Intro to Zero Knowledge Proofs and the importance of Bitcoin Private

In this post, I attempted to break down zero knowledge proofs into simple examples & discuss with you the importance of the bitcoin private project. As always, I recommend doing your own research, forming your own opinions and reaching your own conclusions.

Overview:
With online encryption and cryptography becoming more prominent thanks to the wave of mainstream adoption of blockchain technology, the general public is now starting to become aware of the importance of individual privacy. Individuals can now be in control of their own data and be able to verify transfers of data without the requiring an intermediary to verify the existence & legitimacy of that of data. When people discuss bitcoin, and the ability to transfer money or data anywhere in the world, from any person to any other person, they often assume that this process is anonymous and used by smugglers and drug dealers, it is in fact quite the opposite. All transactions on the bitcoin blockchain are recorded on a public ledger. Bitcoin was designed to be fully open and transparent. So while each individual bitcoin address is not linked to any one person in a registry, and you can hold your private keys off line, all transactions can ultimately be traced backwards, and find a point of origination. This process is known as blockchain analysis and has been used to analyze transactions on the blockchain by governments, law enforcement, but coule also be used by individuals. Etherscan is an example of how one can simply track where a transaction originated from and where it ended up by simply using the transaction ID.

Privacy Coins
This has led to the creation of privacy coins that you see today; Zcash, PIVX, Monero, Dash, & Sumokoin - just to name a few. While these coins are built on different protocols with different privacy tech features, most work by obfuscating (Hiding) information with ring signatures and stealth addresses. Zcash's zk-Snark cryptographic operation is at the bleeding edge of what modern cryptography is trying to achieve.

Zcash, ZCL & the Creation of Bitcoin Private
Zcash was created with a fundamental flaw that many who are deeply involved in the crypto space, vehemently argue against. All blocks that are created and mined for the first four years incur a 20% “tax” which is automatically sent to the founders of the currency. This has come to be known as “the founder’s tax“. Additionally, due to the nature of zk-SNARK technology, it has been theorized that if the founders of the Zcash could potentially make an infinite number of new Zcash tokens without anyone knowing. This is because, at this time, there is no way to know the exact total supply of Zcash tokens.

The situation poses several issues: how do you incentivize the developers to work on this privacy technology without imposing the egregious tax on the miners in order to provide them with proper block rewards. The divisive needs of the different parties make this situation a very tough one to answer. To a certain degree, ZClassic attempts to provide these solutions. Zclassic was created by developer from MIT named Rhett Creighton. Rhett and a community of developers are attempting to combine cryptology with zero knowledge proof's as a way to transfer a store of value without having to compromise their privacy in the process. While I will not get deep into the political nature of this issue, or discuss the monetary aspects of the project, I will break down zero knowledge proofs and their potential impact when combined with modern cryptography.

Zero Knowledge Proofs:

• A zero knowledge proof is a way to prove to you that I know something, without revealing any information about that knowledge itself.

• The two parties involved in this exchange are the prover (the transaction sender) and the verifier (blockchain). The prover wants to convince the verifier that some statement is true, without revealing why it is true (zero knowledge).
Zero knowledge proofs emerged out of interactive proof systems which involves the communication between two parties. In zero knowledge proofs the prover and a verifier engage in some back and forth process in order to reach the conclusion that the statement being made, is indeed true. The issue lies in whether or not the verifier is trustworthy or not.

• In order to achieve this, the verifier needs to prove that the information received is true to the prover. This is in order to conclude that the verifier is indeed who they say they are without them having to reveal any information about their private key in the process. The prover in this scenario encrypts a message using the verifiers public key. They are then able to ask the verifier what the message was, that was sent. If the verifier knows their private key, they can decrypt the message and send back the secret message in order to prove their identity. Any imposter would be unable to decrypt the message without the private key.

• There is some probability that the imposter can get the right message but the chance of this occurring is very low because they would have to guess. If the prover wants even more proof they can simply repeat the process with another message and increase the likelihood that the imposter will guess incorrectly. At this point the prover can conclude that the verifier is the intended person.

This is just one example of the many ways zero knowledge proofs can be applied: Below is an image that should help give you a further example of how the concept can be explained, and how it can be applied.

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Twitter: @CryptoNoShow