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Privacy is one of the main concerns of people pursuing cryptocurrencies and one of the biggest challenges in blockchain application development. Bridging the gap with the real world is still critical for users to fully enjoy their assets, but to do so they typically have to go through a rigorous identification process.

Nobody wants to be forced to expose their sensitive data. In addition, the need to prove identity and other important information with documents and material evidence is an obstacle for disruptive technologies to be made available to the public, or creates a great delay in their use. But there is a way to eliminate this problem.

We have already mentioned in other reports that technologies aimed at Zero Knowledge applications should play an extremely important role in the crypto market in 2023. And this trend has been confirmed! Interesting projects in this segment are catching the attention of users and developers.

By staying on top of everything ZK innovations can offer, you have the chance to pioneer disruptive projects, get ahead and be prepared when they hit the market with force.

What is Zero Knowledge

Zero Knowledge is a cryptographic concept that allows the authentication and validation of information without the need to share the original data between the parties. Based on a mathematical proof, the Zero Knowledge Proof (or zero knowledge proof) allows one party to prove to another that it has certain information without having to expose it.

This means that it is possible to demonstrate that you have access to information without revealing anything about it, thus ensuring data privacy. This technique is especially relevant in systems that require high security and privacy, such as financial transactions, digital identification and authentication in blockchain applications.

How do ZK systems work?

A zero-knowledge proof system usually involves three parts: the provide (or prover), the verifier, and the challenge. The provide is the part that wants to prove an assertion, the verifier is the part that wants to verify the assertion, and the challenge is a series of questions that the verifier asks when providing.

The process usually starts with the provider generating an assertion and creating a proof to demonstrate that the assertion is true. The proof is created using an encryption algorithm that allows the provider to show that it knows the information needed to validate the claim, without revealing the information itself.

Next, the verifier challenges the provider by asking specific questions that require the provider to demonstrate knowledge of the information in question. The challenge is designed so that the verifier can validate the claim without having to know the specific details of the information.

The prover then answers the challenge questions, using the test created earlier. If you provide the correct answer to all the questions in the challenge, the verifier can accept the statement as true, without knowing any additional information beyond the statement itself. This system is very powerful and can be scaled and used in countless ways in the blockchain context.

Possible use cases

When combined with blockchain, ZK systems can improve the ecosystem in many ways. That's why there is so much expectation surrounding the projects under development that promise to mix the two technologies. Let's see some of the possible use cases:

1. Privacy: ZK systems allow transactions to be carried out without the need to reveal confidential information. This can improve users' privacy by preventing third parties from gaining access to personal information when they interact with the network in any way.
2. Authentication: Used to verify a person's identity without having to share personal information. This can improve system security by reducing the risk of identity theft.
3. Auditing: ZK systems can be used to perform audits on transactions without the need to reveal confidential information. This can improve the transparency of the system.
4. Electronic voting: they can be applied to carry out electronic voting, without the need to reveal personal information. This can improve the security of the voting process by preventing fraud.
5. Smart Contracts: Used to verify that the conditions of a contract have been met without the need to reveal confidential information. This can improve the efficiency of the contract process by reducing the need for human intervention.
6. Data sharing: ZK systems can be used to share data between different parties without the need to reveal confidential information. This can improve collaboration between different parties, allowing them to share data without compromising your privacy.
7. Token Creation: They can also be used to create new tokens without having to reveal sensitive information about the issuer. This can improve the security of the tokenization process by preventing sensitive information from being exposed.
8. Token Management: ZK systems can be used to manage tokens privately, allowing users to transact with tokens without revealing confidential information. Thus, transactions can be performed without exposing the sender and receiver of tokens, preserving their identities and the values involved.
9. Ownership Verification: Can be used to verify ownership of a token without revealing information about the owner. This can improve the security of the property verification process and prevent fraud.
10. Integration with other ecosystems: integration of tokens into different blockchain ecosystems, allowing them to be transferred between different platforms without the need to reveal confidential information about the owner. This can improve interoperability between different blockchain ecosystems and increase token adoption.

These are just a few of the many possible use cases. It is quite likely that in the coming months we will see the rise of promising projects that will bring disruptive solutions with the combination of ZK systems and blockchain.

Projects worth studying

As you already know, our report never includes investment recommendations. What we recommend is that you find out more about projects involving crypto and ZK. We bring some examples below.

The next few years could be marked by the success of some of these protocols, so stay tuned and do your own research!

Aztec Protocol

Aztec Protocol is a blockchain platform project that uses ZK systems to ensure transaction privacy and security. To do this, it uses a ZK-based implementation of Ethereum that allows private and confidential transactions without compromising network security. Its main innovation consists of a tokenization model to manage and transfer private assets on the network.

Zcash

Zcash is a token that derives from an interesting platform. It is based on a protocol that uses ZK systems to allow private transactions on the network. The zero-knowledge proof protocol guarantees the privacy of the sender, receiver and transaction amount. Zcash even has an opt-in approach to privacy, allowing users to choose whether they want to keep their transactions private.

StarkWare

StarkWare is a company that develops blockchain solutions that use ZK systems to improve scalability and security. Its flagship product is StarkEx, a scalability platform that uses ZK systems to enable off-chain bulk transactions. StarkWare also offers several other blockchain privacy and security solutions.

Coda Protocol

The Coda Protocol is a platform that uses ZK systems to reduce block sizes on the blockchain. Its protocol compresses the main data to store the entire history of the blockchain in a single proof with reduced size. This allows much less computational power to be used and a blockchain with much smaller blocks, improving scalability.

Aleo

Aleo is a blockchain platform that uses ZK systems to enable the creation of private smart contracts. It achieves this by using a ZK-based implementation of Solidity, the programming language used in Ethereum. Aleo also supports private asset transfers over the network.

Linea Protocol

Linea Protocol is the platform of ConsenSys (the development arm of the Ethereum network) that uses ZK systems to allow private and confidential transactions to be carried out. Uses a tokenization model to manage and transfer private assets on the network. It was released yesterday (03/28/23).

Its protocol allows users to conduct private transactions without compromising network security or scalability. Furthermore, Linea Protocol is an eco-friendly blockchain platform, which will allow the use of only a small fraction of the energy consumed by other blockchain solutions.

Polygon ZK-EVM

Polygon ZK-EVM is the Polygon network scalability solution, which consists of using ZK systems to improve network performance and privacy. It uses a ZK-based implementation of the Ethereum Virtual Machine (EVM) that allows the creation of private and confidential smart contracts, as well as being much more efficient.

Polygon ZK-EVM allows processing thousands of transactions per second, making it a scalable solution for high-demand decentralized applications. In addition, Polygon ZK-EVM uses privacy techniques to ensure that transactions carried out on the network are confidential and secure.