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Hi friends 👋 ,

Happy Monday! 

There are some topics that I write about that make me realize how unbelievably dumb I am compared to some people out there. Today’s topic is one of those. 

Luckily, I have friends who are much smarter than me, and who are down to collaborate. Today’s co-author is one of those. 

Jill Carlson is someone I’ve respected from afar for a while and gotten to know over the past few months. She’s been a Goldman credit trader, Cambridge researcher, a writer, an advisor to some of the most promising crypto projects, and a venture capitalist. I’m missing some, too. Now, she’s working on a new company. If you’re interested in the bleeding edge, particularly in crypto, follow Jill. 

She’s orders of magnitude smarter than me, which is good, because while today’s topic is orders of magnitude more complex than I could figure out on my own, it has the potential to be vitally important in the coming years. I don’t want my own lack of … knowledge … to keep you from learning about it. 

Let’s get to it.

Zero Knowledge

You’re going to be hearing a lot about Zero-Knowledge Proofs (ZKPs) over the next few years. 

Every so often, a technology comes around with the right combination of promise, nebulousness, inscrutability, and abstractness to fully capture and incept the hive mind’s imagination. These technologies aren’t just going to change a few things; they’re going to change everything.

Blockchain. AI. Chatbots. The cloud. VR. Autonomous. Metaverse. mRNA. 

In their infancy, these technologies become blank canvases onto which the world projects its dreams and via which hucksters peddle their snake oil.

When someone figures out how to do something with one of these technologies for the first time, but before practitioners have dealt with the hard work of actually implementing them, the field of possibilities is wide open. As you’ll remember from high school physics, potential energy is highest before that kinetic energy gets burnt off. Samesies here.

Tim Urban, the mad genius behind Wait But Why, illustrated it well in this image:

Tim Urban @waitbutwhy

We think a lot about those black lines, forgetting that it’s all still in our hands.

March 5th 2021

13,592 Retweets59,019 Likes

When nothing’s been done, all possibilities are wide open. 

This, incidentally, is why it’s easier to raise venture capital with an idea and a deck and maybe a prototype than it is once you have a product in customers’ hands and a little bit of revenue. It’s probably why the NBA Draft gets twice as many viewers as the average nationally televised game. People fucking love potential. 

This dynamic helps explain the graph we’re about to show you, which should be very familiar to long-time Not Boring readers: the Gartner Hype Cycle. 

The Gartner Hype Cycle is incredible in its consistency. Every promising new innovation goes through the cycle. It’s a rite of passage. The Hype Cycle works because it’s a big mirror. It just reflects our predictable group behaviors back at us, kind of taunting us. “You’re going to get really excited about this thing, and it’s all going to come crashing down. Watch. But don’t worry, it’ll bounce back, sometimes.”  

Part of the fun is figuring out the things that just experienced their Technology Trigger and getting in super early -- building with, investing in, and thinkboi’ing about that tech before others have even heard about it. That’s a lot of what Not Boring’s here for, to let you know when we’re at inflection points, but I’m nowhere near technical enough to figure out when those triggers occur by myself. I crowdsource by following smart people on Twitter and making friends with people like Jill. 

Take DAOs, which are going through their own mini-Hype Cycle. When I wrote The DAO of DAOs in March, I cited Jill’s tweet as one of a few that made me realize it was time to pay attention. 

Jill Carlson @jillruthcarlson

DAOs getting the same kinda attention I saw around NFTs 6 months ago. Watch this space 👀

March 17th 2021

64 Retweets602 Likes

Jill was right. DAOs have exploded into the hive consciousness over the past three months. 

A couple weeks ago, Jill dropped another prediction: 

Jill Carlson @jillruthcarlson

Prediction: within the next 5 years, we will be talking about applications of zero-knowledge protocols the way we talk today about applications of blockchain protocols. The potential unlocked by the breakthroughs of the last few years is going to take the mainstream by storm.

May 24th 2021

211 Retweets1,284 Likes

When Jill predicts, I listen. Luckily, Mr. Fox tagged me in, and Jill and I decided to team up to explain what zero-knowledge proofs are, why they’re important, and their potential applications. 

ZKPs essentially let someone prove that they know or have something without giving up any information about what they know or have.

For example, I could prove that I know the password to an account without entering the password and risking its exposure, or that I have enough money to cover rent for the next year without telling some random broker all of the details of my personal finances. The technology has implications for personal privacy, crypto, businesses, and even nuclear disarmament. 

Because of all of the potential use cases, and because ZKPs are so hard to grasp, they are ripe for the Hype Cycle. As Jill tweeted: 

We will be reading (and debunking) Time magazine cover stories about the mythical zero-knowledge proof. Accenture will be recommending zero-knowledge proofs as an area of exploration to all their consulting clients. An enormous amount of value (both fundamental and speculative) will be created around anything that touches zero-knowledge proofs.

What’s ultimately so promising about ZKPs is that they have the potential to eliminate a major trade-off inherent in living, working, and transacting online: the convenience, speed, reach, and scale of the internet in exchange for our privacy. They also allow for nuance in a privacy landscape that’s often black-and-white. 

When ZKPs are at-scale, people and companies may no longer have to assume that privacy is unattainable or overly constrictive, which both has predictable direct benefits and opens up a new design space for unpredictable innovation. 

Today, we’ll glimpse into that future and its implications by covering: 

• What Are Zero-Knowledge Proofs?

• The History of Zero-Knowledge 

• The Upside of Hype

• The Privacy Spectrum

• Applications of Zero-Knowledge Systems

• The Zero-Knowledge Design Space

We should probably start with what a Zero-Knowledge Proof is in the first place. 

What Are Zero-Knowledge Proofs?

Our data is everywhere. Names, dates of birth, email addresses, credit card numbers, the addresses we have lived at in the last five years, our mothers’ maiden names… These are just a few of the near infinite bits of information on ourselves that we all fork over every day to companies, social media sites, customer service representatives, and sometimes (unwittingly) to scammers. 

The issues with this state of affairs are self-evident. Identity theft, email compromise, data breaches, and other forms of fraud cost individuals and businesses tens of billions of dollars per year and orders of magnitude more than that in spending on defense and prevention. This is not to mention the headaches of dealing with the fallout.

The proliferation of data and its associated vulnerability has come to be an accepted cost of doing business as a participant in the modern, interconnected world. We have to trust each other. We have to enter our credit card numbers into websites. We have to send our landlord our credit history. We have to give our bank our social security numbers. And it’s not just us as individuals: companies and institutions have to disclose sensitive information to each other all the time in order to run their businesses. Sharing information and accepting its insecurity is a necessary sacrifice in order for society as we know it to function.

But what if there was a way to conduct these interactions and transactions with the same levels of trust and certainty without sharing all of this data? Well, thanks to a tricky little bit of mathematics that even cryptographers refer to as “moon math,” this is possible. Enter: the zero-knowledge proof.

Using this technique, I can prove to you that I know something without disclosing to you the information that I know. Without getting into the moon math itself, it works something like the following.

My color blind friend and I are looking at balls on a table that are identical except that one is red and the other green. He is not sure that he believes me when I tell him they are two different colors. We decide to establish that they are, in fact, different colors by playing a game: 

• I give him the two balls to hide behind his back. 

• He takes one ball out and shows it to me. 

• Then he puts this ball back behind his back, withdraws his hand again, shows me a ball and asks, “Did I switch the balls?” 

If we repeat this game enough times, and if I answer correctly every time, then I will demonstrate to him that the balls are almost certainly two different colors. Importantly, here, I have proven this to him without revealing any other information. Perhaps frustratingly for him, he still doesn’t know which ball is red and which ball is green.

There are lots of these types of explanations out there. If you want a fun look at an older one that is literally geared towards children, you can check it out here.

To quote the original paper defining zero-knowledge proofs, they “convey no additional knowledge other than the correctness of the proposition in question.” Backing up from colored bouncy balls, the implications of this are enormous. 

The History of Zero-Knowledge

Zero-knowledge proofs are not new: they were first designed and devised in the 1980’s by MIT researchers Shafi Goldwasser, Silvio Micali, and Charles Rackoff. 

The trio were working on a problem related to a concept called an interactive proof system. In such a system, there are two parties: a prover of some information and a verifier of that information. Generally in these systems, it is assumed that the prover cannot be trusted while the verifier can be. It is the goal of the system to be designed in such a way that: 

• The verifier can be convinced of a true statement by an untrusted prover, and 

• That it is impossible for the prover to convince the verifier of an untrue statement.

Think of it this way: I am in line outside of a bar trying to get in. There is a bouncer standing at the door who asks to check my ID. In this scenario, I am the prover (of my age) and the bouncer is the verifier. The bouncer does not know if he can trust me. If the bouncer and I use an interactive proof system, and I am over 21, I will be able to demonstrate to him that I am over 21. If the guy behind me is underage, he will not be able to convince the bouncer to let him in.

Goldwasser, Micali, and Rackoff added an additional layer of complexity to the whole interaction. They asked (and answered) the question: how do we handle it if, not only can the bouncer not trust me -- but I also cannot trust the bouncer. Maybe I suspect that the bouncer has been stealing people’s identities. Maybe I don’t want him to know that I’m a Taurus. Whatever the issue is, suddenly the prover does not want the verifier to know the underlying information.

Using what those MIT academics introduced as a zero-knowledge proof, I can convince the bouncer to let me in without ever telling him my actual birthdate.

Over the course of the 1980’s and 1990’s, zero-knowledge proofs enjoyed further research in academia but very little in the way of actual implementation or use. It was not until the new millennium that researchers and entrepreneurs started applying the theory to practical applications.

One of the first such applications, in the mid-2000’s, was the use of zero-knowledge proofs in password security. 

When you go to login to a website using a password, often what happens is that you type in your password and send it to the server, which condenses your password into a string of gobbledygook and then compares it to see if it matches the gobbledygook they have stored next to your name in their system. If the values are the same, you’re in. The gobbledygook is there as a layer of password protection: your password cannot be derived from it and it keeps the company or whoever from storing your password as plaintext. However, there is still an issue here: you are still disclosing your password to the server in the first place! Protocols for using zero-knowledge proofs to solve this vulnerability were uncovered over the course of the 2000s: some of the first examples of applying ZKPs to a real-world problem.

Lots more was written and explored over that decade around how zero-knowledge systems could be applied to identity and authentication problems. But the real inflection point for zero-knowledge happened years later.

In 2013 and 2014, zero-knowledge proofs found commercial application in another system that spent many years incubating in academia before being introduced to the world: cryptocurrency. Despite the fact that cryptocurrencies tend to have a reputation for being good for use in illicit transactions, a core feature of bitcoin and most other cryptocurrencies is that everything that happens with them is publicly recorded. All you need to look at are cases like the Silk Road bust or, more recently, the Colonial Pipeline ransomware crackdown by the FBI to understand that bitcoin is in fact completely transparent.

Cue the introduction of Zcash (originally called Zerocash, as well as its predecessor Zerocoin). Zcash, introduced in 2014 and launched in 2016, uses a specific type of zero-knowledge system to create a cryptocurrency that maintains the decentralized properties of something like bitcoin while introducing privacy-preserving properties much closer to those of physical cash -- which is to say near total lack of traceability. 

In Zcash, zero-knowledge proofs specifically enable the network of computers running the Zcash protocol to verify that every transaction is valid (i.e. I actually have the 10 Zcash I am sending to you) while maintaining the privacy of the transaction data.

If you want to learn more, you should give this 2017 Radiolab episode on Zcash a listen:

The Ceremony By WNYC StudiosPodcast episode

Zcash and other privacy-oriented cryptocurrencies have attracted a great deal of attention -- and money. The market cap of Zcash recently approached $4 billion (before retracing… this stuff is volatile). All of this money and attention has led to a dramatic acceleration of breakthroughs in zero-knowledge systems, particularly when it comes to implementing them.

A new generation of efficient zero-knowledge proofs have been developed that solve many of the issues that previously surrounded the clunky, burdensome, expensive, and controversial setups of these systems. (If you listened to that RadioLab episode, many of the problems discussed in it are no longer problems… only 5 years later!) 

Optimizations have led to huge advancements in the speed and scalability of these systems. A new and larger community of builders have cropped up leading to implementation improvements. Active open source development of libraries around these systems are accelerating development and increasing performance.

The moment for zero-knowledge systems to take off is finally upon us.

To learn more about the upside of hype, the privacy spectrum, how ZKPs will actually be used, both in crypto and beyond, and the ZKP design space…

Continue Reading Online

Thanks to Jill for collaborating with me on this, and to Charles for reviewing!

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Thanks for reading and see you on Thursday,

Packy