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What is Zero Knowledge Proof and How It is Important for Crypto Transparency

One major characteristic that attracts many crypto enthusiasts to the blockchain is the promise of transparency and privacy. However, recent ill occurrences in the crypto space, especially the FTX saga and Luna crash, made it feel like the crypto space has given up on its promise . 

This birthed the need for zero-knowledge-proof protocols. They ensure that transactions are made and confirmed on the blockchain between two parties without revealing details about the transaction. 

In this article, we will explain how zero-knowledge proof works, the qualities of zero-knowledge proof, and its use cases. 

How Zero Knowledge Proof Works

Silvio Micali, Shafi Goldwasser, and Charles Rackoff, who were MIT researchers, were the prominent men who created zero-knowledge proof in the 1980s. According to them, they were trying to build an encryption system where one party, known as the prover, can certify that a specific statement is true to another party, known as the verifier, without revealing more information. 

Zero-Knowledge Proofs (ZKPs). Source: Towards Data Science

This idea has become a very important invention in the crypto industry. Zero-knowledge proof ensures that not even the blockchain network or any other third party can access your secured data. 

To better understand how zero-knowledge proof works, here’s a simple analogy. Imagine you are in a dark tunnel with two locked entrances. The two entrances have a secret code, and you must escape the dark tunnel. Since you don’t know the secret code to the door, you need someone who knows the code and can help you come out. 

Then imagine someone shows up, telling you to transfer a certain amount of money before he can give you the code to open the two entrances. 

However, before paying the man, you must be sure he knows the code and is not deceiving you. So you ask him to prove it by opening and closing the entrance by himself using the secret code he has. This way, you can verify if he knows the secret code that opens the tunnel without knowing the content of the secret code. 

This is simply how zero-knowledge proof works; it allows two parties to make and confirm transactions without gaining access to the content of the transaction. 

Qualities of a Zero Knowledge Proof Protocol

Source- Worldcoin


For a protocol to be zero-knowledge proof, the verifier should be able to tell if the statement is true and both parties are honest without needing additional help. 


A zero-knowledge proof protocol should be sound enough to identify false transactions without additional help. A lying prover must not convince an honest verifier to believe an invalid transaction is valid. 

Zero Knowledge 

As the name suggests, the prover and verifier must not know what happens on the other side of the transaction. In other words, the verifier must not know the statement beyond its true or false status (i.e., validity). When a verifier knows the statement’s content beyond its validity, it should not be considered a zero-knowledge proof protocol. 

Why Zero Knowledge Proof ensures Crypto Transparency

One of the major promises blockchain technology gave its users was the right to privacy and transparency while performing transactions. But has this technology succeeded in doing this? The answer is no. 

Source- Coinloan

Most blockchain networks operate a public database, so anyone online can still access your transaction details. However, instead of seeing your name, only your public key will appear on the transaction history. A public key is a unique code or a kind of account number representing a user on a blockchain network. 

Although the public key was traditionally created to safeguard users’ privacy, certain techniques can be used to reveal the identity of the public key owner. As a result, the promise of blockchain safeguarding users’ privacy is compromised, leading to a lack of transparency between the two parties. 

This is where zero-knowledge proof comes in, as it helps ensure transparency within the blockchain while protecting your privacy. With zero-knowledge proof, the parties involved in the transaction can verify the validity of the transaction without gaining access to any sensitive information. 

Use Cases of Zero Knowledge Proof

Source- Coinloan

Anonymous Payment 

Many would argue that the transaction details must be made public and trackable for surveillance to prevail within the crypto industry. While this argument is valid, making transaction details open to the public comes with misuse and a lack of privacy. 

So zero-knowledge proof helps to hide the identity and details of those involved in a transaction. Tornado Cash is an example of a protocol that conducts Ethereum transactions without further information being exposed to the public. 

Identity verification 

The usefulness of identity verification does not only apply to the crypto industry; it can also be used in digital voting. This means that zero-knowledge proofs can be useful in a digital voting process where the identity of voters can be detected without compromising their privacy. 

Besides identity verification, it provides identity security, allowing you to select those who can view your identity. A great example is using zero-knowledge proof to prove your nationality without showing an ID. 


While using the internet, there are cases where the systems need to verify who you are before they give you cards to certain tools and data. In authenticating yourself, these systems might require you to reveal sensitive information. Some can mandate you to verify your marital status and other sensitive information. 

Zero-knowledge proof comes in here, as it helps you authenticate yourself without revealing sensitive information. This can be done by issuing various tier-level verification passcodes that certify you qualify for access or not rather than revealing your private details everywhere.

Another good example is that with zero knowledge proof, you can apply for a house mortgage without revealing your exact salary. Zero-knowledge proof will show that your salary falls within the expected range without revealing how much you earn. 

Verifiable Computations 

Zero-knowledge proof greatly improves the blockchain’s processing speed and power. Zero-knowledge proof allows certain computations on the blockchain to be outsourced while ensuring it gets verifiable results. The entity that took up the outsourced computation will submit the result and proof that the outsourced computation was properly executed. With this, the blockchain processing speed is highly increased while ensuring that security is not compromised. 

Way Forward

Zero-knowledge proof is a very important invention in the crypto industry, as it helps two parties to make and validate transactions without viewing the transaction details. 

The qualities of a zero-knowledge proof protocol are completeness, soundness, and zero knowledge of any transaction details. Zero-knowledge proof also has many applications in the crypto industry, as it helps in authentication, identity verification and security, and many other use cases.


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