Letter 47: ZK-Proofs (Part 1)

ZK-Rollups, ZK-Snarks, ZK-EVM, ZK-WTF?

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When it comes to learning new things in the crypto space, especially technical things, my process usually goes something like this:

Hear a thing once, ignore.

Hear it again, ignore.

Hear it a dozen times, maybe start to pay a tiny bit of attention.

Hear it non stop, everywhere, all the time… okay it’s googling time.

The more complicated and technical a thing is, the more I put off the googling and deeper research element.

That’s why, after years of being “in crypto”, I am only now trying to properly understand what the hell all this ZK stuff is about.

I say properly because I have had an extremely-layman’s understanding of it for a while. The gist being “it’s some fancy math/cryptography stuff that will help us scale and Vitalik is really excited by them so they’re probably a big deal”.

So let’s take a look. This will be Part 1 in a series of probably 2, maybe more. I will use Part 1 to only explain what a ZK-Proof (ZKP) is, because from my understanding, everything else is some version of taking the concept of a ZKP and applying it to different practical applications.

This is going to be a high level overview. I am not a technical person, and I don’t pretend to understand the complexities and depths of ZK-Proofs. I simply want to explain what they are, how they are being used in the crypto space, and why they’re important.

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So.. What is a ZK-Proof?

ZK stands for “Zero Knowledge”, so we’re talking about “Zero Knowledge Proofs”.

What does that mean?

Basically, this is a method that allows someone to prove they know a piece of information, without revealing any of that information itself.

The classic example is a picture of Where’s Wally (or Waldo for my American friends).

A Zero Knowledge Proof would allow me to prove to you that I know where Wally is, without showing you where he is or giving any additional information as to his whereabouts. Seems kinda crazy, right?

It’s possible, though. I was gonna recreate my own example but then I stumbled upon this perfect one while researching. The idea is that you take a huge sheet of paper and cover up the image, and then only reveal the section where Wally is visible.

There, I proved that I know where he is, but no other information. You know that I know where Wally is, but because the sheet of paper is obfuscating the rest of the picture — and the picture could be anywhere in terms of placement — you have no additional information. The circle could be in the top left of the picture, or the bottom right, or dead centre.

Taken from https://www.circularise.com/blogs/zero-knowledge-proofs-explained-in-3-examples

This (somewhat) simple concept it turns out is difficult to prove mathematically. The idea was first introduced in 1985 in an MIT paper published by Shafi Goldwasser and Silvio Micali, where they showed it was possible to prove certain properties of a number without revealing what the number was (or any other information about the number).

How Are They Being Used?

ZKPs are not new to the cryptocurrency space. There are two fairly popular Layer 1 Blockchains that are based on ZKPs, Monero and Zcash, which were launched in 2014 and 2016 respectively.

They are generally know as “privacy-focused” blockchains because unlike with Bitcoin or Ethereum where there is a public ledger that includes wallet balances and transaction history/data, these chains use ZK-Proofs to encrypto/hide even that information.

There are many pros and cons to these types of Blockchains (for instance, it’s easy to argue that we want to be able to see a public record of transactions, for provenance, and accountability purposes).

Closer to home, ZK-Rollups are a Layer 2 scaling solution that leverages ZKPs to increase the throughput of Ethereum Mainnet. In a nutshell, they move computing power off-chain and process thousands of transactions in batches, and then only process a summary of those transactions on-chain. This can significantly reduce gas costs (and increase the number of transactions per second), without sacrificing security.

Why Are They Important?

ZK-Proofs allow for significantly increased privacy, security, and trustlessness between people (or non-people too). For instance, imagine being able to prove you’re a real human without revealing any personal information. Or that you have an account with over X balance, without revealing how much money is in there. Or that you know the password to your account without typing your password in.

In a space that values privacy, security, and trustlessness, Zero Knowledge Proofs open up entire worlds of possibilities to be explored.

I hope this gives you at least a semblance of understanding wtf these ZK-Things are now when you hear / see the phrases being thrown around. I sure feel better having done some further reading on the topic, and I’m excited to dig deeper and understand more of the pros and cons behind the practical uses of ZKPs in crypto.

Never Stop Learning.

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Disclaimer: The content covered in this newsletter is not to be considered as investment advice. I’m not a financial adviser. These are only my own opinions and ideas. You should always consult with a professional/licensed financial adviser before trading or investing in any cryptocurrency related product.

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