Although both Bitcoin and Ethereum were revolutionary inventions that changed the world of finance, they have been plagued with major problems since their inception, namely scalability and privacy.
The question is, how can these blockchains remain sufficiently decentralized while scaling to billions of users? At the same time, how can we protect our privacy if blockchain transactions are in plain text on a transparent, public ledger?
What if there was an innovation that could solve both of these problems?
Innovating on Scalability
Taking the above mentioned problems into consideration, a lot of smart people have been innovating upon Bitcoin and Ethereum for years. We have been witness to new consensus algorithms such as Proof of Stake (PoS), mainnet sharding, and layer 2 (L2) solutions, all of which were developed to improve scalability.
Meanwhile, another technology has been under development for years that could revolutionize the crypto industry even further. In this article we are talking about Zero Knowledge Proofs (ZK Proofs), the innovation behind cryptocurrencies like Zcash and Mina Protocol.
ZK Proofs are a cryptographic innovation that allows one party to prove that a statement is true, without revealing any additional information, aside from the validity of the statement.
Blockchain Scalability
Since Zcash introduced ZK proofs on its blockchain back in 2017, some major Ethereum L2 sidechains have also been integrating them to improve scalability.
For example, ImmutableX, an L2 solution that supports the web3 game Gods Unchained, adopted ZK Proofs to allow more people to play the game at low cost.
The Ethereum sidechain Polygon, which originated as a simple PoS sidechain, is working on transitioning to a Zero Knowledge Ethereum Virtual Machine (zkEVM), which allows for the more efficient execution of Ethereum compatible smart contracts using ZK Proofs.
There is also an innovative blockchain project called Mina Protocol, which uses recursive ZK Proofs to keep its blockchain very small. You can watch this Spaces interview with the CEO of O(1) Labs to learn more about the technical details behind Mina.
In addition to solving blockchain scalability, ZK Proofs can also help thwart modern problems like identity theft.
Personal Privacy
ZK Proofs can be used for more than just improving the scalability of blockchains. Some interesting privacy applications of this innovation include:
- Casting your vote without revealing your identify or who you voted for.
- Proving your age to a bar or nightclub without having to show anyone your drivers licence or other personal identifying information.
- Proving that you are a citizen of a country without revealing your name or passport number.
As you can see, ZK Proofs can help you maintain your personal privacy, while defending yourself from threats like identity theft.
ZK Proofs are also being applied to the DePIN sector to ensure that only authorized devices can join the network. They are also being utilized to add transparency to supply chains.
Transaction Privacy
By simply posting a proof of a transaction, instead of the transaction itself, ZK Proofs let users hide transaction details from the validators and the public ledger of a blockchain. Details relating to the sender, receiver, and transaction amount are obfuscated when ZK Proofs are applied.
Conclusion
The end game solution to the problem of scalability and privacy when it comes to blockchains could very well be Zero Knowledge Proofs. Time will tell if this innovation is able to solve these issues and bring cryptocurrencies to the masses.
If you learned something from this article, be sure to check out my other posts about finance and crypto here on the HIVE blockchain. You can also follow me on InLeo for more frequent updates.
Until next time...
Resources
Zero Knowledge Proof Use Cases [1]
Zero Knowledge Proof Logo [2]
ID Theft Image [3]