zk-SNARK Technology In A Nutshell

zk-SNARK technology is cryptographic proof allowing one party to prove it possesses information without having to reveal it. zk-SNARK is an acronym for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge. More specifically, a zk-SNARK is a zero-knowledge proof protocol used to prove possession of certain information without revealing that information. This technology might play a key role in the future development of Ethereum.



Understanding zk-SNARK technology

The first zero-knowledge proofs were developed in the late 1980s, with a seminal research paper entitled How to Explain Zero-Knowledge Protocols to Your Children released in 1990 by cryptographer Jean-Jacques Quisquater.

The paper explains zero-knowledge proofs in the context of a parable involving Ali Baba’s Cave. But for the sake of brevity, it’s important to understand that these proofs have one fundamental goal and three key players. The verifier must convince themselves that the prover possesses knowledge of a secret parameter called a witness. This witness must satisfy some relation without it being revealed to the verifier or indeed anyone else. 

In a real-world scenario, imagine a patron wanting to enter a bar and having to prove they were over the legal drinking age of 21. The patron does not want to reveal their exact age, but the bouncer at the door must verify whether they are legally allowed to drink. Theoretically, the bouncer could use zero-knowledge proofs to scan the patron’s ID and determine whether they were over 21. Note that the exact age of the patron does not need to be revealed.

Today, zk-SNARK is commonly associated with cryptocurrency and blockchain. We will take a look at this association in the next section.

zk-SNARK technology and cryptocurrency

When cryptocurrencies such as Bitcoin were first developed, privacy was less important than a need to create a trust-less system for maintaining the integrity of digital transactions.

Indeed, Bitcoin users assumed such transactions were anonymous because their real identities were not associated with user public keys. In recent years, concerted attempts by data scientists, hackers, and law enforcement proved it was relatively simple to identify people who had given pseudonymous information to multiple sources.

This put the spotlight back on privacy and lead to the development of coins such as Zcash that were backed by zk-SNARK technology. This technology is based on complex mathematical functions, but in the case of Zcash, zk-SNARKS can be verified nearly instantly without any interaction between the prover and the verifier. The identity of the prover and verifier are kept hidden, as is the payment amount. Importantly, zk-SNARKS usually take up much less data than a standard Bitcoin transaction and are more scalable as a result.

Future applications of zk-SNARKs

zk-SNARK has virtually limitless future applications because it is useful wherever verification is required without disclosing inputs or leaking information.

Having said that, its usefulness is somewhat limited since the generation of proofs for complex functions is resource-intensive. In cryptocurrency, the makers behind Zcash are working to optimize this process to make it more widely available. 

In any case, zk-SNARKs can be added to any existing distributed ledger solution to add an extra layer of security for enterprise use cases. This solution is particularly attractive for multiple companies operating on the same blockchain with a desire to keep sensitive or proprietary business information private. Instead of revealing this information to other players, zk-SNARKS allow each business to store only the proof of each transaction on a given node.

Key takeaways:

  • zk-SNARK technology is cryptographic proof allowing one party to prove it possesses information without having to reveal it.
  • zk-SNARK technology is most commonly associated with blockchain and cryptocurrency, but it was coined as far back as the late 1980s by cryptographer Jean-Jacques Quisquater.
  • zk-SNARK technology is a vital tool for multiple businesses operating on the same blockchain with sensitive information. The technology will become much more widespread once verification functions become less computationally intensive.

Connected Business Concepts

According to Joel Monegro, a former analyst at USV (a venture capital firm) the blockchain implies value creation in its protocols. Where the web has allowed the value to be captured at the applications layer (take Facebook, Twitter, Google, and many others). In a Blockchain Economy, this value might be captured by the protocols at the base of the blockchain (for instance Bitcoin and Ethereum). However, according to blockchain investor Paivinen due to ease of forking, incentives to compete and improved interoperability and interchangeability also in a blockchain-based economy, protocols might get thinner. Although the marginal value of scale might be lower compared to a web-based economy, where massive scale created an economic advantage. The success of the Blockchain will depend on its commercial viability!
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A Proof of Work is a form of consensus algorithm used to achieve agreement across a distributed network. In a Proof of Work, miners compete to complete transactions on the network, by commuting hard mathematical problems (i.e. hashes functions) and as a result they get rewarded in coins.
A Blockchain Business Model according to the FourWeekMBA framework is made of four main components: Value Model (Core Philosophy, Core Values and Value Propositions for the key stakeholders), Blockchain Model (Protocol Rules, Network Shape and Applications Layer/Ecosystem), Distribution Model (the key channels amplifying the protocol and its communities), and the Economic Model (the dynamics/incentives through which protocol players make money). Those elements coming together can serve as the basis to build and analyze a solid Blockchain Business Model.
Ethereum was launched in 2015 with its cryptocurrency, Ether, as an open-source, blockchain-based, decentralized platform software. Smart contracts are enabled, and Distributed Applications (dApps) get built without downtime or third-party disturbance. It also helps developers build and publish applications as it is also a programming language running on a blockchain.
The Graph is an ERC20 Utility Token (built on top of Ethereum) to enable consumers to freely query the blockchain through a fully decentralized database kept by indexers, incentivized by the payment of tokens (called GRT). The network is also ministered by curators and delegators that help maintain a high-quality index.
BAT or Basic Attention Token is a utility token aiming to provide privacy-based web tools for advertisers and users to monetize attention on the web in a decentralized way via Blockchain-based technologies. Therefore, the BAT ecosystem moves around a browser (Brave), a privacy-based search engine (Brave Search), and a utility token (BAT). Users can opt-in to advertising, thus making money based on their attention to ads as they browse the web.
In 2012, co-founders Christian Larsen and Jed McCaleb created Ripple, a technology acting as both a pre-mined cryptocurrency called XRP and a digital payment platform enabling monetary transactions. Where Ripple is the tech company, XRP is the decentralized ledger.
In 2014, Jed McCaleb – which also played a key role in the development of Ripple – created a cryptocurrency to provide fast, reliable, and affordable money transactions. The same cryptocurrency has considerably grown seven years later. It is now one of the most stellar cryptocurrencies to provide a real-time platform that links banks, payment systems, and people. Meet, Stellar!
In early 2019, a joint project between TRON and BitTorrent Foundation called BitTorrent Token came to fruition. BitTorrent Token launched to tokenize in-demand file-sharing protocol and enhance content delivery and bandwidth accessibility with blockchain technology.
Chainlink is considered the most established decentralized oracle network. As an ecosystem housing several decentralized oracle networks running simultaneously. As a decentralized oracle service built on Ethereum, Chainlink has the power to support the development of blockchain solutions for both traditional businesses and enterprises.
Uniswap is a renowned decentralized crypto exchange created in 2018 and based on the Ethereum blockchain, to provide liquidity to the system. As a cryptocurrency exchange technology that operates on a decentralized basis. The Uniswap protocol inherited its namesake from the business that created it — Uniswap. Through smart contracts, the Uniswap protocol automates transactions between cryptocurrency tokens on the Ethereum blockchain.
In essence, Polkadot is a cryptocurrency project created as an effort to transform and power a decentralized internet, Web 3.0, in the future. Polkadot is a decentralized platform, which makes it interoperable with other blockchains.
Designed and created as an alternative to Ethereum, Cardano claims to be the first decentralized blockchain protocol to use a scientific approach and undergo a peer evaluation.
Solana is a blockchain network with a focus on high performance and rapid transactions. To boost speed, it employs a one-of-a-kind approach to transaction sequencing. Users can use SOL, the network’s native cryptocurrency, to cover transaction costs and engage with smart contracts.

Read Next: Blockchain Business Models Framework Decentralized FinanceBlockchain EconomicsBitcoinHard-Fork.

Read Also: Proof-of-stakeProof-of-workBlockchainERC-20DAONFT.

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