TL;DR
ZK-rollups are a technology that offloads computationally intensive work from a main blockchain to a separate layer. They bundle multiple transfers into a single proof which is then submitted on-chain. Originally developed for the purpose of scaling Ethereum, it is now conceivable that they come to Bitcoin too. It would scale Bitcoin without compromising on decentralization.
The idea of ZK-rollups on Bitcoin is not new. Bitcoin OG Gregory Maxwell was posting about zero-knowledge tech applicable to Bitcoin at least as early as 2013 on Bitcoin Forum. But the idea was put back on the slow burner.
While Bitcoin was tick-tocking its blocks in the decade that followed, there happened a great amount of innovation in the space of zero-knowledge cryptography, for example in privacy coin Zcash on Ethereum. Zero-knowledge technology has matured and has made things possible that were just never possible before. And that’s when Bitcoiners started taking notice again.
What Are Zero-Knowledge Proofs?
Imagine I can prove that I am the legitimate owner of a valid passport, without uploading my passport photo in the online process of a let’s say renting a car. Zero-knowledge proof technology enables cryptographic algorithms to verify claims regarding the possession of data without having to reveal the data. Somehow, enough data of my passport is revealed without showing the entire thing. Without knowing my name or seeing my passport number, the car rental agency could still conclude that I’m over 18, and, say, that I have Dutch nationality.
How does ZK-tech tie into crypto payments? Well, for example, you ideally would like to prove you have the funds to pay for something without showing your counterparty how much BTC is in your wallet.
Some benefits of Zero-Knowledge Proofs:
- Scalability: ZK-rollups can process thousands of transactions off-chain and then post a single proof to the blockchain, greatly increasing throughput.
- Reduced Fees: Because fewer on-chain transactions are needed, users will pay lower transaction fees. With a higher volume of transactions processed off-chain, there’d be less congestion on the main chain.
ZK-Rollups on Ethereum
The zero-knowledge developments in the Ethereum ecosystem have been impressive. Zero-knowledge proofs are applied in rollups on Ethereum: the bundling of transactions that help the Ethereum base chain save data storage. A zero-knowledge rollup runs a computation off-chain and then submits that computation as what is called a validity proof to the Ethereum base chain. This means all the transactions are processed, and proven to be not fraudulent. The rollup then submits the transactions list and the stamp of approval to Ethereum. Voila: Ethereum has offloaded some of its work to the zero-knowledge rollup.
Zero-Knowledge Proofs are Hot Again in Bitcoin
At the time Satoshi was working on Bitcoin in the first decade of the 2000s, ZK-tech wasn’t advanced enough to incorporate it into the Bitcoin protocol. Some five years later after Bitcoin’s launch, it was mature enough.
Privacy coin Zcash jumped on the opportunity. Zcash is based on the Bitcoin protocol, with the important addition of privacy-preserving transaction data using zero-knowledge proofs. ZK-rollups are used to restrict third-party access to recipient and sender…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
