From privacy coins to shiny iris-scanning orbs, zero-knowledge proofs have become synonymous with crypto, scalability and privacy.
In 2022, investors gave over $700 million in funding to companies pushing the envelope with zero-knowledge proofs. This year, ZK-proofs has arguably become one of the biggest blockchain trends, with several major Ethereum scaling protocols hitting mainnet.
ZK-proofs are a cryptographic protocol that allows one party to prove the truth of a statement to another party without sharing any of the statement’s contents.
An often-cited example is proving to a bartender that you’re old enough to drink without showing your ID or even telling them your birthdate.
In August 2010, the user “Red” on the online forum Bitcointalk asked whether there could be a way to improve the privacy of Bitcoin transactions.
“One of the things that bugs me about bitcoin is that the entire history of transactions is completely public,” the forum-goer said. Another member piped in, suggesting that zero-knowledge proofs could be the solution.
“This is a very interesting topic,” replied Nakamoto.
“If a solution was found, a much better, easier, more convenient implementation of Bitcoin would be possible.”
However, Nakamoto wasn’t convinced the tech could get around the “double-spending” problem — a fundamental flaw that exists in all digital cash protocols where a bad actor could spend the same digital tokens more than once.
“It’s the need to check for the absence of double-spends that requires global knowledge of all transactions,” said Nakamoto.
Satoshi Nakamoto’s response to users suggesting ZK-proofs to raise the privacy of Bitcoin transactions. (Bitcointalk)
“It’s hard to think of how to apply zero-knowledge-proofs in this case. We’re trying to prove the absence of something, which seems to require knowing about all and checking that the something isn’t included,” he argued.
Years later, someone cracks the code
Little did Nakamoto know that the cypherpunks would eventually find a way to solve the problem.
Privacy-focused cryptocurrency Zcash was launched in October 2016 by Electric Coin — a firm made up of computer scientists from the formative years of Bitcoin. Zcash was built by modifying Bitcoin’s original source code.
It was also the first time zero-knowledge proofs were used in a real peer-to-peer cryptocurrency, allowing users to hide or shield the crypto wallet address sending or receiving funds.
The world finally knows that famed whistleblower Edward Snowden was one of the pivotal members of the Zcash Ceremony, where six people combined portions of the project’s private key to launch it in 2016. https://t.co/Lgag6bGA0n
The founding scientist of Zcash, Eli Ben-Sasson, would then go on to found StarkWare, a company known today for using zero-knowledge proofs to scale Ethereum through rollups.
Ben-Sasson tells Magazine that the early enthusiasm from Bitcoin core developers for ZK-proofs played a “pivotal role” in his eventual co-founding of StarkWare.
“The Bitcoin 2013 conference in San Jose marked my Eureka moment.”
“Mike Hearn, a then-Bitcoin developer and one of the earliest Bitcoin adopters, went as far as to declare my talk on ZK-proofs as the most crucial of the event due to its potential impact on the future of blockchain.”
“It was there that I realized the transformative potential of the Validity Proofs I was developing,” says Ben-Sasson.
Fast forward to today, Bitcoin itself now stands ready to enter the world of ZK-proofs.
ZeroSync, a nonprofit founded by three computer scientists (and sponsored by StarkWare), is developing the world’s first ZK light client for Bitcoin.
“Long-term, we hope to bring mass scalability to Bitcoin using STARK Proofs,” said Robin Linus, co-founder of ZeroSync.
Linus said that ZeroSync has designed and is currently implementing a layer-2 protocol that could allow Bitcoin to process more than 100 transactions per second while bringing privacy properties to Bitcoin.
“This could be a major feat in bringing Bitcoin toward the scalability it needs.”
So what would Nakamoto think?
“It’s evident from Satoshi’s past remarks that he strongly favored the use of ZK-proofs for privacy,” says Ben-Sasson.
Nakamoto was a stickler for anonymity. His public interactions on Bitcointalk and his emails were all reportedly done using the IP-masking browser, Tor. It’s the main reason his public IP address could never be traced back to him.
The administrator for Bitcointalk says Nakamoto has always used The Onion Router (Tor) to access the forum. (Bitcointalk)
The Bitcoin creator even dedicated a section to privacy in the Bitcoin white paper, suggesting users keep their public keys anonymous so that, even though the public can see transactions occurring, they don’t know who is involved, like a stock exchange.
Privacy diagram as shown in the Bitcoin white paper. (Bitcoin.org)
“It’s clear that Satoshi would have been intrigued by the privacy innovations my peers and I contributed to at Zcash,” says Ben-Sasson.
Unfortunately, Nakamoto never approached the subject again before he vanished from the public eye on Dec. 12, 2010 — the date of his last post on Bitcointalk.
“While they have recently found their way into Bitcoin through ZeroSync, I believe Satoshi would have been inclined to make the necessary adjustments to integrate them further,” he says.
“After all, for Bitcoin to realize its vision as a global currency, the imperative to scale cannot be ignored, especially considering its current state of ossification.”
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Felix Ng
Felix Ng first began writing about the blockchain industry through the lens of a gambling industry journalist and editor in 2015. He has since moved into covering the blockchain space full-time. He is most interested in innovative blockchain technology aimed at solving real-world challenges.
The US Securities and Exchange Commission and crypto exchange Gemini have asked to pause the regulator’s suit over the exchange’s Gemini Earn program, saying they want to discuss a potential resolution.
In an April 1 letter to New York federal court judge Edgardo Ramos, lawyers representing the SEC and Genesis requested a 60-day hold on the case and that all deadlines be pulled “to allow the parties to explore a potential resolution.”
“In this case, the parties submit that it is in each of their interests to stay this matter while they consider a potential resolution and agree that no party or non-party would be prejudiced by a stay,” the letter states.
The lawyers added that a stay was in the court’s interest as “a resolution would conserve judicial resources” and proposed that a joint status report be submitted within 60 days after the entry of the stay.
The SEC sued Gemini and crypto lending firm Genesis Global Capital in January 2023, alleging they offered unregistered securities through the Gemini Earn program.
In March 2024, Genesis agreed to pay $21 million to settle charges related to the lending program, but the enforcement case against Gemini remains outstanding.
Letter from SEC and Genesis Global requesting extension of stay. Source: CourtListener
The letter did not specify what a possible resolution would entail, but the SEC has dropped several lawsuits it launched against crypto companies under the Biden administration, including against Coinbase, Ripple and Kraken.
In February, Gemini said the SEC closed a separate investigation into the firm as the regulator winds back its crypto enforcement under President Donald Trump.
“The SEC cost us tens of millions of dollars in legal bills alone and hundreds of millions in lost productivity, creativity, and innovation. Of course, Gemini is not alone,” Gemini co-founder Cameron Winklevoss said at the time.
OpenSea, Crypto.com and Uniswap, among others, have also recently reported that the SEC had closed similar probes into their companies that were investigating alleged breaches of securities laws.
Two Republicans who received a combined $1.5 million from the crypto-backed political action committee (PAC) Fairshake will enter the US House after winning special elections in Florida.
Republican Jimmy Patronis won the vacant seat in Florida’s 1st Congressional District to replace Matt Gaetz, taking 57% of the vote to defeat Democrat Gay Valimont, according to AP News data.
Randy Fine also took Florida’s 6th Congressional District with 56.7% of the vote to beat his Democratic rival, public school teacher Josh Weil, and fill a seat left vacant by Mike Waltz, who took a job as White House national security adviser.
Florida’s 1st and 6th Congressional Districts — located in Florida’s western panhandle and along the state’s northeast coast — have been controlled by Republicans for roughly 30 years, but their lead has narrowed in recent years.
Fairshake, a PAC backed by crypto industry giants including Coinbase, Ripple and Andreessen Horowitz, gave Fine around $1.16 million in advertising spending and funneled $347,000 to Patronis to support his campaign.
Both Republicans have expressed support for the crypto industry, with Fine stating in a Jan. 14 X post that “Floridians want crypto innovation!”
Fairshake and its affiliates poured around $170 million into the 2024 US presidential and congressional elections to back candidates who committed to supporting the crypto industry.
The wins by Patronis and Fine increased Republican representation in the House to 220 seats, with the Democrats holding 213 seats.
There are two vacant seats to be filled after Texas and Arizona Democrats Sylvester Turner and Raúl Grijalva died on March 5 and March 13, respectively.
Florida can expect to see a crypto-friendly regulatory environment
The victories for Patronis and Fine likely mean that crypto legislation will continue to see support in the US capital.
The Republican Party would have maintained its House majority even if it lost both seats in Florida, but it would have made it more difficult for some of the recently introduced Republican-backed crypto bills to pass through the House and Senate.
Bills that could eventually make their way to the House include the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which passed the Senate Banking Committee in an 18-6 vote on March 13.
Senator Cynthia Lummis also reintroduced a Bitcoin reserve bill about a week after the Trump administration announced the establishment of a Strategic Bitcoin Reserve on March 6, with the legislation referred to the Senate Banking Committee on March 11.
Several British trade associations have asked Prime Minister Keir Starmer’s office to appoint a special envoy dedicated to crypto and for a dedicated action plan for digital assets and blockchain technology.
In a March 31 letter, the coalition of six UK digital economy trade bodies urged Starmer’s special adviser on business and investment, Varun Chandra, for a “greater strategic focus and alignment to deliver investment, growth and jobs” for the crypto industry.
The group, which consisted of the UK Cryptoasset Business Council, Global Digital Finance, The Payments Association, Digital Currencies Governance Group, the Crypto Council for Innovation and techUK, noted the US policy shift on crypto under President Donald Trump and his appointment of a crypto czar.
Britain’s commitment to an economic trade deal focused on technological cooperation with the US “presents a significant opportunity to mirror the United States’ ambition in fostering leadership in blockchain, digital assets, and other emerging financial technologies,” the letter stated.
The group recommended that the UK appoint a blockchain special envoy, similar to the US, to coordinate policy, foster innovation, and position the country competitively in global markets.
The trade bodies also called for the development of a dedicated government action plan for crypto and blockchain technology, including a concierge service to attract high-potential firms.
They added that the government should acknowledge and leverage the commonalities between blockchain, quantum computing and artificial intelligence technologies, including potential applications for government services.
Another recommendation was to create a high-level industry-government-regulator engagement forum to ensure informed decision-making and cross-sector collaboration.
The UK crypto and tech associations lobbying the government for a policy shift. Source: LinkedIn
“With deep pools of talent, access to capital, world-class academic institutions, and sophisticated regulators, the UK provides an environment where digital assets and blockchain innovation can thrive,” they stated.
The coalition argues that crypto and blockchain technology could boost the UK economy by 57 billion British pounds ($73.6 billion) over the next decade, with the sector potentially increasing global gross domestic product by 1.39 trillion pounds ($1.8 trillion) by 2030.
Tom Griffiths, the co-founder and managing partner of crypto compliance advisory firm BitCompli, said in response to the letter on LinkedIn that the Financial Conduct Authority “has a lot of talent and a good sight of future plans, but the UK is definitely losing pace with Dubai, Singapore, and other EU jurisdictions.”
“Now is the time for the FCA to act, or the UK will lose out on this huge opportunity, which is digital assets and all the benefits this sector can bring, not only now but over the next 20 years,” he added.