Understanding Privacy on the Blockchain

Hashing

  1. The Pre-image
  2. The hash value.

Merkle Tree

Merkle tree illustration

Zero-Knowledge Proofs

  1. Interactive Zero-Knowledge: Interactive zero-knowledge as the name suggests involves an interaction between two parties. For example, I can say that I know how to predict heads or tails whenever you flip a coin. This zero-knowledge involves you flipping a coin while I guess correctly. This style is very conversational, it also creates a lot of doubt “what if it was beginner’s luck? what if I rigged the coin?” A third party might also see this and think we have rehearsed this performance. This lack of trust in the result plus the fact the blockchain doesn’t permit interactions is why Interactive Zero-knowledge proofs aren’t in existence.
  2. Non-Interactive Zero-knowledge: These are the ones currently being used on the blockchain, it requires no interaction. For example, if I show you that I have 4 apples, 4 oranges, and 2 Pineapples, then I say I have all the pineapples in my hands but I don’t want to show you the pineapples, I can then display the 4 apples and 4 oranges for anyone to confirm. There are two main types zk-SNARK and zk-STARK
  1. It requires a high degree of trust. I need to trust that the SNARK proof you generated is legitimate. Here is an idea of how it works, I want to confirm that all the transactions you batched and sent to the blockchain is legit. You set up a SNARK proof that acts as an intermediary and then check if it is legit. This SNARK proof then returns to me that the transactions are legit. As you can see it requires A LOT of trust, think of them as your electoral commission that counts votes for elections. We have to trust that the counting is not rigged.
  2. It makes use of quantum computing which poses a threat to hacking the blockchain.

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