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What are zkSNARKs? | The Complete Guide

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As more people have embraced Bitcoin and the amazing technology that makes it function, they have also discovered some of its most important pitfalls. One of those is the concept of a completely anonymous transaction. While Bitcoin is often thought of being “anonymous”, it is actually only “pseudonymous”, because every Bitcoin address’s transactions are tracked on the public blockchain. There are, however, other cryptocurrencies that have been able to develop blockchains that provide for complete privacy in their protocols. One such cryptocurrency is Zcash which makes use of a revolutionary privacy implementation called zkSNARKs.

In this post we will take a look at the basics of zkSNARKs, how they hide privacy and how they will develop in the future.

Zero Knowledge of It

zkSNARKs are based on a relatively recent cryptographic principle called zero knowledge proofs. In the initial academic paper that theorized Zero Knowledge protocols, they were defined as:

“A zero-knowledge protocol is a method by which one party (the prover) can prove to another party (the verifier) that something is true, without revealing any information apart from the fact that this specific statement is true.”

So, essentially a zero knowledge proof can allow for one person to prove that they know something secret without revealing what that secret is. This has important implications for many situations in which we need to exchange a secret but cannot fully trust the party that we are sending that information to.

For example, think about the way in which your online passwords work. When you insert your password on a website, that password is sent to the server and stored in a hashed form. While hashes do attempt to obscure the password, in the hands of a competent hacker, a hash can be just as dangerous as plain text. Hence, you are disclosing a secret to a website and relying on the supposed trustworthiness of the site to protect it. Would it not be much more secure if you could demonstrate your knowledge of the password by solving some cryptographic proof?

This is exactly how zero knowledge proofs work and they are particularly important in crypto privacy protocols. You want to be able to prove to the party that you are transacting with that you do indeed hold the private key to your wallet without actually revealing that private key. According to the theory, in order for a zero knowledge proof to be valid, it has to meet the following requirements:

  • Completeness: If the input is true, the proof will always return “true”.
  • Soundness: If the input is false, you cannot trick the zero-knowledge proof to return “true”.
  • Zero-Knowledge: The verifier learns nothing more than whether the statement is true

Now that we have laid the groundwork of zero knowledge proofs, let’s take a look at how they have been incorporated into zkSNARKS.

zkSNARKs and Blockchains

zkSNARKs expand on the mathematical theory of zero knowledge proofs and allow them to be used in blockchains with reduced computational complexity. “zkSNARKs” stands for Zero Knowledge Succinct Non Interactive Argument of Knowledge. Yes, that is a mouthful but let’s break that down word by word.

  • Zero-Knowledge: Explained Above
  • Succinct Can be verified very quickly
  • Non Interactive: A proof where a single message can be sent from the prover to the verifier. There is no need for a back and forth of messages.
  • Argument of Knowledge: The prover can convince the verifier that information exists and that they are the only person that can access that information without revealing said information.

In regular transactions, when a payment is sent from one party to the other, the details of this payment are visible to all nodes on the network. This includes all the inputs and outputs to the transaction which contain information about the public addresses and amounts. However, with a zero knowledge transaction, the only information that one is able to glean is that a transaction has taken place. There is no information about the sender, recipient or amount. Below is a simple visual representation as to how Zero Knowledge Transaction work in a blockchain protocol.

Another term for these transactions is a “shielded transaction”. zkSNARKs are used to prove that the conditions of a valid transaction has been met without revealing anything. The sender of this transaction will have to construct a proof that shows the following:

 

  • Input values equal the output values
  • The sender does indeed have control of the private keys to the wallet
  • There is a cryptographic link between the private spending key and the signature to the transaction. This will eliminate the possibility that a third party can tamper with the transaction.

Of course, this is the basic theory behind zkSNARKS and zero knowledge proofs. A deeper look would require an understanding of advanced computational mathematics and cryptography (moon math according to Vitalik Buterin).

zkSNARKS in Use

Given that zkSNARKs have such an important impact on cryptocurrencies, they are already in use on a number of chains and are being considered by others. Most notably, they were popularized for their use in the Zcash protocol.

Zcash is one of the most popular cryptocurrencies in the world with a current market cap of $4.3bn. There have also been a number of forks of Zcash and forks of forks. For example, you have Zclassic which is a fork of Zcash. Zclassic has also spawned two of its own forked coins in ZenCash and Bitcoin Private. Both of these chains make use of zkSNARKs for their shielded transactions. Then, there is also the ambitions of the second most valuable cryptocurrency, Ethereum, to include zkSNARKs into their protocol. This will come as part of their Metropolis upgrade that will include a number of features like Proof-of-Stake.

Currently, the computational complexity involved with generating many of these proofs is quite high. This limits their application in many other potential use cases. Yet, as more work is done on this and computing power advances, we are likely to see similar technology in a number of privacy dependent applications.

Potential Challenges

One of the most important concerns about zero knowledge blockchains is that they have to rely on a certain “master key”. Having an active master key to a blockchain worth billions is no doubt a big deal. This is a shadow that has remained over the Zcash blockchain since its inception. Although the ZCash team has claimed that they have destroyed the master key in their Zcash ceremony, there is always a risk that it could have leaked or someone has a copy. However, there may soon be an alternative to this in the form of another unique adaption called a “zkSTARK”. The main advantage of this technology over zkSNARKs is that it would not have to rely on a master key or public key cryptography. All they would need is a simple algorithm to function. zkSTARKs could also be much more efficient in terms of the computing power required to complete the proofs. The technology is in its infancy though and is still being researched by numerous cryptographers. It would be interesting to see how the technology develops over the next few years.

Conclusion

Bitcoin was developed for a number of reasons, one of which which was to give personal financial control back to individuals. Privacy of the holder is likely to have been another of the most important considerations. But as cryptocurrency adoption has grown, so has the ability for governments and agencies to meticulously track these transactions on the very public blockchain.

With technology such as zkSNARKs, however, such transactions will be shielded and the parties will remain completely anonymous. There is also a great deal of other applications that will benefit from these technological advancements. While the technology is still new and questions do remain, one cannot discount the demand for a truly private cryptocurrency.

The post What are zkSNARKs? | The Complete Guide appeared first on UNHASHED.

Source: https://unhashed.com/cryptocurrency-coin-guides/what-are-zksnarks/

Blockchain

Binance Coin price falls to $26, what’s next?

Binance Coin price falls to $26 losing support at $27. Binance showing volatility period along with other cryptocurrency. Bitcoin price fluctuating associated with market The Binance Coin price line observed a move towards the downside on the 20th of September as the altcoin market saw a bearish momentum. The cryptocurrency fell towards the $26 level, […]

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  • Binance Coin price falls to $26 losing support at $27.
  • Binance showing volatility period along with other cryptocurrency.
  • Bitcoin price fluctuating associated with market

The Binance Coin price line observed a move towards the downside on the 20th of September as the altcoin market saw a bearish momentum. The cryptocurrency fell towards the $26 level, while it traded above the $27 mark for most of the 24-hour trade.

1-Day Binance Coin price analysis

Binance Coin is currently ranked 7 amongst the cryptocurrency as per its market capitalization. Per coinmarketcap.com, the cryptocurrency has a market capitalization of $3,770,154,431 US Dollars. The max BNB supply currently lies at 176,406,561. The cryptocurrency secured an all-time high of $39.57 US Dollars, while it’s all-time low was at $0.096109 US Dollars.

Binance launched the Binance Smart Chain on the 1st of September. The Chief Executive Officer (CEO) of Binance, Zhao, has discussed the decision of the company to add newer DeFi projects to the platform.

At the beginning of the day’s trade, the cryptocurrency traded at $27.08 US Dollars. The price stayed above the $26.8 level until noon on the 20th of September. The BNB price line fell to a day’s low of $25.58 in the evening of the 20th of September.

During the time, the Relative Strength Index (RSI) had dropped to lower values, thus depicting an oversold cryptocurrency. At the time of writing, the cryptocurrency was priced at $26.06 US Dollars on Binance.

Binance Coin technical indicators

The Bollinger Bands showed lower price volatility until 06:00 GMT on the 20th of September. The cryptocurrency traded above the $26.8 price level during that time. Near 03:00 GMT, the cryptocurrency can be observed showing increased price volatility on the smaller time frames. In the afternoon, the cryptocurrency fell bearish towards the $26 mark. At the same time, the Bollinger Bands showed increased expansion, as the price observed more fluctuations during that time.

Near the time of writing, the cryptocurrency held above the midline, while the Moving Average Convergence Divergence (MACD) line was about to slide below the signal line. Here, the histogram size appears to be increasing in the positive region. The technical indicator’s lines moved towards the negative region near noon and returned towards the positive region by 13:30 GMT. This repeated twice in the evening. During this time, the cryptocurrency exhibited a bearish bias. At the time of writing, the MACD stood at 0.010, while the Signal line was observed at 0.00025. The histogram was marked at 0.010.

UNI is a new governance token minted by Uniswap. The governance token was recently made live on Binance and Coinbase along with their iOS and Android apps. This allows customers to buy, sell, trade, or even store the token. UNI’s price has gone from $1.76 to $5.85. This marks over a 300% increase in its price after Binance and Coinbase’s listings. The market capitalization has gone up to $995 million US Dollars.

Disclaimer: The information provided is not a trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Blockchain

Ethereum network blockage soars with increased user activity

Ethereum network traffic reaches new levels ETH supply shifting towards smart contracts Ethereum network blockage drives gas price Ethereum users have been exerting immense pressure to the ethereum blockchain in recent days causing ethereum network blockage. The network has seen increased demand as users interact with smart contracts, AMMs, DEXs and many other activities leading […]

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  • Ethereum network traffic reaches new levels
  • ETH supply shifting towards smart contracts
  • Ethereum network blockage drives gas price

Ethereum users have been exerting immense pressure to the ethereum blockchain in recent days causing ethereum network blockage. The network has seen increased demand as users interact with smart contracts, AMMs, DEXs and many other activities leading immense transactional volume to the blockchain.

As a result of the massive congestion, ethereum transaction fees have gone through the roof. Moreover, the sky-high fees have directed investor funds to alternative layer ones, with arguments emerging on which ‘ethereum killer’ might tap a substantial proportion of the market.  

More ethereum held in smart contracts compared to exchanges

Furthermore, the Defi hype has established another fascinating trend for ETH besides the elevated transaction fees. Ethereum traders have been massively moving their holdings from crypto exchange platforms and transferring them to smart contracts. At the moment data suggests there is a greater number of Ethereum tokens retained in smart contracts than in smart contracts.

This actual trend might be affirmative for ETH’s price, as the tokens become harder to access for trading, which can result in a positive price action movement.  

Ethereum network blockage goes through the ceiling

DeFi is almost solely developed on ethereum and boosts the network’s demand through several features. The users keen to obtain tokens take advantage of AMMs or DEXs to acquire them. However, every single changeover needs authorization and a real swap. This procedure alone has coerced the ethereum network.

Notably, the yield farming trend has blended the procedures, with traders locking their crypto assets under smart contracts and cash reserves to make profits on their investment. According to blockchain analytics firm Santiment, the current ethereum network blockage is the highest it has ever experienced.

Moreover, users might have to fork out more than $60 in transaction fees to have their transaction handled without delay during pinnacle activity moments. Furthermore, Glassnodes data shows that ETH supply is shifting towards smart contracts, suggesting that the elevated gas price may not fade out anytime soon.  

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Blockchain

Bitcoin price sees a drop below $10800

Bitcoin price sees a drop below $10,800. Bitcoin likely to get back to a new price high. The Bitcoin price line was observed under a downtrend on the 20th of September. The cryptocurrency made its way towards the $10800 mark. The price line varied between the $10760 and $11160 levels over the 24-hour trade. 1-Day […]

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  • Bitcoin price sees a drop below $10,800.
  • Bitcoin likely to get back to a new price high.

The Bitcoin price line was observed under a downtrend on the 20th of September. The cryptocurrency made its way towards the $10800 mark. The price line varied between the $10760 and $11160 levels over the 24-hour trade.

1-Day Bitcoin price analysis

The cryptocurrency’s price fell to at day’s low of $10775.14. The king of cryptocurrency was priced at $10873.64 US Dollars on Bistamp at the time of writing. The 24-hour price low was observed at $10873.64.

What’s next for the BTC price?

The Trading View analyst X Force Global is of the opinion that the BTC price line will either rise past the $11200 mark to continue the bullish ascension, or the cryptocurrency will fall below the rising trendline which is currently the support level for the cryptocurrency king.

The cryptocurrency is facing a strong resistance near the support-turned-resistance between $11200 and $11300. The Relative Strength Index (RSI) has also depicted a bearish divergence on the 4-hour scale. The technical indicator lies near 60.00. Bitcoin trades above a rising wedge support level since the 9th of September. The price line has recently observed the bearish divergence and it dropped towards the support mark.

Per the analysis, if the cryptocurrency breaks below the rising support then the price will see a turn of the trend, which will allow BTC to return towards the support mark once the price stops falling.

Can Bitcoin rise to $12000?

The Trading View analyst Rocket Bomb is of the opinion that the BTC price will rise towards the $12000 level after observing a few sideways movements.

The cryptocurrency has observed a buy signal on the Moving Average Convergence Divergence (MACD) technical indicator. The blue line has crossed above the orange line. The analyst believes that the cryptocurrency will rise towards the $11600 level at first, which will be followed by a pullback towards the $11000 mark. In the long-term trade, Bitcoin is expected to rise towards the $12000 resistance level with a target price of $12069.17.

What to expect from Bitcoin?

The Trading View analyst Alan Masters believes that Bitcoin is currently facing resistance from the 200-Day Moving Average (200MA) near $11100. The crypto analyst is of the opinion that the price will either fall towards the $10300 soon, or the $9800 level later.

Per the analysis, the 200MA is depicting rejection on the 4-hour chart. The MACD line has also shown a bearish cross on its scale, while a bearish divergence has also been recorded between the trading pair and the MACD. The cryptocurrency’s price appears to be breaking below the 10-Day Exponential Moving Average (10EMA). All of this suggests that the cryptocurrency is about to fall bearish.

Bitcoin to see a price fall ahead?

The Trading View analyst GoldFxcc is of the opinion that the BTCUSD trading pair is currently inside a descending parallel channel. The analyst believes that the BTC price will fall towards the $9000 mark soon.

The cryptocurrency fell below an important support line on the 3rd of September. Per the chart above, the BTC price has tested the support-turned-resistance near $11300 after touching the bottom of the descending parallel channel.

The analyst believes that the cryptocurrency has run out of the bullish momentum, and the cryptocurrency will now fall towards the $10600 support, followed by the $10200 support, and eventually the bottom of the descending channel. The BTCUSD trading pair will have to break below the descending channel and fall towards the $9000 mark.

Disclaimer: The information provided is not a trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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