Zero-knowledge technology, a branch of cryptography, addresses scalability and privacy challenges for many Layer 1 blockchain projects. Blockchains can leverage zero-knowledge proofs (ZKPs) to increase transaction throughput, verify user identities while protecting data privacy, execute complex computations, and enable enterprises to adopt blockchain technology without compromising intellectual property. In all these applications, zero-knowledge proofs play an indispensable role.
What Is a Zero-Knowledge Proof?
A zero-knowledge proof allows a user to demonstrate knowledge or ownership of information without revealing the information itself. A "prover" uses system inputs to generate a proof, while a "verifier" checks the computational result without accessing the underlying data. Crucially, ZKPs validate dataset integrity while preserving confidentiality.
This article examines the unique advantages of zero-knowledge solutions, how blockchain projects use technologies like zkSNARK and zkSTARK to empower developers in building advanced dApps that scale Web3 and protect privacy, and how Chainlink's trust-minimized services enhance decentralization, reliability, and security for these protocols.
Why Build Networks with Zero-Knowledge Proofs?
Zero-knowledge technology enables developers to leverage the security of base-layer blockchains like Ethereum while improving transaction throughput, speed, and user privacy by keeping personal data off-chain. Transactions are batched and posted on-chain, reducing end-user costs. Ultimately, projects can create sophisticated dApps that rival Web2 systems in performance while retaining Web3’s decentralized benefits.
Zero-Knowledge Solutions vs. Optimistic Rollups
Optimistic rollups, a dominant Layer 2 scaling approach, accounted for 74.3% of Ethereum’s Layer 2 total value locked (TVL) as of June 29, 2022, per L2Beat, while zero-knowledge solutions held 25.9%.
The core distinction lies in transaction verification. Optimistic rollups use fraud proofs, generated only when disputing state changes on Layer 1. In contrast, zero-knowledge solutions publish validity proofs with every batch of transactions posted on-chain. Thus, ZK-based protocols always maintain valid states, albeit with higher gas costs for proof verification on the underlying blockchain.
Combining zk-rollups with off-chain data can optimize gas fees. Enhanced solutions like validium and volition employ validity proofs while keeping data off-chain, ensuring both efficiency and privacy. This advancement encourages enterprise adoption, where safeguarding user data and trade secrets is critical.
Another difference is capital efficiency. Optimistic rollups typically enforce a one-week withdrawal period; zero-knowledge solutions allow withdrawals in about 10 minutes.
Types of Zero-Knowledge Solutions
Layer 2 solutions may use validity or fraud proofs and store data on-chain or off-chain.
Core Architectures
zk-Rollup
zk-Rollups bundle multiple transactions and post them to a Layer 1 blockchain alongside a proof verifying computational validity—known as a validity proof. Validity proofs come as SNARKs or STARKs. Once verified on the base blockchain, the zk-rollup’s state updates.
Validium
Validium combines validity proofs with off-chain data storage to boost scalability. Validity proofs are published on-chain, while data remains off-chain, significantly increasing throughput and reducing gas fees.
Although validium exceeds zk-rollups in efficiency and scalability, it risks data unavailability during attacks, potentially preventing withdrawals. This issue can be mitigated via Proof-of-Stake (PoS) systems that incentivize nodes to maintain data availability. Notably, attackers might halt transactions but cannot directly steal funds.
Volition
Volition merges zk-rollup and validium, allowing users to choose between them while sharing a common state root. Even if validium is compromised, funds on the zk-rollup remain secure.
Institutions may pay higher fees for zk-rollup’s security, while retail users prefer validium’s lower costs—both interacting seamlessly. For example, a DEX’s market makers providing large liquidity might opt for zk-rollup, whereas retail traders with smaller holdings choose validium.
Validity Proofs
SNARK
SNARK stands for "Zero-Knowledge Succinct Non-Interactive Argument of Knowledge." It is a compact cryptographic proof that is easy to verify. SNARKs use elliptic curves to generate proofs, relying on the assumption that discrete logarithms of random elliptic curve elements cannot be derived from a known base point. Elliptic curve computations cost less gas than STARKs’ hash functions.
STARK
STARK means "Zero-Knowledge Scalable Transparent Argument of Knowledge." This cryptographic proof requires minimal interaction between prover and verifier. STARKs outperform SNARKs in proving speed and scalability. Additionally, STARKs use hash functions, making them quantum-resistant.
STARKs were co-invented by Eli Ben-Sasson, a StarkWare co-founder leading development of StarkEx and StarkNet.
Blockchain Projects Using Zero-Knowledge Technology
Projects Using zk-STARK
StarkEx
StarkEx is an Ethereum Layer 2 scaling solution using STARK proofs to verify self-custodied transactions, enabling trading and payment applications. Projects like DeversiFi, Sorare, and dYdX have processed billions in transactions value via StarkEx. However, StarkEx does not support smart contracts, limiting full dApp functionality.
StarkNet
StarkNet is a general-purpose platform for deploying smart contracts on Ethereum via zk-rollup. Major dApps like Aave and Maker plan to launch on StarkNet. Notably, StarkEx’s zk-rollups can deploy on StarkNet to enhance application scalability.
To maximize STARKs’ computational efficiency, StarkWare developed Cairo—a Turing-complete programming language optimized for generating STARK proofs. This requires extensive documentation, frameworks, and tools to grow its developer ecosystem.
Immutable X
Immutable X is an NFT platform for minting and trading NFTs and tokens, leveraging StarkEx for its dedicated zk-rollup. It has facilitated millions of NFT transactions with low costs, even during Ethereum congestion.
Immutable X will also launch on StarkNet. Validity proofs will post to StarkNet first, then to Ethereum via StarkNet’s rollup. This allows Immutable X to use StarkEx for app-specific chains, offering Layer 3 scalability.
Projects Using zk-SNARK
Zcash
Zcash, originally ZeroCash, uses zero-knowledge proofs for private transactions. It was among the earliest projects advancing ZKP adoption in crypto.
Loopring
Loopring is a non-custodial, order book-based DEX on Ethereum. Integrated with Chainlink Price Feeds, it serves hundreds of thousands of users with billions in trading volume.
zkSync 1.0
zkSync 1.0 is an Ethereum rollup supporting token transfers and swaps but not smart contracts. Developed by Matter Labs.
zkSync 2.0
zkSync 2.0 is an Ethereum Layer 2 solution with volition architecture supporting smart contracts. It uses zk-SNARKs for verification and a PoS system (zkPorter) for data availability. Unlike StarkNet, zkSync 2.0 is EVM-compatible. Projects like 1inch, Alchemix, and Curve plan to deploy here.
ZigZag
ZigZag is a decentralized exchange using an order book model for ERC-20 token trading—unlike typical AMM-based DEXs. Its order book benefits from zk-rollup scalability. Any token in zkSync’s registry is tradable on ZigZag, currently on zkSync 1.0 with plans for zkSync 2.0 and StarkNet.
Mina
Mina is a lightweight blockchain using SNARKs to produce blocks capped at 22KB. It supports full smart contract functionality for dApp deployment.
Enhancing Decentralization, Reliability, and Security with ZK Protocols
Zero-knowledge proof protocols can integrate Chainlink’s decentralized oracle services to enhance security and enable automation. By accessing external APIs and secure off-chain computation, Web3 protocols build more advanced applications.
ZK protocols can utilize these services:
- Accurate Market Data – Chainlink Price Feeds provide highly reliable data for decentralized stablecoins, lending protocols, exchanges, and other DeFi use cases.
- Verifiable Randomness – Chainlink VRF generates random numbers with cryptographic proofs, verified on-chain. NFT platforms use it for fair minting; games create unpredictable experiences.
- Smart Contract Automation – Chainlink Keepers automate critical functions like settling limit orders, executing liquidations, and rebasing tokens.
- Proof of Reserves – Chainlink’s Proof of Reserve automatically verifies backed assets, reducing risk and increasing transparency for ZK protocols.
- Cross-Chain Communication – The Cross-Chain Interoperability Protocol (CCIP) offers an open standard for building secure cross-chain applications, transferring tokens, sending messages, and triggering actions across Web3.
Conclusion
Zero-knowledge proofs, combined with base-layer blockchains and decentralized oracle networks, are poised to transform the blockchain industry. Teams can develop highly scalable, cost-effective applications that prioritize user privacy.
While other Layer 2 solutions may suit specific applications, zk-rollups, validium, and volition will increasingly attract both individual users and enterprises as the ecosystem evolves.
Frequently Asked Questions
What is a zero-knowledge proof?
A zero-knowledge proof is a cryptographic method allowing one party to prove knowledge of information without revealing the information itself, ensuring both validity and privacy.
How do zk-rollups differ from optimistic rollups?
zk-Rollups use validity proofs for every transaction batch, ensuring always-valid states but with higher gas costs. Optimistic rollups assume transactions are valid and only use fraud proofs during disputes, leading to longer withdrawal times but lower immediate gas fees.
Which zero-knowledge proof is better: SNARK or STARK?
SNARKs have lower gas costs and smaller proof sizes but rely on trusted setups. STARKs offer faster proving times, better scalability, and quantum resistance but may require more computational resources. The choice depends on specific application needs.
Can enterprises use zero-knowledge proofs for privacy?
Yes, solutions like validium allow enterprises to use blockchain technology while keeping sensitive data off-chain, protecting trade secrets and user information without sacrificing verifiability.
What role do oracles play in zero-knowledge ecosystems?
Oracles like Chainlink provide external data and computation, enabling ZK-based dApps to access real-world information, generate randomness, automate functions, and verify reserves securely.
Are zero-knowledge proofs quantum-resistant?
STARKs, which use hash-based cryptography, are considered quantum-resistant. SNARKs, based on elliptic curves, are not inherently quantum-resistant but can be adapted with future advancements.
For those interested in practical implementations, you can explore more strategies for integrating these technologies. Additionally, to view real-time tools that leverage ZKPs, many platforms offer accessible resources for developers.