Aleo — Zero-Knowledge Proof

The sheer number of web services is constantly growing, while privacy is reducing. Nowadays, it is very difficult to call any personal data private. Our browser history, social media accounts, and personal information are all in someone else’s possession. Regardless of the credibility and level of data security, leaks still occur at an alarming rate. Because of this, coupled with the growth of web applications, there is a demand for a true online privacy.

The next logical step in the development of the web is the privatization of all data. Private resources are getting more and more popular and this is the inevitable future. The best proof is the dramatic growth of cryptocurrencies, which privatize users’ financial markets.

One of the flagship projects of privatization for web developers is Aleo and its Zero-Knowledge Proof. It has a new approach to expanding the private information space. Unique information encryption algorithms allow the developer to be absolutely safe for their data. In one of the previous videos we already talked about the Aleo project, and the time has come to release a series of videos about the latest news and activities in which you can participate.

Today we will take an in-depth look at Zero-Knowledge Proof and its use cases. But first, let’s quickly go through what is Zero-Knowledge Proof.

Zero-Knowledge Proof

Basically, it is a protocol that allows data to be exchanged between two parties without the use of a password or any other information associated with a transaction. It is a method by which one party can prove to the other party that something is true without revealing any additional information.

Using Zero-Knowledge Proof, projects like Aleo can help put the power back in the hands of users, not the companies that run the web today. This is a direct path to complete confidentiality of any application or service used online.

That’s all well and good, but where else can Zero-Knowledge be used?

ZK in Web3

If we are talking about Web3, then one example that comes to mind is DAO. Decentralized Autonomous Organizations have become very popular in Web3 ecosystems. By its nature, DAO should be autonomous and transparent, in reality, however, this is not the case.

DAO needs to become a privacy-oriented, verifiable, and programmable base-level protocol for a community funding platform. Using zero-knowledge would allow a DAO to raise funds privately, issue tokens privately, and manage a treasury, eliminating the external management problem. This way, miners would only be able to see zero-knowledge proofs, without knowing what quantitative data is encrypted in those proofs. This eliminates the possibility of insider trading on a blockchain and prevents miners from exploiting the system.

Of course, it is only one example and use cases stretch far beyond Web3.

Real-world use cases

One example that many of us can relate to is applying for a loan. No matter the type of loan you want to apply for, you will be required to provide documents that prove you will be able to pay it back. Although some online lenders have started looking at alternative credit data, they still tend to look at your credit history. These financial requirements are mandatory, and over time companies incriminate your data and store it for quite some time.

Does it seem reasonable that these third-party lenders should have access to the entire current and past financial history of a person? Institutions, businesses, and individuals are forced to disclose information at their own expense, not knowing how it will be used in the future. Zero-Knowledge helps to solve this problem.

Let’s say a lender can check your financial history, credit rating, and proof of residence without knowing any specific data about you. Zero-knowledge applications will allow you to hide your information but give creditors the ability to verify that it meets the financial criteria without disclosing any of it. This is a best-of-two-worlds scenario that combines applications not only in traditional finance but also in the DeFi world.

Conclusion

It is exciting to see how many other use cases of Zero-Knowledge we will see in the future. But for the time being, Aleo is hard at work and opens up the possibility of moving into the new technological era to every user and developer.

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WebSite — https://www.aleo.org/
Twitter — https://twitter.com/AleoHQ
GitHub — https://github.com/AleoHQ
Discord —https://discord.com/invite/aleohq

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Mark Zilla

Crypto-enthusiast, You-Nube blogger, social media commentator, node-runner, and crypto fan.