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Zero-knowledge Technology: How Zk Solutions Can Help Improve Cross-chain

July 13, 2023

Cross-chain technology has revolutionized how we transfer data cross-chain but has not, unfortunately, succeeded in achieving complete blockchain interoperability. Moreover, it has created several critical issues that must be addressed to ensure the crypto industry's future growth and mass adoption (learn more about them here).

Zero-knowledge technology (Zk technologies or simply Zk) is emerging as a potential solution to the most prominent cross-chain problems, having the potential to improve the security, privacy, scalability, interoperability, and speed of cross-chain technology.

Cross-chain Security

Zero-knowledge solutions have gained popularity for their potential to enhance security in blockchain networks. One of the most widely discussed applications of this technology is the use of Zk proofs, which enable anyone to prove the truth of a statement without revealing any personally identifiable information during transactions or data exchange operations. This feature enhances privacy and security in data sharing between different blockchain networks.

Using Zk proofs eliminates the need for third-party validators that can pose a risk to the security of the blockchain and its operations. Third-party validators are often vulnerable to attacks by hackers or can be compromised in other ways due to the human factor and technologies used. By replacing them with cryptography, blockchain projects can eliminate such risks and enhance the overall security of their network.

Cross-chain Privacy

Protecting user privacy is another way Zk can improve cross-chain. One particularly useful application of Zk solutions is secure authentication without the need for passwords or any identifying information. By concealing user identity, hackers are less likely to gain unauthorized access to sensitive data and use it for malicious activities. 

Cross-chain Scalability

Zero-knowledge rollups (Zk-rollups) use zero-knowledge technology to improve the scalability of cross-chain transactions. They are a layer-2 scaling solution that takes computation and state storage off-chain while keeping the transaction data on-chain on a layer-1 network. 

By using Zk-SNARKs to create proofs, Zk-rollups reference the transaction on the chain and utilize relayers to transfer funds deposited by a user to a smart contract. This way, projects can batch hundreds or thousands of token transfers into one transaction, sharing fees and computer power amongst hundreds or thousands of users.

As a result, Zk-rollups enable more transfers to be executed with less time and smaller costs, significantly improving the scalability of cross-chain transactions.

Cross-chain Interoperability

Interoperability between different blockchain networks is often hindered by differences in their protocols and data structures. However, Zk technology can pave the way for seamless communication and data transfer between these networks. By using a common language that all blockchain networks can understand, Zk proofs have the potential to enhance cross-chain technologies used to establish communication between blockchains and create a secure and trustless bridge between them. It can help develop new, more efficient, and flexible decentralized applications and services, which can become a part of a truly connected and collaborative ecosystem.

Cross-chain Speed

Zk technology is vital in simplifying cross-chain transactions and making them quicker and more user-friendly through non-interactive Zk proofs such as Zk-STARKs and Zk-SNARKs. They rely on a shared key accessible to both the prover and verifier, thus reducing the necessary communication between them to one round. 

The prover inputs sensitive information into an algorithm that calculates a zero-knowledge proof. The proof is then sent to the verifier, who uses a separate algorithm to confirm that the prover knows the secret information. Such a proving model simplifies and speeds up the process of transferring crypto assets or any other process involving an exchange of information. 

Cross-chain Liquidity

The DeFi market faces issues with liquidity, including frozen liquidity, which complicates the situation. Frozen liquidity refers to assets stuck in a smart contract during the creation of wrapped tokens, rendering them unusable by anyone, including their owners. This problem can result in insufficient liquidity and high volatility for lesser-known tokens, although well-known crypto assets might not be affected.

Atomic swaps were developed to address this problem, and Zk technology is widely used for them. It is essentially a peer-to-peer exchange, meaning no tokens are locked in smart contracts. With atomic swaps, users can securely and trustlessly swap crypto assets across chains without making the crypto market less liquid in the long term.

Final Thoughts

Zero-knowledge technology can become a promising solution for multiple cross-chain challenges, ensuring secure and private data sharing. The technology's numerous advantages, such as enhanced security, privacy, and scalability, make it an ideal solution for various industries, including crypto. 

As the need for secure and private data sharing continues to grow, Zk is expected to become more prevalent and widely adopted, evolving further to meet the ever-changing demands of various sectors.

Kinetex Network will use Zk technology, particularly Zk-SNARKs, in the innovative Kinetex dApp, particularly its second mode, Flash Trade. It will address the most prominent security issues of cross-chain by utilizing zero-knowledge proofs instead of third-party validators and allow users to make swaps directly with market makers.

Kinetex Network: Website | Kinetex dApp