a dialogue in which the examiner poses challenges that the prover must answer to demonstrate knowledge.

Simple example of a zero-knowledge proof

A concrete example of one Zero Knowledge Proof (ZKP) can through the so-called Ali Baba’s Cave example be illustrated. This is a simple, intuitive metaphor that illustrates how ZKPs work:

Scenario: Ali Baba’s Cave

Framework condition: There is a magical door at the end of a circular cave that can only be opened with a secret password. The Prover (the one who knows the secret) wants to prove to the Verifier (the verifier) ​​that he knows the password without revealing the password itself.

Zero Knowledge Proof process

1. The cave: The cave has two entrances, which we use as a path A and way b designate. Both paths lead to the magic door. The Prover and Verifier stand at the entrance to the cave.
2. Prover’s choice: The Prover enters the cave and chooses one of the two paths (A or b). The verifier stays outside and cannot see which path the prover has chosen.
3. Choice of verifier: The verifier randomly calls the name of one of the two paths (A or b) and asks the prover to come back from this path.
4. Prover’s action: The Prover can only go back the desired path if he can open the magic door (if the Verifier’s chosen path does not match the Prover’s original path). If the prover knows the password, he can open the door and change paths.
5. Repetition: The verifier repeats this process multiple times (e.g. 10-20 times) to reduce the chance that the prover just guesses and happens to be correct every time.

Why is this a zero knowledge proof?

• completeness: If the prover knows the password, he can correctly pass any challenge from the verifier.
• Freedom from contradiction: If the prover doesn’t know the password, he only has a 50% chance of randomly choosing the correct path. After several repetitions, the probability of the prover passing all tests by chance becomes extremely low.
• Zero knowledge: The verifier never learns the actual password. All he sees is that the Prover is able to open the door if necessary.

This principle is used in cryptography, for example zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge), which are used in cryptocurrencies like Zcash be used for secure transaction validation without revealing sensitive information.

Become into cryptocurrencies Zero Knowledge Proofs (ZKPs) used to make transactions private and secure to design while at the same time maintaining the integrity of the Blockchain remains guaranteed. A well-known example of the application of ZKPs is Zcasha cryptocurrency that uses zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge).

Using zero-knowledge proofs in cryptocurrencies

1. Transaction privacy
   • problem: For most blockchains (e.g. Bitcoin), all transactions are publicly visible. Anyone can track which addresses are sending or receiving how much money.
   • Solution through ZKPs: ZKPs can be used to prove that a transaction is valid (e.g. that the amount sent is available) without revealing the amount, sender and recipient addresses, or other sensitive details.
   • Example: In Zcash, users can carry out a “shielded transaction”. The transaction is cryptographically protected with a zk-SNARK. The Prover proves that:
     • The sender has enough credit.
     • The balance is correctly transferred from one address to another.
     • All blockchain rules are adhered to. Without disclosing the amounts or addresses.

2. Verification without full disclosure
   • problem: Typically, blockchain users are required to disclose all of their account details or transaction data so that miners or validators can verify them.
   • Solution through ZKPs: Validators can verify transactions without seeing the sensitive details.
   • Example:
     • zk-SNARKs in Zcash: The user proves that they have the correct signature for the transaction and follow the rules of the blockchain without disclosing the signature or contents.
     • zk-Rollups (Ethereum Layer-2): Multiple transactions are rolled up into a single proof structure. Zero Knowledge Proof proves that all transactions included are correct without having to check each one individually.

3. Increased efficiency
   • problem: Blockchains like Ethereum suffer from scalability issues because every transaction must be verified by all nodes.
   • Solution through ZKPs: With zk rollups Many transactions can be bundled and validated by a single zero knowledge proof. This significantly reduces the load on the main blockchain.
   • Example: zkSync, a Layer 2 protocol Ethereumuses zk-rollups to bundle thousands of transactions into a single batch. The proofs ensure that transactions are accurate without having to check each transaction individually.

4. Anonymized voting and DAOs
   • problem: In decentralized organizations (DAOs), voting on the blockchain could potentially reveal the identities of participants.
   • Solution through ZKPs: Participants can vote with ZKPs and prove that they are eligible to vote without revealing their identity or voting choice.

Benefits of ZKPs in Cryptocurrencies

• Data protection: Details of transactions remain hidden while ensuring validity.
• Security: Manipulation is impossible because the proof is cryptographically binding.
• Scalability: The load on blockchains is reduced particularly through zk rollups.
• Lack of trust: No third party needs to be trusted – the proofs are secured directly by mathematical principles.

Advantages and areas of application

Zero-knowledge proofs offer numerous advantages and are used in various areas.

Advantages of zero-knowledge proofs

• Improved data protection: Zero-knowledge proofs make it possible to prove knowledge of information without disclosing the information itself. This significantly reduces the risk of data leaks and unauthorized access to confidential information.
• Secure authentication: Zero-knowledge proofs can be used in online authentication systems to verify a user’s identity without requiring them to reveal sensitive personal information.
• Integrity and privacy in transactions: In the Blockchain technology Zero-knowledge proofs can be used to ensure the integrity and privacy of transactions.

Areas of application in practice

Financial sector: Banks can use zero-knowledge proofs to prove that customers have the correct credentials without revealing banking information. This provides a secure and efficient way to authenticate while protecting sensitive data.

Electronic voting: Zero-knowledge proofs can be used in electronic voting systems to ensure voter anonymity while ensuring voting accuracy.

Secure data exchange: In areas where sensitive data is exchanged, zero-knowledge proofs allow certain properties of the data to be proven without revealing the data itself.

Verification of digital identities: Companies can use zero-knowledge proofs to verify customers’ identities without disclosing personal information, protecting user privacy.

Challenges and limitations

Zero-knowledge proofs offer many advantages, but they also face technical challenges and have certain limitations.

Technical challenges

• Computational effort: Creating and verifying zero-knowledge proofs can require high computational resources, which can impact efficiency.
• Implementation complexity: Integrating zero-knowledge proofs into existing systems requires specialized knowledge and can be technically demanding.
• Scalability: When dealing with large amounts of data or many transactions, applying zero-knowledge proofs can lead to scalability issues.

Limitations and criticism

standardization: There is a lack of uniform standards for zero-knowledge proofs, which makes interoperability between different systems difficult.

Trust Assumptions: Some zero-knowledge protocols require initial trusted setups, which can pose a potential security risk.

Ethical concerns: The ability to hide information could be abused in certain contexts, raising ethical questions.

Frequently asked questions (FAQ) about zero-knowledge proofs

In this section we answer the most common and important questions about zero-knowledge proofs.

Are zero-knowledge proofs always secure?

Zero-knowledge proofs are secure as long as the underlying cryptographic algorithms are implemented correctly. However, weaknesses can arise if the code is broken or an insecure setup is used.

Can zero-knowledge proofs be used in real time?

Yes, but speed depends on the implementation and available computing resources. Advances in technology now enable ever more efficient real-time application.

How is a zero-knowledge proof different from a digital signature?

A digital signature confirms the authenticity and integrity of a message, while a zero-knowledge proof proves that a specific piece of information is known without revealing the information itself. However, both technologies can be used together.