What are the definition and application scenarios of ZK technology?

Privacy has always been very important to users, and the emergence of ZK technology has opened up new possibilities for privacy protection in DeFi. ZK technology usually refers to zero-knowledge proof technology. Zero-knowledge proof is a technology in the field of cryptography and computer science that allows one entity (prover) to prove the authenticity of an assertion to another entity (verifier) ​​without No specific information about this assertion needs to be revealed. Briefly introduce what ZK technology is? Some people may not understand that, simply put, it is used to ensure the validity of the transaction without revealing the details of the transaction. The editor below will give you a simple explanation of ZK technology.

What is ZK technology?

ZK technology is a zero-knowledge proof technology that allows one party to prove to another party that they know certain information without revealing the specific details of the information. This technology has been widely used in DeFi projects, such as ZigZag, unyfy, and OKX’s ZKDEX. It greatly enhances the privacy protection capabilities of DeFi, especially the protection of transaction information. The widespread adoption of ZK technology heralds a revolution in the way DeFi and the entire cryptocurrency space are approached. It will drive the future development of the entire field and achieve major breakthroughs.

ZK technology can ensure the legitimacy of transactions while hiding transaction details. Users need to submit two types of information: one is a private transaction, which contains some hidden details, such as the transaction recipient or amount; the other is a ZK certificate related to these hidden information. Verifying the legality of private transactions is actually verifying the corresponding ZK certificate.

What are the usage scenarios of ZK technology?

ZK technology is mainly used in three aspects: resisting front-running transactions, preventing liquidity manipulation, and empowering lending platforms. The following is a detailed analysis:

1. Resisting front-running transactions

The application of ZK technology can significantly reduce the risk of sandwich attacks. By using ZK technology, we can hide transaction volume, asset types, user or liquidity pool balances, user identities, transaction instructions, and other protocol-related information, thereby effectively improving the privacy of transaction data. This approach makes it difficult for an attacker to obtain complete transaction information, making it more difficult to implement a sandwich attack.

In addition, ZK technology can also increase the difficulty of judging user behavior models, thereby improving privacy protection. Through ZK-based private transactions, third parties who attempt to collect blockchain data to analyze account historical transactions, infer behavioral patterns, explore active cycles, transaction frequencies or preferences will face challenges. This kind of analysis, known as behavioral model inference, not only violates user privacy, but also paves the way for honeypot attacks and phishing scams.

2. Prevent liquidity manipulation

Liquidity manipulation and front-running transactions are both attack methods in DeFi. Both attack methods involve using market information and transaction speed to obtain benefits. , but their specific strategies and operations are different.

Front-running is taking advantage of information, while liquidity manipulation is using market activity to mislead other traders. The former mainly makes profits by obtaining and using undisclosed important information, while the latter misleads other investors by creating false market activity, causing them to make unfavorable trading decisions.

ZK technology can not only play a key role in resisting front-running transactions, it can also help prevent liquidity manipulation. Based on ZK technology, it can resist the liquidity manipulation in the TWAP oracle, and a smart contract can be designed to rely on the TWAP oracle to obtain asset prices.

3. Empowering lending platforms

ZK technology can protect user privacy. The combination of ZK technology and reputation tokens can protect user privacy while maintaining and tracking it in the network. reputation.

Users can use ZK technology to generate reputation tokens without disclosing historical transactions. On the one hand, users can generate proof of historical transactions based on ZK technology; on the other hand, the proof is verified by a smart contract (often called a reputation token generation contract), and reputation tokens can be generated if the verification is successful.

In addition, on some DeFi lending platforms that require over-collateralization, reputation tokens can reduce mortgage requirements, thereby solving the problem of over-collateralization and improving market liquidity. And the application of reputation tokens based on ZK technology is not limited to DeFi lending platforms, it can also be widely used in insurance, medical subsidies and other fields.

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