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What Is a Zero-Knowledge Proof (ZKP)?

While the inherent transparency of blockchains provides an advantage in many situations, there are also a number of smart contract use cases that require privacy due to various business or legal reasons such as using proprietary data as inputs to trigger a smart contract’s execution. An increasingly common way privacy is achieved on public blockchain networks is through Zero-Knowledge Proofs (ZKPs)—a method for one party to cryptographically prove to another that they possess knowledge about a piece of information without revealing the actual underlying information. In the context of blockchain networks, the only information revealed on-chain by a ZKP is that some piece of hidden information is valid and known by the prover with a high degree of certainty.

In this article, we explore how zero-knowledge proofs work to provide privacy guarantees, the core benefits they offer to users, and an array of blockchain use cases that leverage ZKPs. In addition, we showcase how Chainlink’s DECO technology allows for the creation of privacy-preserving oracle networks that can prove data came from a specific web server in a confidential and backwards compatible manner.

How a Zero-Knowledge Proof Works

Zero-Knowledge Proofs were first described in a 1985 MIT paper from Shafi Goldwasser and Silvio Micali called “The Knowledge Complexity of Interactive Proof-Systems”. In this paper, the authors demonstrate that it is possible for a prover to convince a verifier that a specific statement about a data point is true without disclosing any additional information about the data. ZKPs can either be interactive—where a prover convinces a specific verifier but needs to repeat this process for each individual verifier—or non-interactive—where a prover generates a proof that can be verified by anyone using the same proof. Additionally, there are now various implementations of ZKPs including zk-SNARKS, zk-STARKS, PLONK, and Bulletproofs, with each having their own trade-of...

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