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With the development of the DeFi industry, projects are starting to face more and more challenges that might hinder their adoption and popularity among users. Two of the most pressing challenges are information security and verification process speed, and Zero-knowledge technology (Zk technology or simply Zk) can help with both.
The most popular verification approaches right now require the use of trusted validators or other participants who watch transactions. With the first approach, a user has to provide evidence that their assets have been transferred from their address to the address of another user during a peer-to-peer transaction. The verification process involves trusted validators who verify the given proof and come to a consensus on its correctness using multi-signature. The proof is only accepted if at least 2/3 of the validators sign it. The second verification method, Optimistic Verification, includes signing messages on the original network and then enforcing a timeout period during which participants can inspect messages and flag them if anything seems incorrect. Both approaches have certain drawbacks, such as susceptibility to hacking, inadequate speed of execution, and lack of privacy.
Verifying a transaction at the network level is the most reliable method currently available. By performing a verification of another network's block on-chain, we obtain a foolproof confirmation of the transaction, ensuring its security. However, the initial implementation of a light blockchain client requires significant computational resources for block validation. Running a light client on-chain would, therefore, be too expensive.
Zk technology enables us to generate proof that a certain calculation has a particular result, which can be verified quickly, regardless of the time taken to perform the underlying calculations. Due to its speed, Zk-proofs can be used effectively in validating transactions, providing credible evidence that the block header has enough signatures from validators and has indeed been included in the chain. Furthermore, Zk-proofs are checked in the network at a much lower cost, which is another advantage of this technology.
Apart from its higher speed and security, Zk also offers increased privacy by eliminating the need to reveal personally identifiable information during transactions and other operations involving the exchange of information.
Zero-knowledge proofs come in two types: interactive and non-interactive. Interactive proofs require multiple rounds of communication between the prover and verifier, slowing down the process.
Non-interactive proofs were created to address this issue. They use a shared key for the prover and verifier, resulting in a single round of communication. The prover computes a zero-knowledge proof based on the secret information and then sends it to the verifier. The verifier uses another algorithm to check that the prover indeed knows the secret information. Moreover, once a proof is generated, anyone with access to the shared key and verification algorithm can use it, not just the original prover. As a result, non-interactive proofs reduce the necessary communication and increase proof usability.
Two prominent non-interactive proofs are currently on the market: Zk-SNARK (Zero-knowledge Succinct Non-Interactive Argument of Knowledge) and Zk-STARK (Zero-knowledge Scalable Transparent Argument of Knowledge). The latter is more transparent and scalable and, for instance, is used in the Ethereum blockchain.
Zero-knowledge technology has far-reaching potential beyond just transferring proofs. It can be utilized to address other challenges that are present in the DeFi industry, including identity protection, authentication, and preventing voting manipulations.
Zk proofs allow users to control access to their identifiers, eliminating disclosure of sensitive information. It is particularly useful for proving identity when using online services that require personal information such as names, email addresses, dates of birth, etc. With Zk proofs, users can authenticate themselves without revealing their personal information, making the authentication process more effortless and thus improving the user experience. Lastly, Zk proofs can help prevent manipulations with votes in on-chain voting systems by using newer solutions like Minimum Anti-Collusion Infrastructure (MACI), which leverages zero-knowledge proofs to avert any malicious acts or collisions.
Zero-knowledge technology is an incredibly effective method for secure, fast, and private data sharing. As the cryptocurrency industry continues to expand and evolve, the demand for more efficient and robust solutions increases as well. Zero-knowledge technology is expected to become even more prevalent, providing individuals and organizations with a faster and more secure way to exchange sensitive information while also verifying it.
The Kinetex team is working to implement Zk technology in its products to enhance the security of cross-chain transactions, including ensuring protection from possible MEV attacks.
Kinetex Network: Website | Kinetex dApp
