Decentralised finance is based on shared control and security, allowing users to preserve their identity. However, crypto transactions have been victims of many cyberattacks and hacks, which made people sceptical about dealing with crypto.
Therefore, crypto developers and web3 communities have been working on several security updates and innovations that restore faith in cryptocurrencies. ZK-proofs are one the latest inventions made to protect encrypted transactions.
This technology is distinguished from other security measures due to its innovative solutions and unconventional approach. Let’s explore what ZK-proof means and how it keeps the blockchain safe.
Understanding ZK-Proofs?
Originally, the zero-knowledge proof concept was introduced in 1985 as a second layer to protecting sensitive information, like passwords, personal data and confidential documents, especially with the rise of digitalised platforms and the Internet of Things.
In short, ZK-proof means having parties agree on the validity of information without knowing the content of the information. Thus, no one can see or get exposed to the encrypted data, but they know that the subject data exists and is verifiable.
The name zero-knowledge implies that no one acknowledges the content of the information, but they can almost prove that information.
ZK-Proof Example
Let’s put this concept in simple terms. Jack has a key to a secret room which has 1 Bitcoin inside, and he wants to prove to Bob that he has the key. Bob knows that there is 1 Bitcoin inside the room but does not know what type of keys Jack has.
The only way for Jack to prove that he has the key without revealing it is to enter the room using the key and take the 1 Bitcoin out. Jack shows the Bitcoin to Bob, proving that he has the right key without revealing any information about the key.
ZK-Proofs Applications
Zero-knowledge protocol was introduced way before cryptocurrencies saw light, meaning that it has broader use cases than cryptography.
Banking
Banking systems can use ZK-proofs to safeguard their clients’ personal information. ING Bank introduced ZK-proofs for loan applicants to prove that their income falls within the requested range without revealing how much they earn.
Supply Chain
Supply chain management uses the simplest approach to ZK-proofs, yet the most effective, which has been used for years. Providing information about the source of goods and meeting the quality standards is enough for the ports to process the shipment without physically checking the transported products.
Cryptocurrency
Decentralised transactions involve encrypting the transfer message and sending it over to the node network for verification. However, if the message gets exposed to hackers, funds can be stolen, and wallets can be compromised. Therefore, Zk-proofs can used to validate transactions without exposing the content of the crypto payment.
Conclusion
Zero-knowledge proof is a method of verifying information without knowing the information content. This helps safeguard data and personal information from the risk of having them exposed or hacked.
