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A Newcomer's Exploration

Blockchain, Zero-Knowledge, and Applications in Industry

ANDY GUZMAN

Opening Line

In this talk, we'll begin by breaking down the core principles of blockchain technology, exploring its decentralized nature and its potential to enhance security, transparency, and efficiency in a wide range of industries.
We'll then dive into the essentials of zero-knowledge proofs, a cryptographic technique that allows one party to prove the validity of a statement without revealing any information beyond the truth of the statement itself.
As we delve deeper into these cutting-edge technologies, we'll discuss current and potential applications in various sectors, such as finance, healthcare, supply chain management, and beyond. We'll also address the challenges and limitations faced by these technologies, as well as their implications for data privacy and security in our increasingly interconnected world.

My goal with this talk, is that we get a good overview so we can hold conversations and get excited about the potential use cases.

My name is Andy Guzman, I´m Product Owner in a group called Privacy Scaling Explorations team, a team that does cryptographic research to enhance Ethereum.

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Future Ideas

https://zkvalidator.com/emerging-zk-use-cases/

Ethereum for Business book

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Blockchain

Fundamentals

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What is Blockchain?

A blockchain is a decentralized and transparent digital ledger that securely records and verifies transactions across multiple computers.

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What is Blockchain?

A blockchain is a decentralized and transparent digital ledger that securely records and verifies transactions across multiple computers or nodes, utilizing cryptographic algorithms and consensus mechanisms to ensure data integrity, immutability, and trust, enabling a peer-to-peer network where participants can interact directly without the need for intermediaries.

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What is Blockchain?

Distributed Ledgers

Blocks and Chains

Cryptography

Consensus Mechanisms

Immutable and Transparent

Smart Contracts

Technically speaking, a blockchain is a decentralized and distributed digital ledger that records transactions across multiple computers or nodes. It is designed to be transparent, secure, and resistant to tampering. Here's a breakdown of the key elements and concepts behind a blockchain:

Distributed Ledger: A blockchain is a distributed ledger, which means it is maintained and updated by multiple participants or nodes in a network. This distributed nature eliminates the need for a central authority or intermediary.
Blocks and Chains: Transactions or data are grouped into blocks, which are then linked together in a chain-like structure. Each block typically contains a reference to the previous block, forming a chronological sequence. This chaining ensures that the blocks are linked and provides the immutability of the recorded data.
Cryptography: Blockchain relies on cryptographic techniques to secure the data and ensure its integrity. Each block is associated with a unique hash, a fixed-length string of characters generated by applying a cryptographic algorithm to the block's data. The hash serves as a digital fingerprint, and any change in the block's data will result in a different hash.
Consensus Mechanisms: To maintain the consistency of the blockchain across multiple nodes, consensus mechanisms are employed. These mechanisms determine how agreement is reached on the validity and order of transactions. Examples of consensus mechanisms include Proof of Work (PoW), Proof of Stake (PoS), and Delegated Proof of Stake (DPoS).
Immutable and Transparent: Once a block is added to the blockchain, it becomes extremely difficult to alter or remove the data contained within it. This immutability provides a high level of trust and integrity. Additionally, blockchain is often designed to be transparent, allowing anyone to view the entire transaction history, although the identity of the participants may be pseudonymous.
Smart Contracts (Optional): Some blockchains, such as Ethereum, support smart contracts. These are self-executing contracts with predefined rules and conditions encoded into the blockchain. Smart contracts enable automated and decentralized execution of agreements without the need for intermediaries.

Overall, a blockchain is a decentralized and transparent ledger that provides a secure and tamper-resistant method for recording and verifying transactions or data across a network of computers. It has applications in various domains, including cryptocurrency, supply chain management, voting systems, and more.

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What does this mean?

Open
Distributed
Permissionless
Censorship resistance
Immutable
P2P
Resilient (Distributed)
Open Source
Transparent
Trazable

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Bitcoin

World Ledger

Ethereum

World Computer

Let’s look at the most prominent examples existing around:

Bitcoin was the first cryptocurrency around 2008-2009. It’s the combination of many innovations around
Ethereum adds to Bitcoin the programmability capacity. Sometimes it’s called as “programmable money” and other times as “world computer” as essentially it’s a shared and persistent

Virtual machine that does state transitions;

Reference: https://inevitableeth.com/en/home/ethereum/world-computer

Ethereum es una red distribuida de computadores&ordenadores (conocidos como "nodos") que ejecutan software capaz de verificar bloques y datos de transacciones.

En otras palabras, todos nos ponemos sobre la realidad de transacciones, balance de cuentas, y programas de computadora. Por eso Ethereum se conoce como la “computadora mundial”

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Advantages

Speed, efficiency and accuracy
Trust and transparency
Immutability

Challenges

Permanent
Human factor
Loopholes

Self-executing code on a blockchain

They typically are used to automate the execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss. 1

These actions could include releasing funds to the appropriate parties, registering a vehicle, sending notifications, or issuing a ticket. The blockchain is then updated when the transaction is completed. That means the transaction cannot be changed, and only parties who have been granted permission can see the results.
Speed, efficiency and accuracy
Once a condition is met, the contract is executed immediately. Because smart contracts are digital and automated, there’s no paperwork to process and no time spent reconciling errors that often result from manually filling in documents.
Trust and transparency
Because there’s no third party involved, and because encrypted records of transactions are shared across participants, there’s no need to question whether information has been altered for personal benefit.
Security
Blockchain transaction records are encrypted, which makes them very hard to hack. Moreover, because each record is connected to the previous and subsequent records on a distributed ledger, hackers would have to alter the entire chain to change a single record.

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Challenges: Blockchain Trilema

Scalability

Security

Decentralization

Sounds like an awesome technology, but what are the challenges?

Blockchain´s vision is to be more scalable and secure, but also to remain decentralized. Achieving these 3 qualities is a problem known as the blockchain trilemma.

A naive way to solve Ethereum's problems would be to make it more centralized. But decentralization is too important. It's decentralization that gives neutrality, censorship resistance, openness, data ownership and near-unbreakable security.
Secure and decentralized
Secure and decentralized blockchain networks require every node to verify every transaction processed by the chain. This amount of work limits the number of transactions that can happen at any one given time. Decentralized and secure reflects the Ethereum chain today.
Decentralized and scalable
Decentralized networks work by sending information about transactions across nodes - the whole network needs to know about any state change. Scaling transactions per second across a decentralized network poses security risks because the more transactions, the longer the delay, the higher the probability of attack while information is in flight.
Scalable and secure
Increasing the size and power of Ethereum's nodes could increase transactions per second in a secure way, but the hardware requirement would restrict who could do it - this threatens decentralization. It's hoped that sharding and proof-of-stake will allow Ethereum to scale by increasing the amount of nodes, not node size.

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Applications & Use Cases

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Use Case

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Example Use Cases

1 The Ukrainian government – and an NGO providing support to the military – have raised $63.8 million, through more than 120,000 cryptoasset donations since the start of the Russian invasion.
2a 2b Argentina´s inflation is between 70-110% per year around 2022 and 2023. Argentina peso is a nightmare to save, store or even live with. Similar to Venezuela. Dollars are capped and artificially maintained by the government. Crypto dollars have been a lifesaving boat to store value and transact internationally.
3 Civil Liberties:
4 MedRec MedRec by MIT decentralizes health access rights via blockchain, thereby giving patients control over record distribution. Patients and providers operate nodes that authorize others to retrieve data. It is a basis for a generally useful permissioning system.
5a 5b Quadratic Funding is the mathematically optimal way to fund public goods in a democratic community. Impact: $50,000,000+ TOWARDS PUBLIC GOODS, 3.8M UNIQUE DONATIONS, 105 QUADRATIC FUNDING POOLS
6a 6b UNICEF Giga NFTs to Offer Internet Access to Schools in Developing Nations. UNICEF-led Giga released the Patchwork Kingdom NFTs in an effort to fundraise to provide internet access to schools in developing countries. n totality, valued at $700,000
Example: IBM Food Trust: IBM has developed a blockchain-based system called Food Trust, which aims to create transparency and accountability in the food supply chain. It helps track the origin of food items from farm to store, providing consumers with more information about the food they purchase.

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More Example Use Cases

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Key Takeaways

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Key Takeaways

Distributed truth
Unbreakable promises
Challenges: blockchain trilemma
Zero-knowledge and other techniques help here!

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Zero-Knowledge Proofs

Fundamentals

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Challenges: Blockchain Trilema

Scalability

Security

Decentralization

Sounds like an awesome technology, but what are the challenges?

Blockchain´s vision is to be more scalable and secure, but also to remain decentralized. Achieving these 3 qualities is a problem known as the blockchain trilemma.

A naive way to solve Ethereum's problems would be to make it more centralized. But decentralization is too important. It's decentralization that gives neutrality, censorship resistance, openness, data ownership and near-unbreakable security.
Secure and decentralized
Secure and decentralized blockchain networks require every node to verify every transaction processed by the chain. This amount of work limits the number of transactions that can happen at any one given time. Decentralized and secure reflects the Ethereum chain today.
Decentralized and scalable
Decentralized networks work by sending information about transactions across nodes - the whole network needs to know about any state change. Scaling transactions per second across a decentralized network poses security risks because the more transactions, the longer the delay, the higher the probability of attack while information is in flight.
Scalable and secure
Increasing the size and power of Ethereum's nodes could increase transactions per second in a secure way, but the hardware requirement would restrict who could do it - this threatens decentralization. It's hoped that sharding and proof-of-stake will allow Ethereum to scale by increasing the amount of nodes, not node size.

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Zero Knowledge Proofs

“…method by which one party (the prover) can prove to another party (the verifier) that a given statement is true while the prover avoids conveying any additional information apart from the fact that the statement is indeed true.¨

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ZK Intuition: Where is Waldo?

Understanding Zero-knowledge proofs as if you were 5 years old

Let’s simplify Zero-Knowledge Proofs (ZKPs) as if we are explaining it to a 5-year-old. Essentially, ZKPs are a (proving) system that lets you prove to someone that you know a secret, but without revealing the secret itself (yeah, please read that again).

Consider a scenario where you and a friend are looking over a 'Where's Waldo?' book. Suddenly, you spot Waldo and excitedly tell your friend. Skeptical, your friend wants proof, but how can you prove you found Waldo without giving away Waldo’s location on the page?

Consider this solution: Suppose the book page measures x * y. You, as the prover, receive a cardboard sheet, twice as large (2x * 2y) from your friend, the verifier. We call him the verifier as he wants to verify that you actually know Waldo’s location. The verifier can only see this larger cardboard. You (as the prover) then take the book page behind this cardboard and cut out a small window in the middle of it. You align the page so that through this window, the verifier can see Waldo (refer to Exhibit 1). With just a glimpse, the verifier can confirm Waldo's presence ("Ah, indeed, there's Waldo, so you do know where he is"), validating that you indeed found Waldo. You couldn't have showcased Waldo through the window without knowing his location.

So, why is it termed “zero-knowledge”? The secret lies in the large dimensions (2x on each side) of the cardboard. The size allows you to position the book page in multiple ways, keeping its exact alignment variable. Thus, the verifier 1) has zero knowledge about Waldo's precise location, but 2) is certain that you know where Waldo is.

In essence, a Zero-knowledge Proof (ZKP) system allows the prover to convince the verifier of a known secret, without revealing the details of that secret. As a result, the verifier is assured of the prover’s knowledge.

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ZK Intuition: color guessing

Prover

“I can tell the color of each paper”

Verifier

V: show
V: pick
V: shuffle or not
V: show
P: pick

… repeat

“Convince me these are different color”

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ZK Super Powers

(2) no need to see all the data that went into a computation to verify that the result is correct

(1) no need to re-run a computation to verify that it was executed correctly

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Proof of Everything

Proof of Education

Proof of Access

Proof of KYC

Proof of correct execution

Proof of transaction

Proof of healthcare data

Proof of Age

Proof of Residence

Proof of event

Proof of ownership

Proof of reputation

Proof of solvency

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Zero Knowledge Areas

Scalability

Interoperability

Privacy

Sounds like an awesome technology, but what are the challenges?

Blockchain´s vision is to be more scalable and secure, but also to remain decentralized. Achieving these 3 qualities is a problem known as the blockchain trilemma.

A naive way to solve Ethereum's problems would be to make it more centralized. But decentralization is too important. It's decentralization that gives neutrality, censorship resistance, openness, data ownership and near-unbreakable security.
Secure and decentralized
Secure and decentralized blockchain networks require every node to verify every transaction processed by the chain. This amount of work limits the number of transactions that can happen at any one given time. Decentralized and secure reflects the Ethereum chain today.
Decentralized and scalable
Decentralized networks work by sending information about transactions across nodes - the whole network needs to know about any state change. Scaling transactions per second across a decentralized network poses security risks because the more transactions, the longer the delay, the higher the probability of attack while information is in flight.
Scalable and secure
Increasing the size and power of Ethereum's nodes could increase transactions per second in a secure way, but the hardware requirement would restrict who could do it - this threatens decentralization. It's hoped that sharding and proof-of-stake will allow Ethereum to scale by increasing the amount of nodes, not node size.

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Privacy

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Summa

Proof of Solvency

Anon Aadhaar

Prove Indian citizenship, locally & privately

ZCash

Proof of transaction

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More Privacy Examples

Credentials Attesting

Proof of Personhood

Compliance (KYC)

Governance

Authentication

Decentralized Social

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Useful for GDPR too!

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Scalability

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Prove Arbitrary Computation

Big to small

MIPS - Million instructions per second

Create proof

Verify

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Prove Arbitrary Computation

Many small to big

Each end can compute on behalf of the ______ (central verifier)

Proof

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Aztec Era

Encrypted zkRollup

Scroll

zkEVM

Polygon zkEVM

zkEVM

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Interoperability

“Prove something is true from one domain into another”

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Web2 <> Web2 & Web3

For example:

Prove X savings in one bank to another
Export my social connections from Facebook, Reddit, Twitter
Prove access to an account
Prove

TLSNotary (Proof of data authenticity)

Export data from any web application and prove facts about it without compromising on privacy.

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Key Takeaways

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Key Takeaways

ZKPs can be compared to a 'Where's Waldo?'
Convinces without disclosing specifics
ZKPs play a significant role in privacy, scalability and interoperability (in blockchain and will do in web2 world)
Unexplored and hugely dynamic field.

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Interoperability

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Now let's chat how this can be useful to you!

PSE Discord

@AndyGuzmanEth