Zero-knowledge proofs or zero-knowledge protocols (ZKP) were first introduced in the mid-80s by a group of MIT researchers in their paper, “The Knowledge Complexity Of Interactive Proof Systems.” They essentially defined ZKP as a method by which one party can interact with another party and provide proof of knowledge without unveiling their confidential data. In other words, as Lukas Schor of The Argon Group states:
“Zero-knowledge proofs let you validate the truth of something without revealing how you know that truth or sharing the content of this truth with the verifier. This principle is based on an algorithm that takes some data as input and returns either ‘true’ or ‘false’.”
For a more detailed explanation of how ZKP works, I recommend reading Cossack Labs post, “Explain Like I’m 5: Zero Knowledge Proof (Halloween Edition).”
Why Is ZKP Important?
Enterprise businesses don’t want to share proprietary information that can get into the hands of hackers or their competitors. Businesses also want to ensure that the information is securely delivered to the intended party. Ordinary blockchains can accomplish this, but with ZKP businesses can share proofs about the data without sharing the data itself.
Some believe this new property will enable entirely new classes of blockchain applications to be built. Managing Partner of Multicoin Capital, Kyle Samani, thinks so too:
Which Industries Could This Impact First?
Generally speaking, ZKP could impact any industry that involves transactions, identity systems, and other proprietary information. ZKP can be used as a diligence, security, and verification tool in some of the most highly regulated industries like financial services, insurance, audit firms, and retail just to name a few.
Who is Building ZPKs?
Below are a few startups as well as enterprises utilizing the technology:
The majority of cryptocurrencies expose peoples entire payment history to the public. Zcash is the first open, permissionless cryptocurrency that can fully protect the privacy of transactions using zero-knowledge cryptography. ZCash’s shielded transactions hide the sender, recipient, and value on the blockchain. ZCash was also one of the first to implement zK-SNARKS. ZCash’s market cap (as of 9/15/18) is $582,340,168.
This Israeli-based startup’s zero-knowledge blockchain provides proof for all parties, without unveiling the underlying confidential data. QED-it can be integrated into existing systems enabling enterprises to better manage private data in a collaborative world. Some of their customers include Deloitte and BNP Paribas.
Nuggets is a consumer blockchain platform that gives users a single, simple biometric tool for payment, login and verifying identity in online transactions without sharing or storing personal data. According to the Nuggets website, “Nuggets tackles the urgent challenge of protecting consumers’ personal data, using zero-knowledge blockchain storage, encryption, privacy, security, and trust — all combined with the decentralized immutable ledger.” Nuggets is currently being tested by a small group of users and was recently accepted into Lafayette Plug and Play Business Accelerator.
Netherlands-based bank ING launched a modified version called zero-knowledge range proofs in Ethereum. Mariana Gomez de la Villa, Global Head of ING’s blockchain program, says “zero-knowledge range proofs can be used to prove that someone has a salary within the range needed to attain a mortgage without revealing the actual figure.” This is key because it reduces computational power which results in faster transactions. ING has open-sourced their code on GitHub. Similarly, JPMorgan’s Quorum also addresses specific challenges to blockchain technology adoption within the financial industry.
For other recent ZKP-based projects click here.
Are There Limitations?
ZKP is computationally expensive. Nelson Petracek, CTO of the Strategic Enablement Group at TIBCO, states in a VentureBeat article that “Performance and the level of compute power required to support trust setup can be an issue.” Although ZKP technology has been around for decades it is just now maturing and gaining more attention. The ability to verify sensitive information like the amount of a transaction, passwords and other identifiable data will become more valuable for everyone with the rising presence of bad actors. This technology shows great promise and I believe we’ll be seeing more partnerships between big institutions and startups working more closely together to develop new products solving privacy problems in the near future.