Why is Zero Knowledge Proof (ZKP) Important in the Web3 Space with Over $400 Million in Investments?
Vitalik, the founder of Ethereum, once stated in a public speech that Zero Knowledge Proof (ZKP) and blockchain, although two independent technologies, complement each other in three key areas: privacy, scalability, and interoperability.
According to data from Messari, investments in the ZK field exceeded $400 million in 2023, with a focus on Ethereum’s L1/L2 scalability and emerging ZK developer infrastructure.
Although ZKP technology is relatively new, its rapidly developing ecosystem is expected to integrate best practices to achieve more secure, private, and scalable blockchain applications.
In this article, we will explore the important impact of Zero Knowledge Proof on the Web3 space, from the basics to more in-depth understanding.
What is Zero Knowledge Proof?
Zero Knowledge Proof is a technique that proves the truthfulness of a statement while maintaining privacy.
This technology holds significant importance in the fields of information security and privacy protection. Let’s delve into its essence, importance, operation, and applications.
Essentially, Zero Knowledge Proof is an encryption technology that allows one party (the prover) to prove to another party (the verifier) that a computation is valid without revealing any underlying data used in the computation. ZKP originated in 1985 and has evolved from theory to practical applications with the latest advancements in software tools and hardware.
A classic example of Zero Knowledge Proof is the game “Where’s Waldo?”
The prover knows the location of Waldo in the picture but does not want to disclose the specific location. They can use a covering that hides most of the picture, revealing only Waldo’s covering, to prove that they know where Waldo is without disclosing the exact location. This is a form of Zero Knowledge Proof: the prover proves a fact (knowing Waldo’s location) without revealing any other information.
Zero Knowledge Proof allows one party (the prover) to prove the truthfulness of a statement to another party (the verifier) without revealing any information other than the truthfulness of that statement.
In simple terms, it’s like saying, “I know, but I won’t tell you what it is.” Here’s a real-life example: if you need to prove your age to purchase alcohol but don’t want to disclose your specific birth date or other personal information, Zero Knowledge Proof is a technology that can assist you in doing so.
Zero Knowledge Proof and the Three Complementary Aspects of Blockchain
When Vitalik mentioned that Zero Knowledge Proof (ZKP) and blockchain are excellent complements, he emphasized their mutual enhancement in privacy and scalability, as well as the trust interoperability achieved through ZKP. Let’s further explore the positive contributions of Zero Knowledge Proof (ZKP) to blockchain in these three aspects.
Benefit One: Privacy Protection
One of the main features of blockchain is transparency: all transaction records are public, meaning anyone can view transaction details. While this is an advantage in some cases, it can also lead to privacy concerns. For example, on the Bitcoin network, although addresses are anonymous, specific user behavior can be traced through transaction analysis.
Zero Knowledge Proof plays a crucial role here. Through ZK technology, users can prove that they have complied with specific rules (such as having paid enough funds) without revealing the specific details of the transaction. This enhances the privacy of blockchain users by hiding their identities and specific transaction content.
Benefit Two: Scalability of Blockchain
Another major challenge faced by blockchain is scalability. As more transactions and complex smart contracts are loaded onto the blockchain, processing speed slows down, and transaction costs increase.
Another important feature of ZKP is its succinctness. It means that even if the statement to be proven is highly complex, the required proof can be very short and efficient. This is particularly important in resource-constrained environments like blockchain, as it means that complex verification can be performed without consuming a significant amount of network resources. This feature is highly effective in reducing transaction data size and improving system throughput.
Zero Knowledge Proof can help address this issue in the following ways:
ZK Rollups: This is a Layer 2 solution that “rolls up” multiple transactions into a single transaction and submits it to the main chain. ZK technology ensures that these rolled-up transactions are executed correctly without the need to process them one by one. This significantly reduces the data burden on the blockchain, improves throughput, and reduces transaction costs.
ZK-SNARKs in Smart Contracts: The increasing complexity and quantity of smart contracts pose challenges to blockchain’s performance. With ZK proofs, certain computations of smart contracts can be performed off-chain, with only the final proof being sent to the chain. This reduces the burden on the blockchain while maintaining the integrity and security of contract logic.
Benefit Three: Trust Interoperability
Current blockchain interoperability protocols rely on trusted systems, such as multi-signatures or incentive validator sets. ZKPs can replace cryptographic economic trust assumptions with cryptographic proofs, paving the way for more secure and robust cross-chain communication. Interoperability is one of the emerging areas in the main applications of ZKP.
What are the Applications of Zero Knowledge Proof?
With advancements in encryption technology and increasing attention from the blockchain community, ZKP’s performance has significantly improved, driving its applications in various fields. The ZK ecosystem can be divided into three layers:
1. Infrastructure Layer: Tools or hardware used to build protocols or applications on top of ZKP. For example, ZK-VM is a novel blockchain virtual machine that uses ZKP to ensure the execution of transactions and smart contracts is not only correct but also private. This offers great potential for enhancing the privacy and functionality of blockchain platforms.
2. Network Layer: L1 and L2 protocols that utilize ZK proof systems. For example, ZK Rollup is a Layer 2 solution that bundles multiple transactions together and verifies them through a single Zero Knowledge Proof. This maintains transaction privacy while significantly improving the processing capacity and throughput of the blockchain.
3. Application Layer: User-end products that utilize ZK mechanisms. For example, Dark Forest is a game based on ZKP that demonstrates how interactive gameplay mechanisms can be achieved while protecting player privacy.
Zero Knowledge Proof has a wide range of applications. Here are some use cases:
1. Privacy-Protected Payment Systems: Examples include Zcash, which allows users to conduct encrypted cryptocurrency transactions without revealing transaction details.
2. Identity Verification: Users can prove they possess certain qualifications or attributes without revealing specific identity information.
3. Smart Contracts: On the blockchain, Zero Knowledge Proof can be used to prove that certain conditions have been met without revealing the specific data that satisfies these conditions.
4. Compliance Verification: Companies can prove their compliance with certain rules or standards without revealing proprietary information.
The Market Demand for Generating ZK Proofs
While ZKP technology is highly effective in improving scalability, privacy, and trustworthiness of projects, it requires significant computational power. This high computational demand poses challenges for infrastructure teams, creating a huge market opportunity for companies that can efficiently provide this computational service.
In terms of methods for generating ZK proofs, there are two different models: Proof Markets and Proof Networks. Proof Markets offer flexibility and cost-effectiveness, allowing broader participation in ZK proof generation. Proof Networks, on the other hand, provide a smoother and more developer-friendly experience through internal servers.
With the emergence of new ZK applications such as ZK Coprocessors, ZK Attestation, ZKML, and ZK Bridges, the demand for generating ZK proofs continues to grow. The diversity and growth rate of these applications indicate that ZKP’s application is expanding into broader areas, further driving the demand for ZK proof generation capabilities.
The Future of the Zero Knowledge Ecosystem
Although still in its early stages, the rapid development of the ZK ecosystem is expected to usher in a new era of secure, private, and scalable blockchain solutions.
The future of ZKP involves prioritizing speed in novel Zero Knowledge Proof designs, reducing hardware requirements, improving developer tools, and supporting decentralized proof generation.
While Optimistic and ZK scaling solutions are both used for aggregating verified transactions, each solution has made design trade-offs between security, latency, and computational efficiency. However, in the medium to long term, we will see the fusion of these two stacks to adapt to a diverse range of on-chain applications.
The ZK application layer is currently in its infancy, but as the demand for privacy protection on public blockchains grows among end-users, it may continue to expand. Emerging concepts like Solana’s Token 22 program with Confidential Transfers, which utilizes ZKP for privacy features in token balances and SPL token transfers, demonstrate the adaptability and potential of ZKP beyond the ETH ecosystem.
The transformative potential of ZKP is becoming evident, indicating an enhancement of security, privacy, and scalability in blockchain solutions. As the infrastructure in the ZK field develops, we will unlock more forms of on-chain applications.
Please note that this article presents diverse perspectives and does not represent the stance of “WEB3+.”
Proofreading Editor: Gao Jingyuan