What Is Zero-knowledge Proof

Zero-knowledge proof is a general-purpose technique for enabling private transactions and data compression, and is one of the most common cryptographic schemes in the blockchain space. Dating as far back as the 1980s, zero-knowledge proof allows an individual to prove possession of a specific piece of information without revealing it, thereby verifying the information without compromising privacy.

We can explain zero-knowledge proof with a classic example: If Alice wants to prove to Bob that she owns the key to a warehouse, a common approach would be for Alice to give the key to Bob, who then opens the warehouse, proving that Alice does hold the key.

However, this approach discloses Alice’s key to Bob. With zero-knowledge proof, Bob can ask Alice to retrieve a specific item from the warehouse, which is chosen at random and unknown to Alice, eliminating the possibility of cheating. Moreover, as the warehouse can only be opened with the key, Alice could open the warehouse and retrieve the item to prove that she does possess the key while avoiding disclosing it.

zk-SNARKs: The mainstream solution to private transactions

Blockchain technology advocates openness and transparency but has always been criticized for its lack of privacy. Transaction records of mainstream cryptos such as BTC, ETH, and USDT are all available on blockchain explorers, which means that once your address is known, then anyone can check your on-chain transfers, including the amount and sender/recipient. However, in reality, many do not want their transactions to be publicly available.

As such, over the years, we have witnessed the emergence of many privacy coins based on zero-knowledge proofs, including the famous Zcash, which uses the zk-SNARKs technology to hide transaction information while allowing miners to validate transactions and maintain network security.

In addition to Zcash, privacy crypto mixer Tornado Cash, privacy-preserving public chains Aleo and Iron Fish, and Layer2 privacy-preserving protocol Aztec have all adopted ZKP solutions.

zk-Rollup: A major Layer 2 scaling solution

As the Layer 2 sector booms, the Rollup solution has attracted wide attention. The Rollup approach allows a chain to transfer transactions to Layer 2 for processing and data compression. Further, with Rollup, a public chain can upload the compressed data to Layer 1 to save part of the data, which not only ensures the chain’s security but also significantly improves its performance. Right now, Rollup solutions mainly include zk-Rollup and Optimistic Rollup, and the biggest difference between them lies in the validation method. In particular, zk-Rollup uses zero-knowledge proofs to validate transactions.

Upon processing off-chain transactions, zk-Rollup generates a zero-knowledge proof and submits it to the contract on the main chain for quick validation. Since the zero-knowledge proof is small and will not become larger as the number of transactions goes up, validation of such proofs is fast, which boosts the chain’s TPS.

Many institutional investors say that zk-Rollup might be the most notable crypto category in 2023, and it has presented us with a number of hit projects, including Polygon zkEVM, zkSync, and StarkNet.

In addition to private transactions and zk-Rollup, recently, many other public chains using zero-knowledge proofs have captured the spotlight. For instance, Mina Protocol, which uses recursive zero-knowledge proofs, is such a chain. Mina effectively compresses block data by leveraging zero-knowledge proof, keeping the block size at about 22 KB. For more details about Mina, please refer to our previous article: MINA (Mina Protocol): The World’s Lightest Blockchain.

Zero-knowledge proof boasts obvious advantages in enabling private transactions, data compression, and blockchain scaling. Additionally, ZKP technologies including zk-SNARKs and zk-Rollup have scored smooth progress, and ZKP-based public chains have also earned extensive recognition among investors. CoinEx Wallet now supports plenty of cryptos deployed on ZKP-based public chains, including ZEC, MINA, and SYS. Going forward, as more zk-Rollup protocols start to issue coins, CoinEx Wallet will roll out more premium assets to meet user demands.

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