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Bybit Learn
Jul 15, 2022

Zero-Knowledge Proof

A zero-knowledge proof offers a method of data authentication that limits the actual disclosure of the data in question.

What Is Zero-Knowledge Proof?

One of the most present and pressing needs in the contemporary world is data privacy. How do you protect information? One of the most common security protocols is password protection. In this case, you and the system you interact with both know a secret: The actual password. As long as no one else knows the secret, the system works great. However, since passwords become compromised all the time, it’s an imperfect system.

This is where a zero-knowledge proof (or zero-knowledge protocols) come in. These protocols still involve two parties: Provers and verifiers. With this system, the prover possesses some kind of secret information. The verifier, however, doesn’t possess the actual information. Instead, the verifier only possesses knowledge about the information’s features.

The verifier then poses questions to the prover about those features. If the prover correctly answers the questions, it demonstrates with sufficient certainty that the prover possesses the actual information.

Advantages of Zero-Knowledge Proof

A zero-knowledge proof offers individuals and systems several important benefits.

Limits Data Exchange

In most traditional security scenarios, the only way to prove you possess information is by disclosing it. With a zero-knowledge proof, you all but eliminate that data disclosure. You remain the only person with access to the actual information.

Even if someone acting in bad faith compromises the verification exchange, they never get access to the actual information. All they see is the verification that you either possess the information, or you don’t.

Boosts Security

Every disclosure of information increases the chances of data compromise. This is why password protection fails so spectacularly — and so often. Since a zero-knowledge proof intentionally prevents this information exchange, it’s a much more secure approach. Unless you intentionally disclose that information to a third party, it’s very difficult for anyone to compromise it.


While the basic description of zero-knowledge protocols describes two parties — such as two individuals — the protocols are almost always handled algorithmically. You, as the prover, must typically be the only one to possess the correct key to access your personal profile, account or information. The actual verification happens between computers, or even large-scale systems running algorithms.

Disadvantages of Zero-Knowledge Proof

While a zero-knowledge proof provides definite benefits, it’s not without its drawbacks.


One of the biggest challenges with zero-knowledge protocols is scalability. In most cases, the querying process between computers is interactive, rather than static. That can call for some serious computing power on both sides. The larger the system becomes, the more computing power it demands.

For example, a system that can handle 1,000 users might utterly fail if you boost it to 3,000 users, simply because the computing demands become too intensive. While it’s possible to use brute force — with more servers and additional computing power — it’s not a great solution. At a certain threshold, the infrastructure and utility costs begin to outweigh the benefits of running the system.


A zero-knowledge proof system allows you to retain complete control over your data. However, that isn’t always a desirable thing. One reason why password protection systems remain popular is that you can, for instance, recover or change a password inside the system.

That possibility doesn’t exist with a zero-knowledge protocol. You retain complete control but you also retain complete responsibility. If you lose your data or your key, recovery is simply out of the question. Whatever data you have locked up behind the proof will stay locked up — forever.

No Recognized Standards

One of the reasons why large-scale computer systems operating in different countries and languages can interact with one another is the existence of international standards. These standards essentially create operational boundaries that everyone works within.

That’s why the HTML on a Russian website functions correctly on a computer loading it in Denmark or the U.S. At present, no international standards exist for the use of zero-knowledge proofs. That can limit accessibility to any system that uses such proofs. Until such standards do exist, widespread use of these protocols will remain out of reach.

Applications of Zero-Knowledge Proof in Crypto

While a zero-knowledge proof might sound like an intellectual exercise — much as artificial intelligence (or AI) once did — it does see practical use. It’s most commonly used with blockchain systems, and crypto in particular.

Preserve Anonymity

For those buying and selling cryptocurrency, the person on the other end of the transaction is usually a complete stranger. The odds are that you don’t want your personal details revealed to them — for a number of excellent reasons. A zero-knowledge proof lets both parties hide their identities, while confirming to the system’s satisfaction that both have the right to access the system.

Funds/Crypto Verification

One of the other major concerns with buying and selling crypto is verification. The buyer wants verification that the seller actually has the cryptocurrency to sell. The seller wants verification that the buyer can afford the amount of cryptocurrency they’ve asked to buy. This is an ideal use for a zero-knowledge proof.

The algorithm can pose queries that ensure the buyer has sufficient funds, without actually exposing the amount in their account. By the same token, the algorithm can check that the seller owns enough cryptocurrency to complete the transaction without exposing how much crypto the seller owns.