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What is Zero-Knowledge Proof in Blockchains?

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What is Zero-Knowledge Proof in Blockchains?

Source:Zhe-Wei Chen

How do you prove you possess secret knowledge without divulging the secret? Enter “Zero-Knowledge Proof”, the latest trend in blockchain technology. Privacy is essential in the digital age, and now it’s an important financial tool as well.

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What is Zero-Knowledge Proof in Blockchains?

By Jamie Lin
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How do you prove you possess secret knowledge without divulging the secret?

Enter “Zero-Knowledge Proof,”the latest trend in blockchain technology.

Privacy is essential in the digital age, and now it’s an important financial tool as well. (Read: Crypto Is Libertarian, A.I. Is Communist)

Zero-Knowledge Proof, abbreviated as ZKP, is the latest trending topic in the world of blockchain technology. Local media often uses a literal translation of this phrase, but I think it is just as well interpreted as “Zero-Disclosure Proof.”

ZKP was developed as a way to achieve both transaction confidentiality and transaction verification within the unique distributed ledger structure of the blockchain system.

Since their conception, popular cryptocurrencies such as Bitcoin and Ethereum have been based on public blockchain systems, which meant that every transaction between accounts was recorded in a public ledger. In other words, it took just one transaction for me to discover your account number, every transaction under your account, and by extension, any other account that may be connected with yours. Privacy was almost non-existent.

Why were the transactions recorded in a public ledger? It was to help the receiver of the transaction verify that the cryptocurrency they were getting has not already been given to someone else in anther transaction. In the world of cryptocurrency, the fraudulent practice of “double spending,” in which a single cryptocurrency is copied and spent more than once, is a real problem. 

But how do you make a transaction public for the purpose of verification without disclosing sensitive information? It used to be easy. Conventionally, banks acted as the intermediary and were responsible for data security. However, there are no intermediaries in the decentralized world of blockchain. New rules needed to be made.

Hence the invention of ZKP. ZKP allows for transaction verification without the disclosure of sensitive data on any public blockchain system. It’s actually easier than it sounds.

Simply put, the key is to prove you have knowledge of the data, but not actually divulge any information.

Let’s use an easy example. Say I have to prove that a game of Sudoku is following the rules without revealing the solution. I could scramble all 18 rows and columns of numbers, but each row and column would still include every number from 1 to 9. You could then ascertain that the rules of Sudoku were being observed, even though you wouldn’t know the answer to the puzzle.

Apply this logic to blockchain, and a user could prove the authenticity of each transaction without exposing the content. Thus are verification and confidentiality both achieved.

In a curious case of an old dog learning new tricks, conventional financial services are also adopting ZKP methods to increase the protection of personal data. Recently, Dutch multinational banking and financial services corporation ING Group launched its Zero-Knowledge Range Proof solution for mortgage applicants to help them prove their income level without divulging actual numbers.

In conclusion, though the blockchain ecosystem is still at an early stage of development, it has already attracted brave souls and brilliant minds to start making valuable contributions to society. (Read: Red Blockchain Rolling in Taiwan)

Translated by Jack C.
Edited by Tomas Lin


About the Author
Jamie Lin, founding partner of startup accelerator AppWorks, and Chairman of Taiwan Internet and E-commerce Association (TiEA).

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