The challenges of ZK Privacy and how Aleph Zero solves them

Privacy elevates on-chain experiences but before it can become appealing to the average user, some hurdles need to be overcome. Here’s what we believe needs to happen in ZK Privacy space and how we’re making it happen.

A significant majority of people still view cryptocurrencies and blockchain technology as mechanisms where users can transact with complete anonymity – and many times – for nefarious purposes. However, in actuality, they do not offer anonymity, but rather, pseudo anonymity. 

One of the core tenets of blockchain technology – transparency – ensures that all activity and transactions are tracked and directly linked to specific addresses. While these addresses do not outwardly display the identities of users, further analysis could be conducted to uncover someone’s identity – and a whole host of intimate details about them. 

There are benefits to blockchain’s transparency, as well as there are benefits to on-chain privacy. Putting users in control over how much they want to share is the ultimate goal for Aleph Zero. Such selective privacy is what can enhance the whole crypto ecosystem–and Zero Knowledge technology is here to make it happen.

“The first step toward discovering public blockchains’ missing ingredient, privacy, was the introduction of zero-knowledge proofs, allowing participants to encrypt their transactions while operating on a public blockchain. This method of cryptography offers the privacy many firms need, particularly those in the financial services sector while allowing them all the benefits of a public blockchain.”

HfS Research

What is with all the hype and expectations surrounding ZK proofs?

In technical terms, a ZK-proof is a cryptographic primitive that allows one party to prove the knowledge of certain information to the other party without revealing the data in question. Or put more simply – proving something is true without revealing any of the additional info behind it. It’s this function – the configurable privacy-enhancing element of ZK-proofs – that really has people excited and expecting so much. However, just like any rapidly emerging technology, ZK-proofs come with their own set of challenges. 

Addressing potential risks: Intensity, complexity, and usability issues

It’s important to note that ZK-proofs are a very new technology – and no major exploit has taken place on a ZK protocol yet – which may be lulling people into a false sense of complacency surrounding risks. So, let’s take a deeper look at some of these potential risks – and how Aleph Zero is addressing them as a leader in blockchain and ZK-proofs. 

“Zero-knowledge proofs show immense promise, but the technology remains in its early stages. Like with any new innovation, challenges exist around identifying vulnerabilities in areas like circuit design, random number generation, and cryptographic implementations.”

Matthew Niemerg, Aleph Zero Co-founder 

Firstly, proof generation between parties is extremely computationally intense. This means ensuring that ZK proofs are carried out as fast as possible – while simultaneously putting less stress on computers – which can be quite difficult. Secondly, ZK-proof implementation is inherently complex. In general, it’s hard to create ZK applications, but with a decent level of modularity (i.e., ease of integration), this can be made much easier for developers to execute. ZK-proofs can also be difficult to use. People need to fundamentally understand how this tech works (at least in principle) to benefit from the heightened privacy that ZK proofs offer. They at least need to understand why this technology is so valuable – and how they can generate proofs, store them, access shielded assets, etc.

Interoperability, storage, set-up vulnerability, and regulatory challenges

Additionally, owing to the rapid evolution of ZK-proofs, interoperability has emerged as a major issue. This is largely due to the fact that in general, contemporary ZK apps are typically created with certain technologies in mind (which is also the case with Aleph Zero). They can be difficult to implement cross-chain; however, on Aleph Zero, you can utilize them via wrapped assets. This enables you to keep your wallet and holdings private, while also ensuring that you are less of a honey pot target for hackers or frontrunners.

Proof and secret storage also pose challenges, as ZK-proof technology requires users to store proofs somewhere. This is why figuring out a natural, seamless flow for this is our ultimate UX goal here. Risks are also emerging around set-up vulnerabilities. A trusted setup is critical to the security of the whole system – and it must be built with the highest security standards to mitigate these concerns. Regulatory challenges are also a big concern, as many ZK-proof protocols don’t address the need to comply with applicable laws around KYC and AML/CFT. At the moment, it’s difficult to believe that regulators will be okay with more advanced levels of privacy, which ultimately could be abused. This is why ZK-ID private domain solutions and extensive auditability throughout the entire system are critical.

Aleph Zero’s comprehensive approach to ZK proofs: Solving the privacy paradox and keeping everyone happy on chain

With our multichain, privacy-enhancing engine, Aleph Zero is taking a unique approach to ZK proofs, which offers solutions to all of the above challenges and provides opt-in privacy features that are native to the Aleph Zero network. This enables users to benefit from extensive privacy, while our solution design employs ZK-ID as a ZK-based KYC verification and on-chain monitoring services to comply with AML/CFT requirements. This means that user actions remain private just as in the real world, but at the same time, those actions are auditable if needed.

Additionally, ZK proofs are just one side of the coin in Aleph Zero’s approach to ensuring user privacy, with the other being secure multi-party computation (sMPC). By employing this combination, we can guarantee speed and configurable privacy with ZK proofs, and in cases that require even more stringent safeguards, sMPC has our backs. Essentially, secure multi-party computation allows for the secure storage of data off-chain on several nodes. Access to the data occurs only if all nodes conduct a secure handshake among themselves. This practice ensures that a single malicious actor cannot gain access to the secured information.  

The potential ZK proofs hold isn’t a secret anymore, but neither are the challenges that are emerging around them. In solving these challenges, Aleph Zero is working to offer the privacy that customers and enterprises demand – together with the transparency that governments and regulators trust.