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From Bitcoin Standard To Zero-Knowledge Proofs - Decentralization 2.0

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Warning: this article intends to be a long reading. You may skip parts you have already known.


If you want to summarize cryptocurrency decades in a short sentence, it would be like this, “the last decade was to make Bitcoin standard to become a cryptocurrency standard”. More specifically, the Bitcoin standard is a blockchain standard for peer-to-peer payment systems that runs without third parties involved. Decentralization is evolving from proven without a third party to move into anonymity blockchain.  


How Bitcoin standard works

Bitcoin standard contains a public key (your wallet address), a private key (to access and recover your wallet), and a blockchain (a public ledger to show transactions). When one tries to transfer funds from one account to another account, you need your wallet and other’s wallet address. Then you hit send from your wallet address with sufficient funds you want to transfer and other’s wallet address to receive funds. You then go to blockchain to make sure the transaction was completed and processed by miners.


How Bitcoin transactions actually work in the background 

You need your private key to access your account and public key as your sending address along with the one’s address or public key you send your funds to. When you hit the sent button, you use your private key to sign your Bitcoin and miners start working to verify your amount of funds sent along with all previous transactions related to your funds. after repetitive confirmations of transactions, it then will broadcast successfully transfer funds to one that you want to send.


Security concerns 

As far as the transaction goes, the process is secure. As far as the information goes, there is too much information sharing during the process. One may use such revealing information to find clues on what transactions are about and what amount transactions are.


Digital footprint 

Bitcoin is not anonymous because the blockchain is to reveal transactions to the public and announce such transactions for everyone who participated in the process. The downside of such a public display is your identification can be traced and linked through digital forensic techniques.


Zero-Knowledge Proofs (ZKPs)

It is a method to indirectly prove that you know a secret without ever revealing the secret to anyone else. Or you will not need to reveal your identity through the transaction that makes you anonymously.


Provers and verifiers 

In the Bitcoin standard, you only got a miner as a verifier. In ZKPs, provers are those who must prove they know the truth and verifiers are those who verify the provers tell truth.


How to judge if provers tell the truth

There are three criteria: completeness, soundness, and zero knowledge-ness.


Completeness: provers know what they say they know


Soundness: provers’ information is true 


Zero-knowledge-ness: reveal nothing else to verifiers 


Games with two parties to guess 

ZKPs form a game between two parties to guess each other without revealing anyone of their secret. Similar to playing guess game on poker. Provers have a deck of cards and without revealing his card, he shows a method to find his card correctly. Verifiers then will watch each time provers show the process to find his card without revealing his card. The more outcomes of the same result, the better chance verifiers agree with the provers method and both parties do not know their card information.


Interactive vs. non-interactive game 

For the interactive games, provers in charge offer a solution to prove to the verifier the method is correct and informs is true without revealing true information. For the non-interactive games, verifiers offer a random challenge for provers to pick and solve.


How ZKPs works in the crypto 

Zcash uses zk-SNARKs or “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge” to operate its network consensus to run its blockchain. It is verifiers in charge who provide challenges for provers to prove he knows the truth without revealing the truth. With an additional layer of the verification process, users’ information will be more secure without ever possible to reveal in the public.


Downside of ZKPs

One downside of the highest risk but with the lowest chance is if the originator of the transaction forgets about the source passcode which is to activate the prover’s method to prove the truth. Then the entire transaction may lose forever. There are some other disadvantages of ZKPs such as lengthy process time, imperfect information sharing, and inflexibility.


Lengthy process time: ZKPs require provers and verifiers to communicate with each other to verify both pieces of knowledge of the truth. It takes a while for processing such communication.


Imperfect information: there is a chance the communication between provers and verifiers got destroyed or changed 


Inflexibility: ZKPs requires a numerical value of the secret information and it needs to be translated as always.


What does ZKPs achieve

ZKPs eliminate the need for a password or ever need to reveal secret information between the communication from two parties. It helps to achieve anonymity and increase the security benefits.


ZKPs is regulation resistant

From crypto exchange platforms to Defi, regulations require KYC Orr know your customer’s process to identify who is using your financial services. ZKPs eliminates the needs of KYC and protect customers from the need to reveal their true identities.


ZKPs authentication

ZKPs authentication can protect customers from data collections and it eliminates the need for passwords which further improve users’ security without possibly leaking their information and being hacked.


ZKPs improve crypto ecosystems

The Crypto ecosystem can benefit from ZKPs. From Defi, NFTs, Metaverse to DAO, every aspect of crypto can implement ZKPs to bring up users’ security without possibly revealing their information for hackers to obtain. 


In conclusion

Decentralization 2.0 is focused on the anonymity aspect of crypto security and helps crypto further strengthen its trust in users.


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