Zero-Knowledge Proof and its implementation in Blockchain

Blockchain 

Blockchain technology is a pioneering way of enabling a global decentralised, peer-to-peer network from the centralised system. It is a shift from a trust-based, opaque, and controlled system to a trustless, transparent, independent, and immutable system. It provides unparalleled, security, data integrity, and improved efficiency with lower costs. The legacy system is dominated by bureaucracy and secrecy whereas blockchain is a laissez-faire economy. Blockchain replaces trust with verification by leveraging zero-knowledge proof (ZKP)protocols. 

Zero-Knowledge Proof 

ZKP was first coined in 1985 by MIT researchers Shafi Goldwasser, Silvio Micali, and Charles Rackoff in their paper “The Knowledge Complexity of Interactive Proof-Systems” describing the interesting application of ZKP elucidating ‘honest behaviour’ without tampering the confidentiality. It is a cryptographic method of verifying data without the actual sharing of data.  

As depicted from the name, Zero Knowledge Proof is proving the statement with zero knowledge about the content of the statement and the identity of the prover. It is a two-way interactive game based on the protocol of proof known as ‘secret proof’ used for authentication of the data transferred and parties involved.  

The example demonstrates the algorithm behind the technology used in Zero-knowledge proof. 

Here, the example portrays that A - the verifier can validate the statement from B - the prover based on the value Yes and No given by B without actually sharing the secret of colour blindness. 
Here, the example portrays that A – the verifier can validate the statement from B – the prover based on the value Yes and No given by B without actually sharing the secret of colour blindness. 

Zero-knowledge protocol satisfies three principles: 

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  1. Completeness: The verifier gets convinced that prover possesses the correct input when the statement is ‘true’, the example here A gets convinced that B is colour blind when B replies no. 
  2. Soundness: The verifier will not get convinced by the prover if the statement is false or until the checkable probability of falsehood approaches zero.  
  3. Zero-knowledge: For an event of a statement being true, the verifier will learn ‘the statement is true’ without actually knowing the secret. Here, A learned B is colour blind based on Yes or No without getting any additional information. 

The ZKP operates on the three tenets of completeness, soundness, and zero-knowledge for every transaction. The relating parties are the verifier who demands proof and the prover who has to prove his authenticity without revealing identity. It is an encryption system where prover proves the statement is true to the verifier without disclosing the additional information. The statement value is based on mathematical probability and is an absolute numerical value.  

Implementation of ZKP in blockchain 

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The blockchain platform does not provide privacy to address data sharing rising to the need for zero-knowledge proof integration in the blockchain.  Thus, zero-knowledge proof blockchain was adopted and implemented for various purposes 

Messaging is the prime application of zero-knowledge proof in the blockchain. The advent of ZKP creates an end to end trust in the messaging world without leaking additional information. It safeguards data leakage by creating secure channels for the transfer of sensitive information. The access channels provide a secure and seamless experience in addition to the storage utility services. ZKP is nearly impossible to hack or intercept by third parties on the network thus guaranteeing the highest level of security. It also builds security layers for different purposes and protocols to ensure the safety of the data on the network as well as in the stored unit.  

Use cases 

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The zero-knowledge proof technology was adopted and applied in various cases. 

  • EY the consultancy firm has released the project ‘Nightfall’ that runs on Ethereum blockchain for the private transfer of tokens using smart contracts and ZKPs for privacy, security, and reliability of the transactions, network and parties respectively.  
  • ING, the bank of Netherlands has introduced its zero-knowledge proof blockchain concerning the mortgage value component of the financial sector, where customer validate the transaction by evidencing his salary as proof without revealing the actual salary amount. 
  • QED-it is a start-up company based in Israeli that uses zero-knowledge proof to bolster privacy in the storage of confidential data without the intervention of a third party. This application is used by PNB Paribas, Deloitte for secured data management. 
  • Z-cash enables transactions transparent and shielded using t-addr and zero-knowledge proof Zk-SNARKs respectively on its open-source and permission-less blockchain platform. JP Morgan Chase adopted the Z-cash’s Zk- SNARKs the zero-knowledge proof technique in conjunction with its smart contract called Constellation for strengthening the privacy of its blockchain Quorum 
  • Project Ubin is a collaborative project of Monetary Authority of Singapore (MAS) and Association of Banks in Singapore (ABS) for clearing and settlement of payments and securities. It leverages zero-knowledge proof for the transfer of digital assets on Ethereum without revealing the transaction balances. The ZKP methods like range-proofs, bullet-proofs are coupled with Ethereum for exercising privacy layers. 

Challenges in integrating ZKP in blockchain 

The zero-knowledge proof system is lengthy as the encryption of cipher-text includes a lot of computation and can be sometimes long as the pile of information thus, creating latency in the transaction. A Zero-knowledge proof is the most appreciated system for ensuring anonymity in blockchain transactions. It is user friendly and one of the most secure schemes for trades. Zero-knowledge proof in conjunction with smart contacts in blockchain facilitates privacy as well as anonymity.  

Conclusion 

A zero-knowledge proof is the most fascinating innovation in cryptography. In this digital age, privacy and confidentiality will be focal points of concern. Therefore, ZKP proves to be the most promising protocol enforcing secure and seamless data transfer with substantiating validity without hindering the sensitive information. The application and implementation of the ZKP system and protocols in union with blockchain will give birth to technological innovation by the invention of efficient techniques and underwriting flaws of the established structures.    

The organizations and businesses entering the blockchain industry can stay tuned to this space and Contact us for further details.


About the Author – PARIKA SONI

Parika Soni is a Financial Analyst at Admantium Crypto Advisors, an Investment banking and consulting firm focused on blockchain technologies. We help early-stage entrepreneurs and startups in Building Business Models and Developing Business Ideas take a 360-degree view of how to build a sustainable business using blockchain technologies, translating concepts into clear cut plans.

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