The costs of security breaches in blockchain networks have risen yearly, even more in the last twelve months within the Web3 and Defi space. Zero-knowledge-proof technology could be the much-awaited answer to many cyber threats and data breaches in the crypto ecosystem.
It is a Privacy-Enhancing Technology (PET) that offers multiple ways for online businesses to protect sensitive information while using the best cryptocurrency wallets in Canada.
This article overviews zero-knowledge proof technology, highlighting primary ways it could improve the crypto space.
What is Zero-Knowledge Proof Technology?
Zero-Knowledge Proof (ZKP) technology is a confirming tech product that authorizes or confirms payments without revealing any information. It uses cryptographic algorithms to maintain a certain level of privacy in crypto by calculating the probability that the buyer or seller has private info and isn’t looking to reveal it.
For example, ZKP allows you to prove ownership or knowledge about a thing without revealing what the “thing” is. There are at least three versions of ZKP, such as Bulletproofs and zk-SNARKS. Each type has its specifications and unique applications.
Features of Zero-Knowledge Proof in Crypto
Zero-Knowledge Proof (ZKP) has three main properties. They are:
Completeness:
The prover knows the statement to prove and how to convince the verifier.
Correctness:
The prover has a negligible probability of deceiving the verifier if they don’t know the statement.
Zero-knowledge:
The verifier learns nothing about the fact from the verification process.
Role of Zero-Knowledge Proof Technology in Crypto
Every crypto enthusiast values privacy. It’s a major concern when security threats are rampant in the system. Although everyone appreciates the transparency and reliability of the blockchain, for security purposes, it doesn’t help sometimes.
People can see your transactions and personal details since for example, you joined the system. With ZKP, you can prove you have the money needed to make a transaction without showing the other party your wallet balance or the various addresses you maintain.
Zero-Knowledge Proof (ZKP) provides privacy without disrupting the transaction or stopping the trade from taking place. ZKP algorithms combined with Blockchain technology are a solid team to improve security issues.
Use Cases of Zero-Knowledge Proof Technology in Crypto
Zero-Knowledge Proof (ZKP) is highly useful to various people in the crypto space. Here are some of its prevalent use cases within the system:
Identity verification
ZKP technology allows you to prove you’re whom you say you are without revealing who you are to the next buyer. With this tech, you can make anonymous transactions because the tech will confirm to the next person that you can make a payment.
This use case is also perfect for decentralized applications with many identity verification processes.
Privacy Maintenance
Using ZKP algorithms in decentralized finance (DeFi) applications allows users to lend, trade, and borrow crypto without a third party.
ZKP technology maintains and hides the probate information of all parties involved while the transaction occurs.
Current Applications of Zero-Knowledge Proof Technology
To better understand ZKP tech, you may observe its applications in the Mina blockchain project.
Ethereum level 2 also uses ZKP tech to optimize performance and keep transactions private. A classic example is the blockchain’s Polygon Nightfall project.
The Zilch and MATTR projects are other blockchain projects that employ ZKP algorithms to be more user-friendly.
Pros and Cons of Applying Zero-Knowledge in Crypto
The pros of ZKP algorithms in blockchain are apparent. It allows users to enjoy anonymous transactions, verify their identities quickly and provides privacy across major DeFi applications.
The cons of implementing ZKP technology are that it is computationally costly and difficult to implement on large-scale applications.
The Potential of Zero-Knowledge Proof in Crypto
ZKP technology is the future of cryptocurrency security systems. It will allow all users to protect their private information while applying their portable strategies across all crypto niches. It may also cause a wider adoption of cryptocurrencies across all regions.
