Cryptocurrencies have been exposed to numerous cyber crimes and attacks, which only helped crypto developers reinforce the gaps and improve the blockchain as a reliable and safe ecosystem.
However, people lost a lot of money with every crypto attack, like pig butchering scams, sandwich attacks and more. Therefore, the need emerged for a robust security protocol like zero-knowledge proofs.
ZK-proofs were introduced to decentralised finance recently after being implemented in various sectors like finance, the health sector and the Internet of Things.
What Is The ZK-Proof Standard?
The zero-knowledge proof was introduced by a group of mathematicians in the 1980s, with an almost fool-proof approach to safeguard data. It is a simple yet complicated approach, entailing that information can be verified without knowing the content of the information. Hence, zero knowledge of the verified data.
This methodology was created to secure passwords and personal information during the digitalisation of devices and processes when users were concerned about their personal information.
Later, it was introduced to cryptocurrency and the way blockchain transactions happen, whereas smart contracts encrypt the sender’s money transfer and verify the transaction on a shared network of validating nods.
This approach has the risk of exposing the encrypted info to malicious actors and fraudulent schemes. However, there is no way to compromise data if no one knows its content, which is the notion of ZK-proofs.
The zero-knowledge proof (ZK-proof) principle was invented at MIT University in the 1980s, offering one of the most fool-proof methods to secure information. This principle puts a lid on the probability of cyber breaches within any digital system. As the name implies, this methodology strives to verify data without requiring participants to review the entire information.
To an untrained eye, this methodology might seem paradoxical. How is it possible to check the information at hand without verifying the entire content? Let’s explore a trivial example of ZK-proofs.
How Do ZKPs Work?
The process of ZK-proofs involves a verifier and a prover. The prover needs to illustrate their knowledge/acquisition of information without disclosing it to the verifier. How is that done?
The verifier tests the prover using challenges like accessing certain information or solving mathematical problems that can only be resolved in one way. The prover strives to show their knowledge of the way without revealing how it was done.
When the prover passes the challenge successfully every single time, it reduces the luck factor and enforces the confidence that the prover actually has the key despite having zero knowledge about it.
Zero-knowledge proof may not be the ultimate fool-proof mechanism, but it safeguards data by not revealing its content to anyone, which decreases the chances of data breaches and crypto fraud.
ZKP is a recent application in cryptocurrencies and is used to promote anonymous transactions and trust in blockchain technology.