Almost all cryptocurrencies, excluding stablecoins, operate on ‘trustless systems’. This means that if you want to send crypto to someone, you can send it directly to them, without needing to ‘trust’ a centralized manager to execute or validate your transaction.
In most cases, your transactions can be verified through an anonymous, but public ledger of all transactions on the network.
When this technology first came out, it offered a revolutionary new level of privacy. You could send a large sum of money across the globe without it being recorded by banks or reported to government authorities.
Today, however, the privacy gained by anonymous transfers is largely gone from traditional cryptocurrencies. A new industry has risen, called chain analysis, which uses data collection to analyze blockchain transactions and link them to the individuals or entities behind the transactions.
Speaking with representatives from some prominent chain analysis companies last year, I learned that nearly all crypto activity is trackable.
That said, there is a type of cryptography that enables trustless transactions, without using a public ledger that cannot be monitored by chain analysis companies.
This is called zero-knowledge.
This week, I had the pleasure of interviewing Maurizio Binello, the VP of Sales Engineering for Horizen Labs, to talk about this exciting new technology.
Read on in today’s interview to learn how zero-knowledge works and what it means for the future of crypto.
In layman’s terms, what is zero-knowledge?
In cryptography, they call “zero-knowledge” a method by which one can prove that a statement is true, without disclosing any information other than the truthfulness of that statement.
This is a hard concept to understand intuitively because in our day-to-day experience it’s difficult to prove something without showing the data behind it.
If I want to prove I have at least $100 in my wallet, I don’t have many ways to do that without showing you my wallet… But with “zero-knowledge” I can!
Without showing what’s in the wallet, I can create a cryptographic proof, that is probabilistic but fully reliable.
What makes zero-knowledge so exciting in your opinion? Why should the average person care about this technology?
Actually, what is truly exciting is how much research and development is happening today in the field of computational integrity.
These are tools that offer cryptographic proof that a defined computation (e.g. a computer program) had been indeed run, and run properly. This area of research is booming both from a theoretical and a practical point of view, with papers and code of new proving systems published each month: Sonic, SuperSonic, PLONK, Halo, Marlin, Fractal… to name just a few recent ones.
“Zero-knowledge” is an extra feature that these systems can include: they are “zero-knowledge” if they prove the correct running of a defined computation without revealing the data that was used for that computation.
This “computational integrity” technology is extremely powerful, and it’s the element that will make it possible to map most kinds of real-world applications on a blockchain architecture.
We all love the blockchain as it’s truly “democratic”. We don’t have to trust a third party to certify what’s the current status and how the status evolved over time.
Unfortunately, often we can’t use this wonderful approach because of its fully transparent nature. All the information is public, and that is not acceptable for many applications.
Now, the combination of zero-knowledge computational integrity proving systems (“zero-knowledge”) with the blockchain architecture is going to bring the perfect combination of the best of the two words: public verifiability while respecting privacy.
This is going to change the world!
How do you expect zero-knowledge to be used in the years to come?
I see an amazing future for this technology, considering the increasing privacy problem posed by the general, broad IT progress.
On one hand, as a society, we want to be efficient and secure. That requires to have access to as much data as possible and be as transparent as possible about the data itself and how it gets processed.
At the same time, Orwell’s nightmare has never looked so real and close. Every single transaction that we make can be monitored and recorded by the authorities.
“Zero-knowledge” technology will give us a way to bridge these two requirements in an endless list of use cases.
From data processing of health data to all kinds of potential futuristic scenarios. Just imagine if there were a way to publicly make sure that government agencies stick to their approved budgets, without them having to disclose classified information.
This is just one example of the possibilities. The list is endless!
What, if anything, is unique about Horizen’s use of zero-knowledge?
We now want to evolve that concept, by offering with our sidechain system a broad application to data privacy.
Horizen’s Chief Architect, Alberto Garoffolo, has been designing a new, amazing protocol that is based on “zero-knowledge” technology.
Unfortunately, the details are still confidential, so I can’t share them with you yet. But I can tell you that it’s going to be revolutionary. I can’t wait to see it in production!
Do you think that regulators will seek to control zero-knowledge in the future? If so, how?
As “zero-knowledge” is a cryptographic tool, I don’t think that it will be affected by political decisions.
What we know for sure is that, as an encryption technique, there will always be attempts to break it. So a lot of effort will be needed to make it stronger and more robust.
That said, when it comes to the use of technology, there is always a never-ending contest between privacy and security.
Depending on how the authorities draw these boundaries, this will determine the limits and opportunities for the use of zero-knowledge.
If you want to learn more about zero-knowledge, be sure to check out Maurizio’s Zero Knowledge blog.