The Role of ZK in Enhancing Blockchain Privacy

Blockchain technology relies heavily on a broader category of development within computer science–cryptography. In fact, most of its underlying mechanisms are based on cryptographic concepts.

Hashing algorithms, public and private keys, and other key components that blockchain users usually become familiar with. They are the building blocks that ensure that blockchain networks remain censorship resistant and, to a certain degree, private.

However, as we’ve explained before, blockchains are inherently transparent. The default for most blockchain networks is that its users are operating under pseudonymity, at most. 

If we want to increase the level of privacy that a particular blockchain can offer, we must use additional cryptographic methods. Most privacy preserving blockchains address this with ZK technology. 

What is ZK?

When we talk about ZK technology we’re referring to the concept of zero knowledge proofs. These are a cryptographic technique that allows one party (the prover) to prove to another party (the verifier) that a statement is true without revealing any of its properties–and the verifier can have no doubts about the correctness of his verification.

In simpler terms, this is similar to having a key that would unlock the door without anyone knowing what is its shape. Or being able to prove your age without showing any documents.

The concept of zero-knowledge proofs was introduced in the 1980s by researchers Shafi Goldwasser, Silvio Micali, and Charles Rackoff in the paper “The Knowledge Complexity of Interactive Proof Systems.” The name “zero-knowledge” refers to the fact that the verifier gains zero additional knowledge about the specific information or process being proven, apart from the fact that it’s valid.

How ZK Technology Works

Let’s look at a basic example of what using ZK technology looks like in practice. Imagine Alice wants to prove to Bob that she knows a password without revealing the actual password. They can use a zero-knowledge proof as follows:

• Alice and Bob agree on a cryptographic protocol that supports zero-knowledge proofs.
• Alice uses her knowledge of the password to generate a proof that convinces Bob she knows the password without revealing it. She might perform a series of mathematical operations that only someone who knows the password would be able to do.
• Bob, the verifier, checks the proof provided by Alice. If the proof is valid, he is convinced that Alice knows the password. If it’s not valid, he won’t gain any information about the password itself.
• After successful verification, Bob gains no insight into the actual password or any details about how Alice generated the proof.

Types of ZKPs

There are different ways to go about this basic process. As we saw in a previous post, there are two main types of ZKPs in existence. These are: 

Interactive Zero Knowledge Proofs 

A procedure in which the prover and verifier interact multiple times. The verifier “challenges” the prover and the process continues until they are confident that the prover has been truthful. 

Non-Interactive Zero Knowledge Proofs 

An opposite procedure that requires the two parties to exchange a single transaction that proves the truthfulness of the prover only once. This type of ZK is used in blockchains, as it doesn’t require communication between peers.

How ZK Technology Helps Privacy Preserving Blockchains

Adding ZK technology to a blockchain’s list of cryptographic tools can improve its commitment to user privacy because the kinds of features can be developed using it. Some of the features that ZK technology enables include:

Confidential Transactions 

ZKPs can be used to create confidential transactions, where the transaction inputs, outputs, and amounts are hidden while still proving that the transaction is valid and follows the blockchain’s rules. This ensures that participants can conduct financial transactions without exposing the exact amounts being transferred.

Privacy-Preserving Smart Contracts

ZKPs enable the creation of smart contracts that operate on private or encrypted data. This means that the contract can perform complex operations on sensitive data without revealing the data itself. For instance, a smart contract could process medical data to determine eligibility for insurance without disclosing the specific medical details.

Selective Disclosures 

ZKPs can allow participants to prove a certain fact without revealing all the underlying data. For instance, a user can prove they are over a certain age without disclosing their exact birthdate, enhancing privacy while still meeting certain requirements.

Identity Protection

ZKPs can be applied in digital identity systems. Users can prove their identity for various purposes without revealing personal details, reducing the risk of identity theft.

Auditability without Exposure

Auditors can verify the integrity of transactions without needing access to the transaction details, ensuring privacy while maintaining accountability.

Private Voting Systems

In blockchain-based voting systems, ZKPs can allow voters to prove they have cast a valid vote without revealing their actual choice. This maintains the secrecy of individual votes while still allowing verification of the overall election results.

Data Sharing and Collaboration

ZKPs enable multiple parties to collaborate and compute over shared data without exposing the raw data. This is particularly useful in scenarios where data needs to be processed collectively without revealing individual inputs.

User-Controlled Data Sharing

Users can share specific information from their private data without exposing the entire dataset. This aligns with the concept of decentralized, user-controlled data sharing.

Challenges for Using ZK Technology 

While ZKPs offer significant benefits for privacy enhancement, they also come with challenges, including computational complexity and potential issues related to adoption, interoperability, and understanding. Implementing ZKPs effectively requires careful consideration of these factors and ongoing research and development to make them more accessible and efficient.
Tune in to the Aleph Zero podcast to go more in-depth and learn about using ZK technology to build a new standard for privacy preserving blockchains. Join the Aleph Zero community for updates on the latest developments on web3 privacy.