As the etymology might imply, the cryptocurrency space operates quite concurrently with the crypto space, so any development in one space often has a substantial impact on the other. In this sense, understanding the basics of various cryptographic concepts can prove useful in solving problems in the cryptocurrency space.

A particularly relevant development is the concept of zero-knowledge proof (ZK proof). Originally designed in the late 1980s, ZK proofs seek to minimize the amount of knowledge transferred from “prover” to “verifier” in a transaction verifying something over an amount of data. The measure is also known as the knowledge complexity of a transfer.

The reasons for wanting to do this are manifold, as minimizing the amount of data needed to securely prove something can dramatically increase the speed and security of a proof by reducing the bandwidth demand of a transaction and reducing the potential for reverse engineering the transaction – and therefore uncovering any sensitive data that the transaction might have implicitly handled. Since blockchains are public ledgers, ZK proofs are used to further anonymize and protect the bits of data that pass through blockchains in applications such as private transactions or blockchain messaging protocols.

ZK Proofs Explained

The conditions for something to be ZK evidence are as follows:

  • Completeness: If the statement is true, the verifier will be convinced of this fact by an honest demonstrator.
  • Solidity: If the statement is false, no cheating prover can convince the honest verifier that it is true, except with low probability.
  • Zero knowledge: If the statement is true, the verifier learns nothing but that the statement is true. The statement – not the secret – is sufficient to create a scenario that definitively shows that the Prover knows the secret.

ZK proofs are actually surprisingly intuitive when described in a scenario, as this example shows. Suppose you have an open safe with a six-digit passcode and you want to show your friend that you know the safe passcode. You could ask the friend to write a 10-word message and put it in the safe, with instructions to lock it immediately afterwards. In this case, the declaration is the 10-word message and the secret is the password. If you were to then open the safe – without revealing the code to your friend – and correctly read the friend’s message to him, he would be sufficiently convinced that you know the code for the safe without you having told him the code at any time. point of the transaction – satisfy zero knowledge.

The probability that you guessed the correct password is 1/100,000, and the probability that you guessed your friend’s message without opening the safe is essentially zero, satisfying completeness. The solidity is mainly obtained by the recency of your friend having written the message, which makes it difficult for them to have forgotten it.

ZK Proofs vs. ZK Rollups

ZK rollups are a particular application of ZK proofs in the context of cryptocurrencies, particularly one that acts as a scaling solution for blockchains. It’s no secret that the Ethereum network has recently struggled with the amount of traffic it currently has to handle, leading to skyrocketing gas prices, and Layer 2 solutions have come into play to mitigate these issues.

ZK rollups also come into play here, aggregating and securing hundreds of transactions into a single piece of evidence, which is brought to a layer 2 solution by way of a rollup smart contract that maintains the state of those transactions at unless proof of validity is provided to change the state of a transaction. Proof of validity is the only piece of information that needs to be sent, reducing the amount of data, time, and cost needed to change the state of a transaction. Loopring, zkSync, and ZKSpace are examples of scaling solutions and protocols that use ZK rollups.

What about zk-SNARKS?

The acronym zk-SNARK stands for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge and is a type of ZK proof with small proofs and fast, succinct response times where the two parties involved in the transaction never interact directly with each other. with each other. In this sense, zk-SNARKs only require one-way communication, whereas typical applications of ZK proofs require both parties to engage with each other. Beyond the typical applications of ZK proofs, this one-sided aspect makes it easier to build Tornado-like privacy into every transaction, making zk-SNARK a robust place to build privacy-focused cryptocurrency. Zcash has done just that, essentially giving each address a transparent address (t-address) that acts like a Bitcoin address and a shielded address (s-address) that uses zk-SNARK to hide transaction history.

Where to buy Zcash

Exam in 1 minute

Gemini is a cryptocurrency exchange and custodian that offers investors access to over 100 coins and tokens. Founded in the United States, Gemini is expanding globally, particularly in Europe and Asia. The offerings include both major cryptocurrency projects like Bitcoin and Ethereum, and smaller altcoins like Orchid and 0x.

Gemini is one of the only brokers that offers multiple platform options depending on skill level. New investors will love Gemini’s streamlined mobile and web app interface, while advanced investors might appreciate all the tools that ActiveTrader comes with.

In addition to a host of platform choices, Gemini users also have access to insured hot wallets to store tokens without worrying about digital asset theft. Learn more about what Gemini can do for you in our review.

Best for

  • New investors looking for a simple mobile and web app
  • Day traders looking to use technical analysis tools
  • Users looking for a one-stop-shop to buy, sell, and store all their cryptos
Advantages
  • Easy and fast registrations – can start in as little as 5 minutes
  • Multitude of platforms to accommodate traders of all levels
  • Hot wallets include insurance to protect against theft and hacking attempts
The inconvenients
  • Charges both commission and convenience fees for users who buy and sell through the desktop or mobile app

Zcash can be purchased in fiat at most regular CEXs. Specifically, Gemini became the first licensed Zcash exchange in 2018 and has supported it ever since, and eToro has also had Zcash among its listed tokens for some time.

What are the applications of Zero-Knowledge protocols?

In the blockchain and cryptocurrency space, the main applications of ZK proofs are to aggregate many transactions to build scaling solutions and to create robust coin mixers and other focused tools. on confidentiality. Beyond blockchains and cryptocurrencies, ZK proofs are useful in many other areas, with research and experiments indicating that ZK proofs could be used to solve nuclear miscalculations and proliferation by ensuring disarmament in a more robust manner. In an abstract sense, ZK evidence could also be used to ensure that, in a society of many privacy-seeking people, ethical behavior according to a predefined protocol is followed without the need for an individual to reveal their every action.

For example, a non-monetary token version of the coin shopping cart corral (famously found at Aldi) is a basic example of a ZK proof, to the point where the token verification does not directly monitor shopping carts. purchase in any sense. The Civic Protocol has done almost exactly that with a blockchain-based Civic Pass ID verification system for purchasing restricted substances.

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