Sunday, December 26, 2021

At A Glance – Zero Knowledge Proof

A new way to build trust while maintaining absolute privacy

Trust is fundamental to every single business transaction. In order to make deals, whether online or in the physical world, we need to know who we are doing business with and whether or not they will honor their promises.

The problem is that this comes at the expense of privacy. In order to make a judgment about whether or not you can trust someone, you need to know about the kind of person they are. This means getting hold of their personal information.

zero knowledge proof

Imagine that you want to take out a mortgage. You will need to provide your bank with all kinds of information, from personal details to prove your identity, to financial documents including utility bills, tax returns, bank statements, and pay slips.

Some of this private information won’t be relevant to your ability to meet the required payments, it’s just the current way that the system validates applications. What if people could get a mortgage without disclosing who they are, what they do for work or any other details about their personal circumstances? What if applications could be accepted solely on the basis of proof that applicants are able to uphold the agreement?

Zero Knowledge Proof (ZKP) is a mathematical method used in cryptography to prove ownership of a piece of knowledge without revealing the content of that knowledge. Under a ZKP it is possible for people to enter into financial agreements without ever having to reveal their personal details.

zero knowledge proof

The proof either validates or invalidates a statement – such as the ability to pay back a mortgage, say – without revealing any other kind of information. It is an equal marriage of trust and privacy. Importantly, there is no room for deception in a ZKP.

In a sound ZKP, it is impossible for someone to provide false knowledge and thereby deceive a verifier. The proof can also be statistically checked, making it private, secure, and accurate.

An obvious application for Zero Knowledge Proofs is blockchain. While blockchains are relatively secure, their use of pseudonyms makes it possible for hackers or governments to trace transactions back to real-life identities. 

Zero Knowledge Proofs built into blockchain have the potential to make this technology truly private. Accordingly, several cryptocurrency startups are currently developing ZKP techniques, including Zcash and SmartCash. Established cryptocurrency Ethereum is also investigating ZKP, and in 2016 Bitcoin recorded its first zero-knowledge contingent payment.

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