Here is another explainer for Web3 enthusiasts, the concept of zero-knowledge proofs. This is a privacy protocol that is widely used to protect all Web3 users from data breaches. As usual, I’ve written this in an easy-to-grasp format for everyone to benefit from it.

Definition of zero-knowledge proofs (ZKPs)

Zero-knowledge proofs (ZKPs) are powerful cryptographic tools that are used in Web3 applications to enhance security, efficiency, and privacy. By “cryptographic,” we mean they are powered by complex codes and mathematical algorithms. ZKPs are an exciting breakthrough in the tech space and their use is not limited to Web3, being widely used across an array of industries including supply chain, internet of things, and layer-2 solutions.

Why zero-knowledge proofs (ZKPs)?

To understand what necessitated the need for ZKPs, we need to remember the background of Web3 itself. Why did Web3 come into existence? The answer to that question is the critical theme for the Web2 landscape, namely data. User-generated content, allowed by Web2, contributed to the success of that era of the internet, with social sites taking the front seat. Data turned out to be the most important commodity on the internet and various entities cashed out massively by exploiting this commodity. In addition to this extortion, malicious individuals launched attacks on the personal data of users, indicating that people were not safe on the web.

People needed more, a secure internet that respects people’s privacy and ensures users’ safety. Web3 arrived with critical promises of being a new era of the internet that upholds sovereignty, decentralization, and immutability. Surprisingly, Web3 didn’t solve the problem of data integrity because vicious actors still found their way into invading personal data on Web3 systems. That is why Web3 evolved to a more secure mechanism of protecting users at all costs, leading to the emergence of ZKPs, a strong privacy-ensuring protocol.

Zero-knowledge proofs (ZKPs) use cases

ZKPs are very powerful because they allow a party to prove the validity of a transaction without revealing additional information beyond the statement’s truth. For context, it is like verifying the nationality of someone without having to request their national ID number, name or gender.

ZKPs have been used across various industries, let’s explore a few of them:

Decentralized identity

ZKPs are used to verify people’s identities without requesting sensitive personal data. They achieve this by simply verifying that the person meets certain criteria. For instance, a DeFi app that verifies that a user is a citizen of a country can achieve this by linking to a third-party ZKP-based identity protocol that verifies that the user is from a particular country without requesting their passport number or name.

This empowers people to maintain their privacy, protect against identity theft and fraud, and reduce reliance on passwords, which are vulnerable to attacks. It also relieves organizations of the responsibility of collecting, holding and securing valuable user data, which can make them the targets of cyberattacks and unqualify for the compliance requirements of governing bodies.

Privacy-preserving transactions

In day-to-day financial transactions, zero-knowledge proofs create a digital financial experience that is very similar to spending with cash. This is because ZKPs enable blockchain nodes to validate transactions without needing their actual transaction details like the recipient's home address, the name of the sender or even the smart contract code from the public blockchain ledger. This means users can obscure their transactions on a privacy-preserving network.

Truly anonymous payments have played a huge role for people in tyrannical regimes where financial transactions are closely monitored. Users can now privately support charities, an act that could otherwise bring public backlash if not processed using ZKPs.

Voting systems

ZKPs can revolutionize voting systems by enabling individuals to vote without compromising their identity while allowing independent auditors to verify the fairness in election outcomes.

In traditional systems, voters must provide a means of identification to vote and administrators, who usually use manual and inefficient processes, are trusted to aggregate the votes. With a zero-knowledge-based voting protocol, voters never need to reveal their identity at any point. Furthermore, the integrity of the voting system can be enhanced using ZKPs because voters can independently verify that their voting was recorded accurately without disclosing their voting preferences.

Internet of Things (IoT)

The Internet of Things is a network of devices being connected to the Internet, enabling them to send and receive data and take autonomous actions. Alarm systems can call the police when they detect an intrusion, solar systems can sell excess energy to a neighbour, and wearables can record heart rates in real-time. ZKPs can play a significant role in securing these devices, protecting user privacy, and reducing energy consumption.

ZKPs can help ensure that only authorized parties can access user data on IoT devices, enabling secure communication between the devices. In addition, because they reduce the amount of transmitted and processed data on IoT devices, ZKPs can considerably decrease the energy demands, improve efficiency and reduce costs.

Supply chain

Corporations operating within supply chains have harnessed ZKPs in providing more transparency in their systems. They use it to keep certain information, like customer information and trade secrets, while still verifying the authenticity of transactions. For instance, ZKPs can allow auditors to verify that a batch of goods was shipped and stored appropriately without revealing any additional information, companies can prove to policymakers that they are complying with environmental or labour standards without revealing any sensitive operational information, and end users can track the origin of inputs without knowing the entire value chain.

Bottom line

Overall, zero-knowledge proofs are a fundamental backbone of Web3 technology, enabling it to claim its position as the new era of the internet. Their role in preserving user confidentiality and selectively disclosing information has the potential to transform various sectors, including finance, identity management, and data privacy in the decentralized web. Furthermore, ZKPs will redefine how we handle data, enabling users to meet compliance requirements or verify specific information without exposing their personal details or trade secrets. Since ZKPs are already giving people the privacy they yearn for, we’re seeing rapid adoption within the blockchain space, helping scale the ecosystem and enhancing the privacy, security, and efficiency of digital systems.