{"id":62584,"date":"2023-10-11T17:35:34","date_gmt":"2023-10-11T17:35:34","guid":{"rendered":"http:\/\/egrowonline.com\/?p=62584"},"modified":"2023-10-11T17:35:34","modified_gmt":"2023-10-11T17:35:34","slug":"zero-knowledge-proofs-show-potential-from-voting-to-finance-cointelegraph-magazine","status":"publish","type":"post","link":"http:\/\/egrowonline.com\/?p=62584","title":{"rendered":"Zero-knowledge proofs show potential from voting to finance \u2013 Cointelegraph Magazine"},"content":{"rendered":"


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In a world increasingly anxious<\/a> about privacy and exploitation of one\u2019s personal data by governments, corporations, social media platforms and banks, zero-knowledge proofs may offer some relief.\u00a0<\/strong><\/p>\n

Indeed, this emerging cryptographic protocol could partially remedy two rapidly growing global deficits: privacy and truth.<\/p>\n

ZK-proofs have already found a home within the cryptocurrency and blockchain sector \u2014 enabling scaling protocols<\/a> to make Ethereum transactions faster and cheaper, for example. But this may just be the beginning.\u00a0<\/p>\n

One day, ZK-proofs could help convince your bank that your income is above a certain threshold \u2014 to qualify for a mortgage, for example \u2014 without revealing your actual income. Or prove to the election authorities that you are a resident or citizen without giving them your name, driver\u2019s license or passport.<\/p>\n

ZK-proofs open up a new world of potential applications, including \u201canonymous voting, decentralized games, proving personal information without fully disclosing your personal information, and fighting against fake news by proving the source of the news,\u201d Polygon co-founder Jordi Baylina tells Magazine.<\/p>\n

To this point, some in the cryptographic community already view ZK-proofs as a potential weapon in the looming struggle against false information, including AI-altered documents, images and identities.\u00a0<\/p>\n

\u201cWe may have a technological battle for truth coming up where ZK can play a critical part,\u201d prize-winning<\/a> cryptographer Jens Groth tells Magazine. \u201cThere is this idea of proof-carrying data,\u201d i.e., data that carries within itself<\/em> proofs of correctness including origin and provenance data, \u201cso nirvana would be that all data we get are verified data.\u201d<\/p>\n

In some industry sectors like finance, ZK-proofs may profoundly alter how business is conducted. \u201cWe see this revolutionizing the audit industry,\u201d Proven co-founder and CEO Rich Dewey tells Magazine in connection with ZK-enabled proof-of-solvency protocols, like the one his tech firm has developed. \u201cThe only question is the timeline.\u201d\u00a0<\/p>\n

Requiring fewer resources<\/h2>\n

Even though ZK-proofs<\/a> were first presented back in the 1980s by researchers Shafi Goldwasser, Silvio Micali and Charles Rackoff, only in the past decade have they had their \u201cbig breakthrough,\u201d according to Baylina.<\/p>\n

\u201cNow it\u2019s possible to prove any generic statement.\u201d This statement \u2014 sometimes called a circuit \u2014 \u201ccan be programmed with a specific language and can be anything,\u201d Baylina says.\u00a0<\/p>\n

ZK-proofs are computationally complex, which has arguably slowed their development, but their core intuition seems simple enough. As described<\/a> in a forthcoming paper by the Federal Reserve Bank of St. Louis:\u00a0<\/p>\n

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\u201cBy using a zero-knowledge proof (ZKP), a party can prove to other parties that a computation was executed correctly. There is no need to replicate the computation\u2014only the proof needs to be verified. Ideally, verifying a ZKP needs significantly less resources than re-executing the computation.\u201d<\/p>\n<\/blockquote>\n

What follows are some of the promising ZK-proof use cases on the table today \u2014 beyond the strict confines of the crypto sector \u2014 that may or may not involve the use of blockchains.<\/p>\n

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ZKPs require fewer resources when re-executing a computation. (Federal Reserve Bank of St. Louis)<\/figcaption><\/figure>\n

Verifying digital voting\u00a0<\/h2>\n

Electronic voting has been slow to catch on globally, but if and when it does, the odds are that ZK-proofs will play a prominent part. ZK-proofs are already being used in e-voting systems in trials in a number of Swiss towns and cantons, Dahlia Malkhi, distinguished scientist of Chainlink Labs, tells Magazine.<\/p>\n

\u201cZK-proofs can add verifiability to an online election, allowing anyone to check that the votes were counted correctly,\u201d explains Malkhi, without revealing how individuals <\/em>voted \u2014 a key concern with electronic voting, she says.\u00a0<\/p>\n

Cryptographic electronic voting systems have been around for decades, Malkhi adds, but their adoption has been moderate. On the technical side, one of the challenges has been \u201cthe compromise of end-user devices, which ZK-proofs don\u2019t protect against.\u201d<\/p>\n

There are other obstacles, too, that are beyond ZK-proofs purview or ability to control \u2014 which also may suggest their limitations.\u00a0<\/p>\n

Electronic voting requires a credible \u201cdigital identity\u201d system, i.e., a link to \u201creal world\u201d information that isn\u2019t always easy to secure. (Think of all those voting rolls on aged paper ledgers.) \u201cZK by itself cannot bootstrap e-voting,\u201d Malkhi says.\u00a0<\/p>\n

Cryptographer Groth, like Malkhi, cites the need for some sort of \u201ctrust anchor\u201d to make ZK-proofs impactful in everyday life. \u201cZero-knowledge proofs often need a hook to reality.\u201d\u00a0\u00a0<\/p>\n

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Electronic \u201cballot boxes\u201d like this could benefit from the added security of ZKPs. (Fred Miller)<\/figcaption><\/figure>\n

Maybe one day, thanks to ZK-proofs, someone will be able to prove that they are older than 18 years of age or a United Kingdom citizen without having to pull out a driver\u2019s license or passport, Groth tells Magazine, but \u201cyou cannot prove you\u2019re over 18 out of thin air. You need the trust anchor that establishes your age,\u201d he says, i.e., some authority that verifies your citizenship or birth year, adding:<\/p>\n

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\u201cIn the future, organizations may issue ZK-friendly trust anchors, but right now, it is not common practice, so you have a bit of a chicken-and-egg problem.\u201d<\/p>\n<\/blockquote>\n

Privacy safeguards for CBDCs<\/h2>\n

Today, the world seems awash with central bank digital currency projects. According<\/a> to the Atlantic Council, 130 countries representing 98% of global GDP are now exploring state-issued digital money.\u00a0<\/p>\n

But CBDCs come freighted with privacy questions, and some fear they could be misused by governments to surveil their own populations, for instance.<\/p>\n

That is why high privacy guarantees are \u201cat the core of most CBDC projects today,\u201d Jonas Gross, chairman of the Digital Euro Association, tells Magazine.\u00a0<\/p>\n

ZK-proofs can be part of the solution, he adds, and it is for this reason that \u201cvarious central banks are studying [ZK-proof] applications \u2014 for example, in the U.K., Japan and South Korea.\u201d\u00a0<\/p>\n

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\u201cIf privacy is a top priority, ZK-proofs should be considered,\u201d Remo Nyffenegger, a co-author of the St. Louis Fed paper cited<\/a> above and research assistant at the Center for Innovative Finance at the University of Basel, tells Magazine.\u00a0<\/p>\n

Indeed, the European Central Bank published a regulatory proposal for the digital euro in late June \u201cand states therein that zero-knowledge proofs should be considered in the CBDC tech stack,\u201d he adds.<\/p>\n

Again, there may be limits on what exactly ZK-proofs can do by themselves. \u201cI don\u2019t see using ZK-proofs [alone] as sufficient because ongoing political discussions show that not all CBDC-related data will be obfuscated if ZK-proofs are used,\u201d Gross comments. \u201cHigh privacy also needs to be supported by regulation and educational efforts around the actual degree of privacy of a CBDC.\u201d<\/p>\n

Exposing an altered photo<\/h2>\n

AI apps are now so powerful that distinguishing between machine-generated images or documents and those created by human beings is already problematic. Things will only get worse, but ZK-proofs may offer at least a partial remedy.<\/p>\n

\u201cBlockchain tech and ZK-proofs could be used as built-in safeguards in these systems to verify the origin, authenticity, and ownership of AI-generated files and manage some of the risks associated with AI-generated content,\u201d says Malkhi, while Groth adds:<\/p>\n

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\u201cThere is interesting new research showing applications of ZK-proofs to demonstrate, for example, you\u2019ve not altered a photo too much \u2014 i.e., combating fake news.\u201d<\/p>\n<\/blockquote>\n

High-end cameras that digitally sign<\/a> photos along with metadata like location and timestamp are already on the market and can establish authenticity, continues Malkhi. The current problem is that these digital files are often enormous \u2014 much too large to post on a news service\u2019s website, for instance.\u00a0<\/p>\n

But with ZK-proofs, their file size can be substantially reduced, making them practical to use online while preserving critical verification elements. \u201cIt could prove that the recording or image has not been altered, maybe [including] even the date, without revealing identity or location or whatever,\u201d adds Baylina.\u00a0<\/p>\n

Proof-of-solvency with ZK-proofs?<\/h2>\n

Many believe that finance will be the first major business sector to be impacted by ZK-proofs. Indeed, 41% of respondents in Mina Foundation\u2019s \u201cState of Zero-knowledge Report 2022\u201d agreed that finance was the industry \u201cmost in need<\/a> of ZKPs,\u201d far ahead of healthcare (12%), social media (5%) and e-commerce (3%).\u00a0\u00a0\u00a0<\/p>\n

In March, Mexican cryptocurrency exchange Bitso announced a partnership with tech firm Proven to implement a \u201cproof of solvency\u201d solution that relies on ZK-proofs. This protocol will soon enable investors, regulators and others to know whether the exchange is solvent \u2014 i.e., its obligations are less than its assets \u2014 based on daily reports.\u00a0<\/p>\n

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One of the more ingenious aspects of Proven\u2019s protocol is that it involves the exchange\u2019s customers in the process of keeping the exchange honest. It\u2019s a sort of crowd-sourcing version of auditing.<\/p>\n

Co-founders Dewey and Agustin Lebron tell Magazine that every day, an exchange (e.g., Bitso) publishes a cryptographic proof-of-solvency attestation. And when it does, each individual client\/user of the exchange is issued a \u201creceipt\u201d that reflects that individual\u2019s unique holdings. Millions of digital receipts might be issued on a daily basis.\u00a0<\/p>\n

What if one day a customer doesn\u2019t receive a daily receipt, or it\u2019s wrong? That user might take to Twitter or some other social media venue and complain or ask questions. Have others experienced something similar? A thread might grow.<\/p>\n

This protocol relies on the law of big numbers. Bitso, for instance, has some five million users, and the presumption is that a critical mass of complainants might surface quickly, collectively waving a red flag that might prompt further investigation.\u00a0<\/p>\n

This ZK-proofs-based protocol has another advantage, too, according<\/a> to Bitso. It provides \u201ca proof-of-solvency that can be confirmed without revealing all of that information to a third party. All an auditor needs to do is run the zk-SNARK protocol to come to the conclusion that the proof is true.\u201d\u00a0<\/p>\n

According to Groth, the use of ZK-proofs to demonstrate financial solvency \u201cgained more traction after the FTX implosion.\u201d Indeed, if such a protocol had been available last year, the Bahamas-based exchange\u2019s meltdown might have been avoided, some say \u2014 or at least its wrongdoing would have come to light sooner.\u00a0<\/p>\n

Interestingly, FTX Japan, now rebranded as Liquid Japan, has been using Proven\u2019s proof-of-solvency technology since its recent re-launch in early September. \u201cWith the adoption of Proof of Solvency, we can now prove it [solvency] in a cryptographic manner that is verifiable by 3rd parties,\u201d notes<\/a> the company, adding:<\/p>\n

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\u201cWe are starting to work on increasing the frequency of publishing the Proof of Solvency to 1x day by the end of 2023.\u201d<\/p>\n<\/blockquote>\n

\"\"\"\"
A snapshot of Liquid\u2019s proof-of-solvency widget. (Liquid)<\/figcaption><\/figure>\n

\u201cImmutable\u201d tracking of goods<\/h2>\n

\u201cZK-proofs can become very relevant in the context of digital identities, whether they are issued by the government or private entities,\u201d adds Nyffenegger. They could prove that you are not included on some government sanctions list without revealing who you are, for instance.<\/p>\n

ZK-proofs potential use in supply chains is also frequently cited. But the difficulty here, as with e-voting, is that this requires connecting to a trustworthy \u201creal-world information\u201d source, which can authenticate the date an order was shipped from the factory, for instance.\u00a0<\/p>\n

\u201cZK-proof-based supply chain tracking systems haven\u2019t been battle-tested long enough in live environments,\u201d notes Malkhi, adding that that could soon change:<\/p>\n

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\u201cThe potential of ZK-proofs here is vast \u2014 helping to improve transparency and reduce the potential impact of fraud by enabling the immutable, real-time tracking of goods.\u201d<\/p>\n<\/blockquote>\n

It should be added that while blockchains provide some of ZK-proof\u2019s first exciting use cases, the technology does not require blockchain technology to work \u2014 but they are surely helpful.<\/p>\n

\u201cThey are just a very suitable tool for blockchains because they provide proofs of correct computation \u2014 which aligns well with the need for verifiability on blockchains \u2014 while hiding as much information as possible,\u201d Johannes Sedlmeir,\u00a0 a researcher at the University of Luxembourg\u2019s Interdisciplinary Centre for Security, Reliability and Trust, tells Magazine.<\/p>\n

With a blockchain platform, a verifier can check if a certain \u201chash\u201d appears somewhere on the blockchain \u201cand hence binds me as a prover,\u201d he adds.\u00a0<\/p>\n

Blockchains aren\u2019t required for Proven\u2019s proof-of-solvency protocol to work, Lebron tells Magazine, though it\u2019s always useful to have validators on-chain. It appears to be more of a \u201clike to have\u201d than a \u201cneed to have\u201d circumstance.\u00a0<\/p>\n

Obstacles remain<\/h2>\n

What obstacles still need to be overcome before ZK-proofs become commonplace? Malkhi has already cited the challenges with \u201cbridging to the real world,\u201d and this would well prove the biggest hurdle to surmount before ZK technology becomes mainstream, in her view.\u00a0<\/p>\n

However, other barriers remain that might require laws and regulations to overcome. Will ZK claims be accepted in court, for instance?\u00a0<\/p>\n

Scaling also remains a challenge in many use cases given that there is, at present, no \u201cstandardized way to \u2018program,\u2019\u201d says Malkhi, making it difficult for developers to integrate proofs into their apps.<\/p>\n

To this last point, Proven\u2019s protocol with Bitso requires some five million unique \u201creceipts\u201d to be issued monthly (though soon daily) to Bitso users, but Proven says this isn\u2019t an issue. \u201cWe figured out how to scale,\u201d co-founder Lebron says.<\/p>\n

Complexity is another potential sticking point. \u201cFor small- to medium-size assertions, we already have a good ZK system,\u201d cryptographer Groth tells Magazine. \u201cFor large assertions, we still need to improve efficiency.\u201d ZK-proofs like SNARKs can be cheap to verify, \u201cbut the prover pays a large performance overhead compared to native computation,\u201d he adds.<\/p>\n

Becoming \u201cmagnitudes cheaper\u201d<\/h2>\n

The user experience needs to improve, too. \u201cUsing a technology secured by ZK-proofs for an everyday activity like buying groceries should be so seamless that the user doesn\u2019t even know,\u201d says Baylina.\u00a0<\/p>\n

\u201cThe other thing we need is time,\u201d Baylina says. Protocols like Polygon\u2019s zk-Ethereum Virtual Machine are still new but are becoming more usable all the time. \u201cAs Polygon zkEVM matures, over the next year, we anticipate it will become orders of magnitudes cheaper.\u201d<\/p>\n

Given these potential roadblocks, how long might it take before the technology becomes commonplace?\u00a0<\/p>\n

\u201cI believe five years is too short of a time frame owing to the current TRLs [technology readiness levels] of ZK-proofs,\u201d says Sedlmeir, referencing the finance sector specifically. While ZK-proofs have matured rapidly in recent years, they \u201care still complex to implement and prover performance is still a significant bottleneck.\u201d\u00a0<\/p>\n

There might be a transition period as ZK-proof works in tandem with traditional protocols, as in financial auditing. Proven\u2019s Dewey envisioned working \u201chand in glove\u201d with traditional Big Four audit firms for a time.\u00a0<\/p>\n

Vast potential<\/h2>\n

In sum, ZK-proofs still face challenges. They can\u2019t work in isolation. They still need to be attached to a truth source or \u201coracle.\u201d Doubts about computational complexity, usability and scalability remain as well.\u00a0<\/p>\n

But if these hurdles are surmounted, ZK-proofs could offer a 21st-century solution to not only the \u201cfake news\u201d challenge but also the privacy quandary as with CBDCs, providing just enough anonymity for users to comfortably use state-issued digital money but enough accountability so governments can be assured fraudsters or money launderers aren\u2019t infiltrating their networks.\u00a0<\/p>\n

As the technology and the underlying infrastructure improve, summarizes Malkhi, \u201cZK-proofs have vast potential to enable an internet where the majority of contracts are underpinned by cryptographic guarantees.\u201d<\/p>\n

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Andrew Singer<\/h2>\n

Andrew Singer has been a regular contributor to Cointelegraph since October 2019. He has been a professional business writer and editor for more than 30 years, including 25 years as founder and editor-in-chief of Ethikos: The Journal of Practical Business Ethics, which still publishes. In 2017 he obtained a Master’s degree in statistics from Columbia University \u2014 which spurred his interest in AI, machine learning, and blockchain technology. He currently lives in Peekskill, New York and likes to hike in the Hudson Highlands.<\/p>\n<\/p><\/div><\/div>\n

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In a world increasingly anxious about privacy and exploitation of one\u2019s personal data by governments, corporations, social media platforms and banks, zero-knowledge proofs may offer some relief.\u00a0 Indeed, this emerging cryptographic protocol could partially remedy two rapidly growing global deficits: privacy and truth. ZK-proofs have already found a home within the cryptocurrency and blockchain sector […]<\/p>\n","protected":false},"author":1,"featured_media":62585,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[40],"tags":[68,28,69,1270,14322,2554,7535,11761],"class_list":["post-62584","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-market-analysis","tag-cointelegraph","tag-finance","tag-magazine","tag-potential","tag-proofs","tag-show","tag-voting","tag-zeroknowledge"],"jetpack_publicize_connections":[],"jetpack_sharing_enabled":true,"jetpack_featured_media_url":"http:\/\/egrowonline.com\/wp-content\/uploads\/2023\/10\/Voatz-FBI-student-blockchain-voting-app-scaled.jpg","_links":{"self":[{"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/posts\/62584","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=62584"}],"version-history":[{"count":1,"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/posts\/62584\/revisions"}],"predecessor-version":[{"id":62586,"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/posts\/62584\/revisions\/62586"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=\/wp\/v2\/media\/62585"}],"wp:attachment":[{"href":"http:\/\/egrowonline.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=62584"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=62584"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/egrowonline.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=62584"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}