What is ZK-SNARK Algorithm?

What is ZK-SNARK?

ZK-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) is a protocol that enables users to prove they have specific information without revealing it. In other words, ZK-SNARK maintains private information without any interaction between both parties.

ZK-SNARK is the protocol behind the private cryptocurrency Zcash. The idea behind these proofs was first developed in the 1980s, it solves the privacy and anonymity issues faced by traditional blockchains.

Let’s discuss each component of ZK-SNARK separately.

1. Zero Knowledge

It enables the user to prove that they have a piece of certain information without actually providing the information to the other user.

2. Succinct

The proof is verified in a few milliseconds as the proof length is only a few hundred bytes.

3. Non-Interactive

The proof only has a single message sent from the sender to the receiver.

4. Argument

Argument is the technical term used for these proofs. Since they are not like actual proofs but work like an argument, hence the name.

5. Knowledge

Knowledge here is in the context of information held by the sender.

In short, ZK-SNARKs help keep transactions private, as they are fully encrypted on the blockchain. However, the encrypted transactions can still be validated using the network’s consensus protocol, as ZK-SNARKs can show that the sender has X funds to transfer without making that information public.

ZK-SNARKs Explained

Since the launch of the first cryptocurrency, Bitcoin, which is well known for its decentralization, security, and reliability, the downside has been privacy. Though many users criticized Bitcoin and other cryptocurrencies for their publicly available transaction details, the problem still remained.

The following year after Bitcoin’s launch, many Bitcoin users assumed that their transactions were anonymous as their offline identities were not linked with their public keys. However, over the years, many experts, including data scientists, hackers, and other law enforcement personnel, have discovered this is untrue.

In fact, it is not only feasible but also quite easy to re-identify individuals and link pseudonymous data across multiple sources through advanced blockchain analysis. Due to these privacy issues of traditional cryptocurrencies, developers started working towards privacy-focused coins. The best example of a privacy-focused cryptocurrency backed by ZK-SNARKs is Zcash.

How ZK-SNARKs Work?

Since cryptocurrencies are decentralized and no intermediaries like banks or financial institutions are involved, nodes across the world validate crypto transactions on the blockchain network.

The nodes typically check the predefined conditions. For instance, they check whether the sender has the funds available, and they have given appropriate private keys to prove that the funds belong to them.

However, ZK-SNARKs enable the sender to prove their transactions without even revealing their public addresses or the amounts involved. The blockchain network encodes part of the ZK-SNARKs protocol in its consensus rules to adapt this privacy functionality.

ZK-SNARKs turn the data that needs to be verified into equations during the transaction process. Thus, the equations are verified and validated without even revealing the information.

ZK-SNARKs Examples

One popular example of ZK-SNARKs for shielding crypto transactions and enhancing privacy is Zcash. Modern investors often prefer Zcash for its privacy. Zcash encourages users to have private transactions rather than publicly available traditional crypto transactions.

In fact, Zcash gives options to its users to choose whether to have private or transparent addresses. Hence, when a user prefers to have private addresses, ZK-SNARKs shield the transaction details.

Besides Zcash, other blockchain projects also use this ZK-SNARKs. For example, Ethereum started working on integrating Zcash and ZK-SNARKs way back in 2017. Moreover, Zcash joined hands with JP Morgan Chase and built a blockchain-based payment system with ZK-STARKs in the very same year.

Though ZK-SNARKs are ideally used to maintain private crypto transactions, they are much more than that. Users can expect much more from this technology, such as protecting people’s sensitive information online. Let’s wait and watch.

How ZK-SNARKs are Applied?

ZK-SNARKs are applied by converting the information that has to be proven or validated into a mathematical equation. For instance, the sender builds proof for the transaction with the following details.

• The transactions have matching input and output values.
• The sender has appropriate private keys for the input.
• The private keys are cryptographically linked to a digital signature for that transaction.

All of the above-mentioned proofs ensure that no one can modify the transaction except the sender with private keys. However, these proofs work differently for every cryptocurrency. For instance, Zcash tracks unspent transaction outputs using commitments and needs to reveal a nullifier to spend those commitments. Zcash keeps these commitments and nullifiers private by storing them as hashes.

ZK-SNARKs are a potential technology that cryptocurrencies can leverage to enhance privacy. However, users should be cautious as these privacy coins are also volatile like other cryptocurrencies. Hence, do your research and make informed decisions before investing in any privacy coin.

ZK-SNARK Criticisms

There are some criticisms with ZK-SNARKs. Let’s see them in brief.

• Anyone with access to private keys can create false proofs and generate new Zcash tokens through counterfeiting. Zcash prevents this by elaborating the proving protocols and spreading them over multiple parties.
• Zcash was created with a 20% founder’s tax during the initial years. The tax is used to compensate the crypto developers. Critics suggested that the founders could use this system and create any number of Zcash tokens.
• Developers have been trying to enhance ZK-SNARKs since 2019 by removing the trusted setup.
• Zcash developers implemented the Halo 2 zero-knowledge system to prevent privacy issues, as Halo 2 doesn’t require a trust setup between users.

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