Ethereum's Magic Bullet: Zero-Knowledge Proofs
Alex Shipp writes that zero-knowledge proofs accelerate Ethereum innovation.
Zero knowledge proofs (zk-proofs) are propelling innovation in decentralized ecosystems this year.
Shari Goldwassser, Silvio Micali, and Charles Rackoff first proposed Zk-proofs in 1985. Ethereum developers, system architects, and researchers have spent the last three years developing solutions and workarounds. Their goal is to improve blockchain's scalability and privacy.
Ethereum's sharpest minds have converged on zero knowledge protocols and their diverse implementations to develop the next turing-complete blockchain architecture.
Throughput
A zk-proof is a way to prove a statement is true without providing any more information, including the statement's content. Though more immediately applicable in privacy-centric scenarios — most famously in the 2016 launch of Zcash, a privacy coin that uses zks to shield transactions — zk-proofs have risen to prominence in Ethereum's search for a scalability solution that can open its DeFi and NFT applications to the mass market.
According to the Satoshi whitepaper, blockchain was created to sidestep authority by creating a censorship-resistant, decentralized system. Decentralization is an architectural marvel, but it has drawbacks. In decentralized systems, equipment, software, and humans exchange, store, and validate information. They're high-knowledge systems.
Knowledge complexity detracts from network performance, slowing transaction times and increasing user fees.
Since the Cryptokitties fiasco of 2017, Ethereum has been the poster-child of blockchain's scalability challenge. Ethereum's knowledge complexity restricts its transaction throughput at 10 per second, 12 on a good day.
Since the Cryptokitties fiasco of 2017, Ethereum has been the poster-child of blockchain's scalability challenge.
Developer teams across the ecosystem created preliminary solutions. State Channels required user IDs and up-front capital locks and were not EVM-compatible. Plasma, a network of inconvenient Child-Chains that lacked EVM-compatibility; Sidechains, which ran separately from the Ethereum mainchain; and Sharding, a consensus modification whose attributes and delivery dates wavered and morphed like failed campaign promises.
Zks remained in the picture as Zk-Rollups, a mechanism that uses zkSNARK technology to consolidate off-chain transactions via Merkle Trees and publish them to the Ethereum mainchain with a single transaction — a highly efficient model that conducted computation off-chain and used the mainchain exclusively for data storage. Zk-Rollups, the best technical option, were not EVM-compatible and could only be used as payment channels. DeFi apps must stay on-chain until roll-ups can execute smart contracts.
Rollup optimism
Optimistic Rollups is an EVM-compatible Rollup Chain ready for one-click dApp deployments without a single zk-proof. Optimism's Rollup relied on Fraud Proofs to post bundled transactions on-chain, necessitating users to accept one-week Dispute Time Delays (DTDs) for mainchain withdrawals. Optimism was the best online composability option.
Matter Labs just released zkSync v2, an EVM-compatible Zk-Rollup with computationally sound Validity Proofs and concise DTDs. zkSync's sub-ten-minute mainchain withdrawals are now superior to Optimism, whose OVM still uses lengthy DTDs to confirm withdrawal transactions.
As developer resources continue to move toward zero knowledge, the fact becomes clear: zk-proofs were developed for systems with high knowledge complexity and are best suited to handle many computational challenges facing blockchain ecosystems and their paths to adoption.
Privacy Comes Full-Circle
Ethereum has become the blockchain innovation centre with DeFi. DeFi applications require state saving and Ethereum's Turing-completeness and Account-based transaction architecture. Privacy-centric applications function on blockchains using UTXO transaction models, where wallet applications and block explorers handle global states including account balances.
Developers have built independent UTXO blockchains or highly centralized and opaque Layer 2 models away from Ethereum's public mainchain to offer privacy to DeFi.
Aztec Protocol's EIP-1724 was Ethereum's first on-chain confidential token standard. Aztec advocated using zkSNARKs to generate private Ethereum coins, however distributing private keys would require a trusted setup. Aztec's zk-tokens are obfuscated on a Layer 2 of sorts. Aztec's Layer 2 concept offered Ethereum's initial privacy. Privacy, however, must exist on Layer 1 – no ifs, ands, or bridges.
Setup Trusted
After Aztec's introduction, Offshift proposed a Layer 1 PriFi solution on Ethereum for Q1 2022. The team's approach uses Bulletproof zks, which, unlike SNARKs, live on Layer 1. Offshift's protocol issues zkAssets in the form of cryptographic promises that are exchanged between Ethereum addresses in a UTXO manner, allowing PriFi applications to benefit from Ethereum's Turing-completeness without leaving Layer 1.
Efficient scalability and impregnable privacy are best achieved by computational tools built for decentralized, high-knowledge-complexity systems.
Knowledge complexity helps prove or disprove the accuracy of cryptographic protocols, which are dependent on the confidentiality of private information and should preserve it.
Poetically, they said, "Some information's secrecy provides us an edge over our enemies."