To access goods and services online, we’ve all grown accustomed to disclosing personal information. Few would contest the fact that the internet has completely changed how we interact and conduct business. As a result, the application of blockchain technology has expanded to include fields as diverse as banking, healthcare, real estate, supply chain management, and energy generation.
But as e-commerce grows, there is a greater chance that customers may be subjected to security lapses and unauthorized data usage. So much so that on May 25, 2018, the EU passed the General Data Protection Regulation (GDPR).
Transparency, immutability, and decentralization are just a few of blockchain’s numerous advantages. We can all agree that the less information is shared, the less is vulnerable to security breaches. However, blockchain is a distributed ledger technology (DLT) that exchanges information with third party systems to validate transactions on the blockchain. What if it was possible to validate a transaction’s legitimacy without disclosing the underlying data?
Cryptographic methods are used by Zero Knowledge Proof (ZKP) algorithms to validate transactions without disclosing the underlying data. ZKP algorithms and blockchain technology work well together to provide secure online trade.
Blockchain – what is it?
The technology behind cryptocurrency marketplaces, known as blockchain, is well-known. It has actually transformed trade.
A network of peer-to-peer computers uses blockchain, a distributed ledger technology (DLT), to store data. As a result, no one participant to a transaction owns or controls the information. Every stakeholder in the network may have equal rights to overseeing and confirming transactions. A typical bank, in contrast, owns and keeps all the data that is sent during a transaction.
Blockchain validates transactions using cryptographic methods. Due to the elimination of middlemen and processing costs, members may now trade safely and affordably. Blockchain technology has found use in a variety of sectors, including finance, real estate, healthcare, supply chain management, and the arts.
Zero-Knowledge Proof: What is it?
Cryptographic techniques known as Zero-Knowledge Proof (ZKP) algorithms estimate the likelihood that a party to a transaction holds a piece of information without disclosing what that knowledge is.
It’s similar to attempting to determine someone’s travel history. You may pose a number of inquiries to them, and if they respond accurately, it will be clear that they have been to the nation. You can be more assured that someone has really visited the nation if they accurately answer more of the questions. And not only by using some other method to collect the information. They don’t have to give you the names of the people they visited in that nation, even though you are aware that they have been there. And you’re not required to inquire. It doesn’t affect the transaction. Sensitive information is safeguarded in this way.
ZKP algorithms provide a set of mathematical conundrums that, when successfully solved by the receiving party, establish the recipient’s veracity.
Three MIT scholars, Shafi Goldwasser, Charles Rackoff, and Silvio Micali, planted the seeds for zero-knowledge proofs in the 1980s. It was at this point that they put up the idea of « Knowledge Complexity of Interactive Proof Systems. »
ZKP algorithms come in two varieties:
Interactive ZKPs: they involve a number of arithmetic requirements that the recipient must meet.
ZKPs with no interaction: The parties to the transaction do not engage in non-interactive ZKP algorithms, or the verification process is delayed until after the transaction. More computer resources are needed for this.
The following three requirements must be met by zero-knowledge proofs:
Information’s completeness: If a claim is accurate, the party doing the verification may vouch for the possession of a piece of information by the person making the claim.
Information’s accuracy: You cannot lie about a statement. It is not possible to deceive a verifying party into thinking a receiving party has certain information when they do not.
Zero-knowledge of information: Beyond whether a statement is true or incorrect, the party doing the verification has no further knowledge.
Why are ZKPs a useful addition to blockchain?
Numerous potential for trade have been made possible by blockchain technology. It promotes confidence by providing an irrefutable record of transactions. Despite the fact that blockchain increases trust in several ways, it still requires information sharing with other systems in order to validate transactions. For instance, it must communicate with supplier systems in supply chain management.
Blockchain solutions that enable users to connect with added value digital services while protecting the privacy of their data are being developed utilizing ZKP algorithms by developers. ZKPs give customers who seek control and independence over their information flexibility and options.
ZKPs in messaging software
End-to-end encryption is used by messaging programs to safeguard messages. Users must use passwords to confirm their identity to a server in order to do this. The authenticity of a password might be checked using ZKP protocols without actually knowing it.
Identity management with ZKPs
In order to avoid the difficulties involved with obtaining passports, birth certificates, driver’s licenses, and other documents that serve as proof of identification, password-free verification may also be used for identity management.
Zero-knowledge proof methods enable information exchange between parties without disclosing passwords or private information. This solves a lot of the security flaws in password-enabled authentication mechanisms.
ZKP protocols might potentially be used to anonymize personal data in order to comply with laws like the GDPR or check user credentials in fraud prevention systems.
ZKPs in banking
Consider a ZKPs-powered app that verifies a payee’s account balance without knowing the payee’s bank balance before approving transactions. Or bitcoin transactions that are verified on a blockchain without disclosing whose wallets issued payments or how much money was traded.
Real estate ZKPs
Similar to how letting agents routinely handle transactions on behalf of property owners in real estate. They could be able to check for finances using ZKP-enabled applications rather than requesting renters to provide bank statements or pay stubs.
International security and ZKPs
The Securing Information for Encrypted Verification and Evaluation (SIEVE) initiative has been launched by the US Department of Defense. Through complicated defense applications, the initiative aims to advance zero-knowledge proofs. SIEVE strives to validate skills without disclosing private information.
ZKPs, for instance, might link a cyberattack to a particular entity or country without disclosing how the information was collected. They could also validate the source of information without disclosing how it was received. Alternately, ZKPs might assess a nation’s nuclear capability without having to physically examine its arsenal.
Simply said, ZKPs would aid in safeguarding sensitive data.
ZKPs used in other contexts
Applications using blockchain frequently deal with private documents. ZKPs allow blockchain applications to limit access to the data in particular blocks while ensuring the privacy of sensitive data.
Smart contracts use data from other sources to initiate events. ZKPs allow smart contracts to start these events without needing access to confidential data. This holds true for both centralised apps where the source of the data is known and decentralized applications (DApps) where the source of the data is confirmed via cryptographic techniques.
Private smart contracts are the foundation of the corporate blockchain platform known as Quorum. JPMorgan Chase created the technology to make it possible for digital assets to be settled privately. To improve the anonymity of its platform, the investment bank adopted Zcash’s ZKP-enabled privacy solution.
Nightfall, a ZKP protocol that enables businesses to perform transactions privately on a public blockchain, was introduced in 2019 by professional services company EY.
Conclusion
Passwords and other sensitive data are not need to be shared thanks to zero-knowledge proofs (ZKPs). This improves how well blockchain technology facilitates business. All types of delicate agreements, transactions, and interactions may be mediated in a more private and safe manner with the use of zero-knowledge proofs. ZKPs give blockchain transactions an additional degree of protection.
