A Primer on Zero-Knowledge Proof (ZKP)

Fundamentals of ZKP

Zero-Knowledge Proof (ZKP) is a cryptographic mechanism that enables a transaction to be validated with minimal requirement of the information pertaining to the transaction. The utility of ZKP in facilitating the proving of a fact in relation to private and confidential information without disclosing or conveying the information to the verifier.

With this, let’s explore more about ZKP:-

• The Concept

With its triple elements of completeness, soundness and zero-knowledge, ZKP effectively combines the use of a general interactive proof system with the concept of zero-knowledge. In terms of its utility, ZKP can help protect user privacy while maintaining transactional transparency and ensuring regulatory compliance.

Properties and Use Cases of ZKP (Source: 101blockchains.com)

• The Scalability

Zero-Knowledge rollups (ZK-rollups) are layer 2 scaling solutions that can process thousands of transactions in one go by moving computation and storage of data off-chain. As it requires the posting of only some minimal summary data to the Ethereum Mainnet, ZK-rollups effectively pave the way for the scalability of ZKP protocols.

Merkle Tree illustration of Zk-rollups (Source: Panther Academy)

• The Alternative

Similar to ZK-rollups, Optimistic rollups are also layer 2 scaling solutions which serve to support the scalability of Ethereum’s base layer. ZK-rollups involve the use of validity proof to actually validate transactional changes to the Ethereum Mainnet whilst Optimistic rollups rely on the use of fraud proof which assumes that transactional changes to the Mainnet are valid unless proven otherwise.

Comparison Between Optimistic rollups and ZK-rollups (Source: Blockchain Council)

Through the use of ZK-rollups to enhance the scalability of ZKP protocols, user identification and verification as well as regulatory compliance requirements such as the customer due diligence (CDD) procedures of anti-money laundering (AML) and know-your-customer (KYC) can be undertaken without users having to sacrifice their data protection and privacy security.