What is Zero-Knowledge technology?

Token Takeaways ✍

✨ Zero-Knowledge technology is a breakthrough in cryptography that allows someone to confirm knowledge of a piece of information without revealing the information itself. 

✨ As Zero-Knowledge has many use cases in blockchain and tokens, several projects are leveraging the technology.

✨ As the token ecosystem grows, Zero-Knowledge technology is likely to have a profound impact on the way we use the Internet. 

The token ecosystem shows huge promise, but it faces some challenges. Token enthusiasts hope that the technology will one day hit 1 billion users, but the community will need to address blockchain’s scalability problem to achieve mass adoption. Many projects are working on solutions to help blockchains scale, most notably in the Layer 2 ecosystem on top of Ethereum. Arguably the most important type of Layer 2 solution is ZK-Rollups, which use Zero-Knowledge technology. As many promising new solutions are emerging and Zero-Knowledge is expected to impact the future of tokens and the Internet at large, we explained the technology in this guide. Learn more below. 

Zero-Knowledge technology explained 🔐

Zero-Knowledge technology is a method for revealing knowledge of a piece of information without revealing what the information is. The concept is popularly referred to as Zero-Knowledge Proof or simply ZK technology. 

The colourblind friend and two balls case study is popularly used to explain Zero-Knowledge Proofs.

Let’s say Alice has a green ball and a red ball. But to her colourblind friend Bob, the two balls look identical. 

Alice wants to prove to Bob that the balls are different colours. To do this, she can ask him to place the balls behind his back and choose one to show to Alice. Bob can then place the ball behind his back and repeat the process several times over.

As Alice can see that the ball is red or green, she knows whether Bob switched the balls or not when he put them behind his back. After several rounds, it should become clear to Bob that the balls are different colours because Alice can confirm whether he switched the ball or not every time.

This example is Zero-Knowledge because Alice did not need to tell Bob whether the ball was red or green—but she could still verify whether the information (i.e. the ball switch) was true or not and prove it to Bob. 

Like Bitcoin and other cryptocurrencies, Zero-Knowledge Proofs are a breakthrough in the cryptography field. And similar to the rest of the token ecosystem, they could have many use cases that positively impact the world. 

Zero-Knowledge technology is powerful because it gives people a way to keep important information secret. Today, many teams are using Zero-Knowledge Proofs to bring privacy and scalability improvements to blockchain networks. 

Zero-Knowledge Rollups explained ⛓

Arguably the most notable solutions using Zero-Knowledge Proofs in the token space today are Zero-Knowledge Rollups, otherwise known as ZK-Rollups. 

Found in the Ethereum ecosystem, ZK-Rollups are a type of Layer 2 scaling solution developed to help the top smart contract network scale. 

Token tips: In the token space, scalability refers to a network’s ability to support high transaction volumes and speeds without sacrificing decentralisation or security. Scaling remains one of the space’s biggest challenges 💡

Many of Ethereum’s leading Layer 2 solutions use ZK-Rollups to help the network scale (Source: L2Beat)

Scaling is key to Ethereum’s future. The network aims to onboard many more users in the future. But while Ethereum wants to grow, congestion issues and transaction fee surges have become a problem.

ZK-Rollups help Ethereum scale by carrying data off the main chain onto a new network. Subsequently, they can process many transactions in batches and post a minimal amount of data to Ethereum. This reduces throughput on the network and allows for higher transaction speeds and lower costs. 

Many leading token projects, including StarkNet and Polygon, are developing their own ZK-Rollups today. 

The rise of zkEVM ⚡

As projects have made progress in the Zero-Knowledge space, zkEVM solutions have emerged. 

zkEVM technology is seen as the Holy Grail of Ethereum scaling. zkEVM stands for “Zero-Knowledge Ethereum Virtual Machine,” and it refers to solutions that use Zero-Knowledge technology while offering full compatibility with Ethereum and other networks.

zkEVM solutions can host applications like those running on Ethereum, offering greater scalability. They essentially offer Ethereum functionality in rollup form, allowing for higher speeds and lower costs. In March 2023, zkSync and Polygon both launched their own zkEVM solutions. Other projects building zkEVM networks to scale Ethereum include Scroll and Loopring. 

Why ZK technology will be a game-changer 💯

Zero-Knowledge technology marks a step forward for the token space. It could bring huge scaling benefits, potentially allowing for thousands of low-cost transactions per second on networks like Ethereum. This could be key to achieving mass token adoption. 

However, we’ve barely scratched the surface of what Zero-Knowledge Proofs could enable. Ethereum creator Vitalik Buterin has predicted that the technology will be as important as blockchain in the Internet’s future. 

Ethereum creator Vitalik Buterin has long argued that Zero-Knowledge technology will prove to be hugely disruptive. Specifically, he has pointed to its use in Layer 2 scaling solutions and the decentralised Internet as a whole (Photo: David Paul Morris/Bloomberg via Getty Images)

Zero-Knowledge technology will be used to help blockchain networks scale. Additionally, other applications include verifying identities without revealing sensitive information, verifiable voting, and proof of income or residence. But as the space evolves, it’s likely that more use cases will emerge and the technology will transform the way we use the Internet forever. 

The Zero-Knowledge, 100% Innovation Collection 💫

As Zero-Knowledge technology is set to have a big impact on the token ecosystem, we curated a Collection featuring the foremost projects leveraging the technology today. 

Zero-Knowledge, 100% Innovation features key Ethereum Layer 2 projects like StarkNet, Loopring, dYdX, and Polygon. Additionally, it highlights other projects like Dusk Network, Mina Protocol, and Syscoin. 

Discover more 👀

While the Zero-Knowledge space is constantly evolving, we hope that our guide offers a helpful introduction to the technology. In conclusion, the innovation is likely to change the future of tokens forever, so it’s a good idea to get up to speed on it today. To learn more, head to the Zero-Knowledge, 100% Innovation Collection in the token.com app. 

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Please note: Investing in cryptoassets is risky. Due to the volatile nature of the cryptocurrency market, investors run the risk of losing their funds when they make an investment. Returns from cryptoasset investing are not guaranteed, therefore users should always be aware of the risks.