Zero-knowledge proofs

Polygon 2.0: 2024 to see unified ZK-powered L2 chains

Polygon’s evolution will continue into 2024 as various protocols that make up its ecosystem become increasingly interconnected through the use of zero-knowledge proofs.

Polygon co-founder Jordi Baylina says 2024 will see the amalgamation of Polygon’s various Ethereum layer-2 scaling networks to complete its “Polygon 2.0” cross-chain coordination protocol.

Speaking exclusively to Cointelegraph, Baylina said 2024 would be a litmus test to see how the Polygon ecosystem’s various networks can scale and integrate through the implementation of zero-knowledge proofs (ZK-proofs):

Baylina added that several networks that comprise Polygon’s ecosystem feature their own tokens, sequencers and data availability solutions. The evolution to Polygon 2.0 is set to include several upgrades that will unify these different protocols with ZK-proof technology into “continuous, unbounded blockspace.”

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DeFi driving zkSync growth as 1inch deploys on Ethereum layer-2 scaling platform

1inch Network is the latest decentralized Finance protocol to deploy on Ethereum layer-2 scaling platform zkSync Era.

Decentralized finance protocol 1inch has deployed its aggregation and limit order protocols on Ethereum layer-2 scaling solution zkSync Era to tap into faster and cheaper transactions.

1inch Network is the latest of a host of Ethereum-based platforms and services deploying on the zero-knowledge proof (zk-proof) based scaling platform. Uniswap, SushiSwap, Maker and Curve Finance are also preparing to launch on the zk-proof roll-up zkSync Era.

1inch Network co-founder Sergej Kunz highlighted the promise of the layer-2 solution as his platform joins a handful of first-movers to integrate with the zk-proof powered protocol:

“As zkSync Era gains steam, 1inch users will benefit from faster and cheaper transactions.”

A statement from Matter Labs CEO Alex Gluchowski, who heads up the zkSync development firm, notes that DeFi protocols have been a major factor in the uptake of zkSync era:

“DeFi has been a driving force behind zkSync Era’s explosive growth that has seen over $200 million in TVL driven to the protocol in just three short weeks, and we expect the deployment of 1inch to contribute to even greater adoption and usage of zkSync Era.”

Gluchowski said that 1inch Network’s position as the largest decentralized exchange aggregator by on-chain volume would provide deeper liquidity to zkSync Era. The deployment is also touted to offer faster trades, better rates and lower transaction slippage.

Related: Symbiosis integrates zkSync: ‘Natural evolution’ of scaling solutions

zkSync is among a number of layer-2 solutions that have pioneered the use of zk-rollups to increase Ethereum’s throughput and scalability. The technology enables layer-2 protocols to move computation and blockchain state storage offchain, allowing these platforms to process thousands of transactions before providing summary data proofs to Ethereum’s mainnet.

Matter Labs secured $200 million during a series-c investment round in November 2022, taking its total fundraising to over $450 million to continue the development of its Ethereum scaling platform.

Other major Ethereum development firms, including Polygon and ConsenSys, have also developed their own zk-proof powered scaling protocols. ConsenSys released its zkEVM rollup to its public testnet on March 28.

Meanwhile, Polygon co-founder Sandeep Nailwal described zk-rollups as “the holy grail of Ethereum scaling” upon the release of its open-source zkEVM Ethereum scaling technology to the mainnet on March 27.

Magazine: ZK-rollups are ‘the endgame’ for scaling blockchains: Polygon Miden founder

Buterin weighs in on zk-EVMs’ impact on decentralization and security

Vitalik Buterin has weighed the impacts of the addition of zk-EVMs at the protocol level, saying it could speed up the verification process on the base layer.

Ethereum co-founder Vitalik Buterin wants to see zero-knowledge Ethereum Virtual Machines (zk-EVMs) built on Ethereum’s first layer to speed up the verification process on the base blockchain.

Buterin explained in a March 31 post that it’s possible to integrate a zk-EVM on the base layer without compromising on decentralization and security. The technology enables Ethereum Virtual Machines to execute smart contracts on the blockchain with ZK proofs.

Ethereum was developed with a “multi-client philosophy” to ensure decentralization at the protocol level, Buterin explained. By integrating zk-EVMs at the Ethereum layer 1, it would be the third type of client.

“Once that happens, zk-EVMs de-facto become a third type of Ethereum client, just as important to the network’s security as execution clients and consensus clients are today.”

The other two clients are the “consensus” and “execution” clients. The consensus client implements proof-of-stake to ensure nodes in the network reach agreement, while the execution client listens to new transactions broadcast to the network, executes them in standard EVM and holds a copy of the latest state of the blockchain.

In championing the idea of zk-EVM verification at the Ethereum base layer, Buterin firstly considered the advantages and drawbacks of treating the layer 1 as a “clearinghouse” by pushing almost all activity to layer 2’s.

He said many layer 1-based apps would become “economically nonviable” and that small funds — worth a few hundred dollars or less — may get “stuck” in the event that gas fees grow too large.

Buterin explained that zk-EVMs would need to be “open” in that different clients each have different zk-EVM implementations and each client waits for a proof that is compatible with its own implementation before accepting a block as valid.

He prefers this approach because it wouldn’t abandon the “multi-client” paradigm, and an open zk-EVM infrastructure would also ensure that new clients could be developed, which would further decentralize Ethereum at the base layer.

Related: ConsenSys zkEVM set for public testnet to deliver secure settlements on Ethereum

Buterin said zkEVMs might be the solution to “The Verge,” a part of the Ethereum roadmap that aims to make verification at the base layer easier.

Buterin acknowledged that the zk-EVM infrastructure might cause data inefficiency and latency issues, however, he said those challenges wouldn’t be “too hard” to overcome.

If the zk-EVM ecosystem is implemented, it would make running a full node on Ethereum even easier, Buterin explained:

“Ethereum blocks would be smaller than today, anyone could run a fully verifying node on their laptop or even their phone or inside a browser extension, and this would all happen while preserving the benefits of Ethereum’s multi-client philosophy.”

Ethereum layer-2 scaling platform Polygon has made considerable progress with its zk-EVM, having recently open-sourced its zkEVM to the Polygon mainnet on March 27, promising reduced transaction costs and increased throughput of smart contract deployments.

StarkWare, ConsenSys, Scroll, zkSync and Immutable are also deploying similar zkEVM scaling solutions.

Magazine: Attack of the zkEVMs! Crypto’s 10x moment

Zero-knowledge proofs coming to Bitcoin, overhauling network state validation

Zero-knowledge proofs have powered the development of Ethereum layer 2s, and now they’re coming to Bitcoin.

Bitcoin (BTC) users will soon be able to use zero-knowledge proofs (ZK-proofs) to expedite the process of verifying individual blocks and, eventually, the entire blockchain. 

ZeroSync Association, a Swiss-based nonprofit, is developing tooling which allows users to validate the state of the Bitcoin network without having to download the blockchain or trust a third party for verification.

ZeroSync was formed to develop and maintain open-source software that enables succinct ZK-proofs on the Bitcoin blockchain. The group uses StarkWare’s proprietary Zero-Knowledge Scalable Transparent Argument of Knowledge (zk-STARK) validity proofs to generate ZK-proofs for the Bitcoin network.

The tool promises to overhaul the process of verifying the Bitcoin blockchain, which still requires node operators to download a large amount of data to synchronize the correct state of the Bitcoin network.

ZeroSync is using ZK-proofs to eventually generate valid proof and verify the latest state of the blockchain almost instantaneously.

ZK-proofs have been a revelation for the Ethereum ecosystem, with various proof methods powering several layer-2 scaling platforms, including Polygon, Arbitrum, Optimism and StarkNet.

Related: Polygon’s ‘holy grail’ Ethereum-scaling zkEVM beta hits mainnet

An announcement from the ZeroSync Association highlights the promise of ZK-proofs for blockchain scalability and privacy by providing “almost-fixed-size” proofs verifying large computations.

The project’s work pioneers the application of ZK-proofs for the Bitcoin network, with the organization describes Bitcoin’s relative simplicity and the Unspent Transaction Output (UTXO) model as a unique value proposition for applying recursive proofs.

ZeroSync notes that the ZK-Proof tools do not require consensus changes or additional trust assumptions for the Bitcoin network and its users. The organization is building a software development kit that will allow developers to generate custom validity proof for specific use cases without needing indepth domain expertise.

ZeroSync is in the process of building a client for fast initial block download as well as implementing the first complete proof of Bitcoin consensus. The client will allow users to sync a full node without making code changes to Bitcoin core.

ZeroSync is using the Cairo programming language, pioneered by StarkWare, to create STARK-provable programs for computations.

ZeroSync’s tool is currently in a prototype state but has the ability to prove the validity of individual assumed valid blocks, which verify all Bitcoin rules except for scripts. The team also has a working in-browser demo verifier for STARK proofs of Bitcoin blocks.

The ZeroSync Association was initially funded by Geometry and StarkWare but is establishing a nonprofit entity to enable ongoing development and maintenance from stakeholders within the Bitcoin community.

A statement from StarkWare president and co-founder Eli Ben-Sasson, who co-invented zk-STARKS, summed up the magnitude of ZK-proofs coming to the Bitcoin ecosystem:

“After years of frustration about slow syncing, users will be able to sync with the network much faster, and with less computation. It’s a technological leap akin to the transition from slow dial-up internet to high-speed broadband.”

Lightning Labs, the team behind the Bitcoin layer-2 Lightning Network payment system, is a contributing partner to ZeroSync’s project.

The firm intends to use ZeroSync to power compressed transaction history proofs for its Taproot Asset Representation Overlay (Taro) protocol, which aims to power the issuance of digital assets on the Bitcoin blockchain.

zkSync Era launches with Uniswap and Sushi — First zkEVM on mainnet

A new Era has dawned with the launch of the first Ethereum Virtual Machine compatible ZK rollup, enabling projects like Uniswap and Sushi to easily port over for scaling.

Some of the biggest names in decentralized finance, including Uniswap, Sushi, Maker and Curve, are set to launch March 24 on zero-knowledge proof roll-up zkSync Era.

The Ethereum layer 2 scaling network has finally opened to users in alpha after four years in development, enabling faster and cheaper transactions. It is the first Ethereum Virtual Machine compatible zk-Rollup to launch on mainnet (competitor StarkWare uses a bespoke language called Cairo), allowing most Ethereum DApps to simply port over with very few changes.

Between 32 to 50 projects are expected to go live on March 24 or over the weekend, including Balancer, Pyth Network, Mute, Redstone, Graph and Argent. Banxa, Yearn Finance, Celer, Chainlink, Aragon, Woo Network and Tracer DAO are also porting to the network.

“Friday for us is the big one, it’s full launch alpha,” Anthony Rose, the head of engineering for zkSync developer Matter Labs, told Cointelegraph earlier in the week.

“But the systems are super complex and there’s a million other things we want to do.”

While zkSync Era can provide scaling “orders of magnitude” greater than Ethereum’s current 10 to 12 transactions per second (TPS), Rose said it would offer “tens of TPS” initially and scale up as demand requires.

The project launched its “fair onboarding alpha” on Feb. 17, allowing projects to port over and test out security and optimizations. Matter Labs said it spent $3.8 million on security testing, seven independent security audits and a bug bounty program to reduce the risk of any incidents.

What is a zk-Rollup?

Zk-Rollups — which include zkSync, Scroll and solutions from Polygon, StarkWare and Consensys — compute transactions away from the Ethereum blockchain while providing a tiny cryptographic proof that is written as a single transaction back on Ethereum showing that a bundle of other transactions has been carried out correctly. zkSync also employs recursion, which generates a proof showing a batch of other proofs (each representing many transactions) have been carried out.

Zk-Rollups can enable virtually instant withdrawals, giving them an advantage over optimistic-rollup layer 2s such as Optimism, where withdrawals take a week. However, zkSync Era will impose a 24-hour waiting period initially as a security precaution.

“The reason being is if you have some critical bug that has somehow got through the many different audits and security mechanisms and somebody completely drains the protocol, this is obviously a disaster for everybody involved,” he said. The waiting period is likely to be reduced to an hour within weeks.

Native account abstraction

zkSync has also enabled native account abstraction, meaning every account in the network is a “smart account” that can utilize two-factor authentication (2FA), social recovery, autopay transactions and more via smart contract wallet providers like Argent.

“This was and probably still is my favorite feature,” Rose said, explaining that it’s an improvement on Ethereum’s ERC-4337 implementation and will help remove the “jankiness” for new crypto users getting into the space.

“Scalability is fine, the infrastructure needs to be there. But it needs to come with a user experience that can also scale.”

Not decentralized yet

zkSync Era will not be fully decentralized on launch, so the team can implement fast fixes for any security or technical issues. However, a time lock will later be implemented so that the Security Council and community can sign off on decisions.

Like competitor StarkWare, zkSync relies on a centralized sequencer and prover, which are faster, but provide a centralized point of failure. Running a prover, however, requires the purchase of expensive hardware or renting cloud capacity at $10,000 a month, which makes decentralizing that aspect of the network tricker. Underscoring the challenge, the decentralized version of StarkWare is called StarkNet and is currently running at a paltry 0.11 TPS.

Rose said a new proof system was already being developed that substantially reduces hardware requirements and should be available on mainnet this year.

“So the idea for us is to get through this, then start talking about how we upgrade the proof system to be such that we can be meaningfully decentralized,” he said.

“There’s lots of hard problems to solve to make the systems real.”

NFT Creator: Creating ‘organic’ generative art from robotic algorithms: Emily Xie

Polygon launches decentralized ID product powered by ZK proofs

The public launch of Polygon ID comes 12 months after it was first launched in a closed-environment to a select group of builders.

Polygon, a layer-2 scaling protocol for Ethereum, has launched a zero-knowledge decentralized identity solutionto the public nearly a year after announcing its development.

The Polygon ID service uses zero-knowledge proofs (ZK proofs) that use cryptographic techniques to allow users to verify their identity online without having their sensitive information passed or potentially stored with a third party.

Polygon Labs publicly released Polygon ID on March 1, almost 12 months after the project was officially launched in a closed-source environment.

The Polygon team says Polygon ID was built to “solve the issue of digital trust.”

“What sets Polygon ID apart from most other decentralized ID frameworks is its implementation of zero-knowledge technology, allowing users to verify their identities or other credentials without necessarily revealing sensitive information,” Polygon said.

The public release introduces four new tools to the Polygon ID toolset — Verifier SDK, Issuer Node, Wallet SDK and Wallet App — that will allow Polygon developers to integrate decentralized identity into their applications.

A simple chart explaining how Polygon ID interacts with user credentials. Source: Polygon

Users will be able to produce zero-knowledge proofs using off-chain credentials — such as their passport, national ID or a bachelor’s degree — to interact with smart contracts and verify information on-chain.

“This means that off-chain data can now be used for trustless on-chain verifications in the widely-supported Verified Credential format.”

Polygon claims it’s also the first ZK-based digital ID tool that allows users to hold credentials locally on handheld devices such as smartphones, and that users will no longer need passwords:

“Passwordless logins exchange encrypted verifiable credentials by simply scanning a QR code or connecting to a desktop wallet. Organizations can benefit from improved security, a better user experience, and productivity of their system administrators whose time is not taken up by password resets.”

The co-founder of Polygon ID, David Schwartz, said in a March 1 tweet that the product was built “on the latest decentralized identity standards” which will help protect developers and users against unauthorized access from third parties.

“Providing identity in a way that the average consumer can use is the holy grail of digital ID adoption,” he explained in a separate press statement.

Related: Decentralized finance to be examined at inaugural CFTC tech advisory meeting

Multiple projects have already committed to integrating Polygon ID upon launch, such as Web3 infrastructure provider Kaleido, ID verification solution Fractal and Web3 community management system Collab.Land. Together they have a user base of over 4 million, according to Polygon.

Other Web3 projects, such as metaverse platform The Sandbox and blockchain builder community Guild.xyz, are in the process of integrating Polygon ID too.

Following the news, the price of Polygon’s native token, MATIC (MATIC), increased 2.5% from $1.22 to $1.25 in a matter of hours before falling back to $1.23.

Other blockchain-based ID products out in the space today include Quadrata and IDNTTY.

Why zero-knowledge KYC won’t work

Blockchain technology — including zero-knowledge proofs — doesn’t yet provide adequate solutions for identity verification.

The emergence of blockchain technology presents an opportunity to reexamine and innovate solutions used in our day-to-day life. Blockchains and, broadly speaking, the digital space fuelled by an artificial intelligence revolution urgently need to establish verifiable human identities to ensure trust, accountability and regulatory compliance.

There are a variety of emerging technologies, both on- and off-chain, that could serve as the basis for a functioning trust framework. One solution, in particular, is often referred to as the holy grail of verifications — zero-knowledge Know Your Customer (zkKYC) verification.

What are zk and KYC?

ZK stands for zero-knowledge, a cryptography term used to create cryptographic proofs without revealing the underlying confidential information. Z-based solutions are pioneering privacy across the web. The blockchain industry fueled the innovation of ZK technologies due to their minimal transaction size and privacy-preserving nature.

Related: Kraken staking ban is another nail in crypto’s coffin — And that’s a good thing

Know Your Customer, or KYC, is a set of processes and procedures businesses use to verify their customers’ identities. It is also used in the financial sector to assess any potential risks for money laundering or terrorism financing. It is a requirement for businesses to diligently understand their customers before establishing a relationship with them.

Why zkKYC proofs will not work for blockchains

Zero-knowledge proofs, when created, are linked to a wallet address through a signature. These proofs are not publicly discoverable by design. Yet when a blockchain address interacts with a public smart contract that requires such a proof, the proof’s existence becomes public, negating the privacy benefits of a zero-knowledge proof. It is due to the design of smart contracts running on public blockchains that create a publicly discoverable list of all interacting wallets.

A wallet with zero-knowledge proof that does not interact with an on-chain service that requires such a proof avoids the public disclosure of the proof. Yet this wallet can only transact with another proof-holding wallet following a precursor interaction or the involvement of an intermediary. The hidden nature of these proofs requires both wallets to reveal their proofs to one another proactively.

Another issue with zero-knowledge credentials that are prone to change status over time (such as a Know Your Customer good standing) arises from the lack of dynamic updates in available ZK solutions. This absence of continuous status validity necessitates that the wallet holding a zero-knowledge proof will be required to produce a new proof for every on-chain interaction where this proof is required.

It is worth noting that emerging blockchain technologies advance zero-knowledge-enabled smart contracts, keeping the interacting wallet address private. However, the issues around the need for dynamic proofs and the inability for verified-to-verified peer-to-peer transactions remain relevant even with these advanced solutions.

Do not store personal information in a proof

Projects considering zero-knowledge proofs often contemplate producing these proofs about encrypted data stored on a public ledger. However, it is ill-advised to store any personal information on a public blockchain.

Related: A Supreme Court case could kill Facebook and other socials — Allowing blockchain to replace them

These eternal ledgers are not designed for personal privacy, and for such use, they are not compliant with privacy regulations such as the General Data Protection Regulation and California Consumer Privacy Act. A few significant issues relate to the fact that even encrypted data is considered personally identifiable information. Any such information must be deleted upon request according to these privacy regulations.

Because storing personal information on a blockchain furthers non-compliance with privacy regulations, it is not an ideal solution for storing any form of (verified) personal information on-chain.

What other solutions do blockchain projects have?

Due to the limitations that each blockchain is limited to information and data available on that given chain, builders in the space must consider other blockchain native mechanisms. Any credential design that provides a form of compliance must avoid privacy violations and ensure that the final infrastructure meets the necessary identity verification and regulatory requirements. Technology advancements far outpace regulatory progress; however, disregarding these rules hinders the technology’s adoption.

In addition, when proofs alone are insufficient, and personal information sharing between the participants of a transaction is essential, relying only on off-chain solutions is advised. One example includes decentralized identifiers and verifiable credentials. Another option is to employ off-chain zero-knowledge proofs, which provide privacy protection and are suitable for off-chain data verification.

Balázs Némethi is the CEO of Veri Labs and a co-founder of kycDAO. He is also the founder of Taqanu, a blockchain-based bank for people without addresses, including refugees. He’s a graduate of the Budapest University of Technology and Economics.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Vitalik Buterin divulges the ‘largest remaining challenge’ for Ethereum

While the concept of stealth addresses appears complex in theory, Buterin previously described it as a “low-tech approach” compared to other Ethereum privacy solutions.

Ethereum co-founder Vitalik Buterin has shared a possible solution to what he describes as the “largest remaining challenge” foEthereum — privacy.

In a blog post on Jan. 20, Buterin acknowledged the need to come up with a privacy solution because by default, all information that goes onto a “public blockchain” is public too.

He then arrived at the concept of “stealth addresses” — which he said can potentially anonymize peer-to-peer transactions, nonfungible token (NFT) transfers, and Ethereum Name Service (ENS) registrations, protecting users. 

In the blog post, Buterin explained how on-chain transactions can be carried out between two parties with anonymity. 

Firstly, a user looking to receive assets will generate and keep a “spending key” that is then used to generate a stealth meta-address.

This address — which can be registered on ENS — is then passed onto the sender who can perform a cryptographic computation on the meta-address to generate a stealth address, which belongs to the receiver. 

The sender can then transfer assets to the receiver’s stealth address in addition to publishing a temporary key to confirm that the stealth address belongs to the receiver. 

The effect of this is that a new stealth address is generated for each new transaction.

Vitalik Buterin’s stick figure diagram of how a stealth address system may work. Source: Vitalik’s website

Buterin noted that a “Diffie-Hellman key exchange” in addition to a “key blinding mechanism” would need to be implemented to ensure that the link between the stealth address and the user’s meta-address can’ be seen publicly.

The Ethereum co-founder added that ZK-SNARKs — a cryptographic-proof technology with built-in privacy features — could transfer funds to pay transaction fees.

However Buterin emphasized that this may lead to problems of its own — at least for the short term — stating “this costs a lot of gas, an extra hundreds of thousands of gas just for a single transfer.”

Related: Crypto privacy is in greater jeopardy than ever before — here’s why

Stealth addresses have long been touted as a solution to address on-chain privacy issues, which have been worked on since as early as 2014. However very few solutions have been brought to market thus far.

It also isn’t the first time Buterin has discussed the concept of stealth addresses in Ethereum.

In August, he dubbed stealth addresses as a “low-tech approach” for anonymously transferring ownership of ERC-721 tokens — otherwise known as NFTs.

The Ethereum co-founder explained that the stealth address concept proposed offers privacy differently to that of the now U.S. Office of Foreign Asset Control (OFAC)-sanctioned Tornado Cash:

”Tornado Cash can hide transfers of mainstream fungible assets such as ETH or major ERC20s […] but it’s very weak at adding privacy to transfers of obscure ERC20s, and it cannot add privacy to NFT transfers at all.”

Buterin offered some advice to Web3 projects that are developing a solution:

“Basic stealth addresses can be implemented fairly quickly today, and could be a significant boost to practical user privacy on Ethereum.”

“They do require some work on the wallet side to support them. That said, it is my view that wallets should start moving toward a more natively multi-address model […] for other privacy-related reasons as well,” he added.

Buterin suggested that stealth addresses may introduce “longer-term usability concerns,” such as social recovery issues. However, he is confident the problems can be properly addressed in time:

“In the longer term, these problems can be solved, but the stealth address ecosystem of the long term is looking like one that would really heavily depend on zero-knowledge proofs,” he explained.

Vitalik Buterin divulges the ‘largest remaining challenge’ in Ethereum

While the concept of stealth addresses appears complex in theory, Buterin previously described it as a “low-tech approach” compared to other Ethereum privacy solutions.

Ethereum co-founder Vitalik Buterin has shared a possible solution to what he describes as the “largest remaining challenge” on Ethereum — privacy.

In a blog post on Jan. 20, Buterin acknowledged the need to come up with a privacy solution because by default, all information that goes onto a “public blockchain” is public too.

He then arrived at the concept of “stealth addresses” — which he said can potentially anonymize peer-to-peer transactions, nonfungible token (NFT) transfers, and Ethereum Name Service (ENS) registrations, protecting users. 

In the blog post, Buterin explained how on-chain transactions can be carried out between two parties with anonymity. 

Firstly, a user looking to receive assets will generate and keep a “spending key” that is then used to generate a stealth meta-address.

This address — which can be registered on ENS — is then passed onto the sender who can perform a cryptographic computation on the meta-address to generate a stealth address, which belongs to the receiver. 

The sender can then transfer assets to the receiver’s stealth address in addition to publishing a temporary key to confirm that the stealth address belongs to the receiver. 

The effect of this is that a new stealth address is generated for each new transaction.

Vitalik Buterin’s stick figure diagram of how a stealth address system may work. Source: Vitalik’s website

Buterin noted that a “Diffie-Hellman key exchange” in addition to a “key blinding mechanism” would need to be implemented to ensure that the link between the stealth address and the user’s meta-address can’ be seen publicly.

The Ethereum co-founder added that ZK-SNARKs — a cryptographic-proof technology with built-in privacy features — could transfer funds to pay transaction fees.

However Buterin emphasized that this may lead to problems of its own — at least for the short term — stating “this costs a lot of gas, an extra hundreds of thousands of gas just for a single transfer.”

Related: Crypto privacy is in greater jeopardy than ever before — here’s why

Stealth addresses have long been touted as a solution to address on-chain privacy issues, which have been worked on since as early as 2014. However very few solutions have been brought to market thus far.

It also isn’t the first time Buterin has discussed the concept of stealth addresses in Ethereum.

In August, he dubbed stealth addresses as a “low-tech approach” for anonymously transferring ownership of ERC-721 tokens — otherwise known as NFTs.

The Ethereum co-founder explained that the stealth address concept proposed offers privacy differently to that of the now U.S. Office of Foreign Asset Control (OFAC)-sanctioned Tornado Cash:

”Tornado Cash can hide transfers of mainstream fungible assets such as ETH or major ERC20s […] but it’s very weak at adding privacy to transfers of obscure ERC20s, and it cannot add privacy to NFT transfers at all.”

Buterin offered some advice to Web3 projects that are developing a solution:

“Basic stealth addresses can be implemented fairly quickly today, and could be a significant boost to practical user privacy on Ethereum.”

“They do require some work on the wallet side to support them. That said, it is my view that wallets should start moving toward a more natively multi-address model […] for other privacy-related reasons as well,” he added.

Buterin suggested that stealth addresses may introduce “longer-term usability concerns,” such as social recovery issues. However, he is confident the problems can be properly addressed in time:

“In the longer term, these problems can be solved, but the stealth address ecosystem of the long term is looking like one that would really heavily depend on zero-knowledge proofs,” he explained.

How does zero-knowledge proof authentication help create a portable digital identity solution?

Zero-knowledge proofs are probabilistic assessments that take efficiency of portable digital identity solutions to the next level.

Web engineers have been working for a long time to determine if there is a way to prove something is true without revealing any data that substantiates the claim. Zero-knowledge proof (ZKP) technology has enabled the deployment of cryptographic algorithms for verifying the veracity of claims regarding the possession of data without unraveling it. These proof mechanisms have led to advanced mechanisms that enhance privacy and security.

Leveraging blockchain deals with problems related to centralization, while the lack of privacy in decentralized applications (DApps) can be balanced with cryptographic ZKP algorithms.

This article provides a primer on zero-knowledge proofs, portable identity, problems in prevailing identity solutions, blockchain-based zero-knowledge proof powered portable identity solutions, trustless authentication and the process of creating password credentials.

What is a zero-knowledge proof?

A zero-knowledge proof is a cryptographic technique that establishes the authenticity of a specific claim. It enables a protocol to demonstrate to a verifier that a claim about certain confidential information is accurate without disclosing any critical information. The technology facilitates interactive as well as non-interactive zero-knowledge-proof applications. 

An interactive proof needs multiple communication mechanisms between the two parties. On the other hand, a non-interactive zero-knowledge proof requires a single exchange of information between participants (prover and verifier). It improves zero-knowledge efficiency by reducing the back-and-forth communication between the prover and the verifier.

A zero-knowledge proof works by a prover showcasing to a verifier that they have an identifying secret without disclosing the secret itself. For instance, a prover might be holding an asymmetric key pair and using the identifying secret as a private key to respond to the statement sent with the public key. This culminates in a situation where the verifier is convinced that the prover has the key without the prover revealing it.

Thanks to zero-knowledge proof technology, a user could demonstrate they are of an appropriate age to get access to a product or service without revealing their age. Or someone could prove they have sufficient income to fulfill criteria without having to share precise information about their bank balance.

Zero-knowledge identity authentication

The need of businesses to manage voluminous amounts of consumer data while ensuring consumers’ privacy and complex regulatory compliance led to a burgeoning need for innovative digital identity solutions. Zero-knowledge proof has helped fructify the concept of a portable digital identity efficiently.

Identity portability refers to the ability of users to generate a single set of digital ID credentials usable across multiple platforms. A digital identity management scheme clubs unique identifiers on a user’s device, relevant legal documents and biometrics such as face ID or fingerprints. 

Understanding how a decentralized identity (DID) wallet is stored on a smartphone will help you get a better grasp. An issuer attaches a public key to verifiable credentials they have issued. Securely held in the wallet, the credentials are passed on to the verifiers. All a verifier needs to do is confirm that the proper issuer cryptographically signed a credential sent by a user.

Problems in prevalent identity solutions

Hard-hitting data breaches, privacy overreach and abysmal authentication have been the nemesis of online applications. This is drastically different from the time of initial web architecture when user identity wasn’t a priority. 

Traditional authentication methods no longer suffice due to our complex and ever-changing security environment. These methods severely restrict users’ control over their identities and risk management, thus compromising access to essential data. Usually, enterprises use different identity services to resolve various identity-related issues.

Stemming data from diverse sources through a string of advanced technologies has made preserving identity-related data a cumbersome task. Gathering multidimensional data while adhering to a vast set of regulations has made it exceedingly complex for businesses to resolve identity-related issues quickly, detect fraud and uncover business opportunities simultaneously.

Zero-knowledge-powered-portable identity solutions

Cross-channel, portable self-sovereign identity solutions enable enterprises to secure customer access and data using a single platform. Such a seamless identity experience reduces the churn of customers. Effortless, secure workstation login helps secure remote work and reduces fraud risks associated with weak passwords.

A blockchain-based solution stores identity within a decentralized ecosystem, enabling one to prove identity when necessary. NuID, for instance, leverages a zero-knowledge proof protocol and distributed ledger technologies to facilitate digital identification for individuals and businesses.

NuID’s ecosystem allows users to own and control their digital identity by using services built upon foundational zero-knowledge authentication solutions. The decentralized nature of the solution results in an inherently portable and user-owned identity platform. They can own, control, manage and permit the usage of identity-related data efficiently.

The solution makes business enterprises “consumers” of these identities and their associated metadata, thus promoting more privacy-centric interactions. Dynamic data ownership benefits both the user and the service provider. It eliminates the need for companies to secure a humongous amount of user data, as they no longer need to hide any sensitive, identifying information.

Trustless authentication

When building a software application, authentication is one of the primary steps. In a rapidly evolving security landscape, where context-specific UX (user experience) needs are steadily expanding, user privacy concerns require more than conventional authentication. Applications require a platform that facilitates adaptation to changing demands of digital identification.

Trustless authentication provides a robust alternative to the model of storing passwords in private databases. NuID Auth API (Application Programming Interface), for instance, rolls out endpoints for creating and verifying user credentials through ZKP technology, facilitating the generation of proofs and credentials in client applications for use cases like user registration and user login.

One can expect an advanced platform to address common authentication and user management pitfalls. Features could include password blacklisting to securely inform users of weak and stolen credentials, modular and accessible authentication UI components, and advanced MFA (multi-factor authentication) functionality.

The process of creating password credentials

The process is somewhat similar to the existing workflow for creating and verifying passwords. One takes user info (name, email, password), posts it to the registration endpoint, and initiates a session. To integrate the registration process, one needs to create a credential on the client side. In place of the password, as done in legacy applications, the verified credential is sent to ZPK-based applications.

Here is the usual process for user registration in a portable identity solution based on zero-knowledge proof:

Zero knowledge proof-based user registration process in portable identity solution

The process has no bearing on the remaining registration flow that might include issuing a session, sending email notifications and more.

The road ahead

As zero-knowledge proof technology progresses in the coming years, vast amounts of data and credentials are expected to be represented on a blockchain by a public identifier that reveals no user data and cannot be backward-solved for the original secret. Adapting portable identity solutions based on zero-knowledge protocols will help avoid the exposure of the ownership of attributes, thus effectively eliminating the associated threats.

Backed by ZKP technology, portable identity solutions have the potential to take data privacy and security to the next level in a wide array of applications, from feeding data into the Internet of Things (IoT) to fraud prevention systems. 

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