This can help to preserve user privacy by verifying personal information to a third party. Zk-proofs can also build zk-rollups, which bundle multiple transactions to process them off-chain as a single transaction to increase efficiency and scalability.
Karel Kubat, Founder of Union Labs, explained to Techopedia how zk-proofs work and how they can help increase the security of blockchain bridges. Union Labs recently raised $4 million in seed financing to develop a cross-chain bridge using zk-proofs.
Q: First of all, let’s start with the basics: how does zk-proof technology work?
A: At a very high level, zk-proof technology enables one party to prove to another that a statement is true without needing to disclose any additional information to anyone.
The only information that is shared is the confirmation that the original statement is true. In other words, one party can trust the other party’s claim is valid while preserving the latter’s privacy.
For example, an individual submitting an application to rent an apartment could prove to the landlord that they meet the salary requirements in the lease agreement without disclosing their actual annual salary or sharing recent pay stubs.
The way zk-proofs work, technically speaking, is thanks to arithmetization, a process by which that initial statement is converted into mathematical functions. The statement can then generate a circuit in which the data is randomly verified through different proving backends.
This process then generates a cryptographic proof of execution, showing that the initial information is true and, as a bonus, is cheap to verify.
Q: How can zk-proofs enhance security while preserving user privacy?
A: Blockchain technology has traditionally derived its security by executing the same code on a thousand machines. That decentralization across so many networks is what has enabled it to achieve a greater degree of security than traditional Web2 models.
Zero-knowledge improves on that by executing on a single machine — which can be the user’s machine — while continuing to maintain decentralization. Effectively, we obtain security greater than the economic security of all staked assets while reducing the sharing of data and computation to a single machine (hence increasing privacy). To verify the computation performed by the single entity, we do not need to share the data they operated on.
A Bridge Between Blockchains
Q: How can zk-proofs help to secure blockchain bridges, especially considering their susceptibility to hacking attempts?
A: To begin with, it’s important to understand why blockchain bridges are susceptible to hacks. Blockchain bridges transfer information, such as a transaction or a message, from one chain to another. They work by locking up the assets on the initial chain, after which they are burned, and unlocking them on the second chain, where they are minted. In between the locking and unlocking processes, the funds sit in the bridge, which become profitable targets for hackers.
Traditional blockchain bridges use multisig wallets to hold cryptocurrency as it is transferred from one chain to another. Multisig wallets require multiple validator signatures for transactions to be approved.
Validators provide their signatures using their private keys. So, if a hacker were to compromise those private keys to provide the required number of signatures for a given transaction to occur, they could effectively approve a withdrawal of all the funds being held in the bridge.
This has occurred time and time again; because multisig and private key information is hosted on automated systems, hackers have been able to identify who holds the multisig keys and take control of them during hacking attempts.
With zk-bridges, there are no multisig wallets, and therefore private keys, involved at all, removing the ability for hackers to compromise them and steal funds. Furthermore, sensitive key information does not go onto the server because zk-proofs suffice to confirm that funds have been sent to or deposited on another chain.
Therefore, there is no information available on the bridge for hackers to access, limiting their ability to steal funds. In essence, zk-bridges turn Layer 1 blockchains into zk-powered Layer 2s, meaning the former follows the same settlement mechanism as the latter, enhancing security.
The Advantages of ZK-Proof
Q: What specific advantages does zk-proof technology offer in comparison to other security measures?
A: Zk-proof technology has all the characteristics that improve products: it’s cheaper, more secure, and faster than its counterparts.
The multisig structure used by traditional blockchain bridges creates a centralized point of failure that hackers can target.
Because this model relies on the participation of validators to sign transaction requests, the number of validators tends to be rather small, in turn reducing the number of keys that need to be compromised for a hack to occur.
This becomes even more dangerous when a single entity controls most of the signatures, creating an even more centralized structure, as was the case with the Ronin hack.
READ MORE: 10 Biggest Crypto Hacks of All Time
By removing the need for multisig wallets, zk-proof technology maintains independence from centralized actors. Zk-bridges essentially run on their own, meaning that even if the project that created them were to disappear, the bridges themselves would continue to function as independent entities.
No central authority has control over the bridges and the information they transfer across chains.
More broadly, zk-proof technology has an important real-world value proposition. At the individual level, it can enable people to prove their identity or financial statements without needing to disclose sensitive information to their interlocutor.
In a world in which people are victims of identity theft or risk having sensitive bank account data stolen, zk-proof technology firmly holds its place as a much-needed tool.
This extends beyond individuals to financial institutions and businesses involved in major financial transactions and may need to prove criteria such as creditworthiness.
They no longer need to worry about private data becoming accessible to other parties.
Q: How does zk-proof technology address concerns about scalability and efficiency?
A: Zk-proof technology allows for vertical scalability without giving up decentralization, meaning transactions can occur more efficiently and cheaply without sacrificing security.
Zk-proofs enable token transfers to be bundled into a single transaction, which can then be verified rather than needing to verify each token transfer as its own transaction. This reduces costs and is much more efficient. The same way it scales privacy, it scales throughput.
Q: How can blockchain leaders prepare for the continuing increase in zk-proof adoption?
A: Given zk-proofs require deep technological expertise and knowledge and that the space is overall very academic, the barrier to entry remains high. The best way for leaders to prepare for adoption is to create partnerships and collaborate with leading zk projects, who can best advise them on implementation strategies and teach them about the tech.
READ MORE: What Institutions Need from Cryptocurrency
For leaders in the zk space, education and tooling are key. We need to make zk-tech more accessible — both to understand and to develop — so that it is further implemented into existing and future projects. Providing developers with new tooling to seamlessly code with zk-proof technology and resources to better understand how it works will play a critical role in doing so.
About Karel Kubat
Karel Kubat is the Founder of Union, the first fully trustless bridge powered by zero-knowledge technology. Prior to Union, Karel was the CTO of Composable Finance, a company he grew to a $450 million valuation.
Drawing from his deep technological expertise and his background in Systems Engineering, Karel developed the IBC Protocol on Substrate (Polkadot) and is now committed to bringing interoperability, security, and trustlessness to Web3––and the world–through his work at Union.
Karel Kubat’s Twitter