ZK oracles: Unlocking a new benchmark for blockchain security

PANews · 2023-12-01T09:32:03+00:00

In the blockchain space, oracles play a vital role as a bridge to external data, but traditional models face trust and security challenges. The introduction of ZK oracles, by making full use of zero-knowledge proof technology, not only ensures the improvement of data privacy, but also solves the trust problem head-on.

PANews

2023-12-01 09:32:03

Blockchain technology has revolutionized all walks of life, enabling secure and transparent transactions without intermediaries. Despite its transformative implications, integrating real-world data into blockchain systems remains an enduring challenge. Oracles play a key intermediary role in this process, seamlessly connecting the blockchain with external data sources. However, traditional oracles often rely on trusted third parties, raising concerns about reliability and security.

As a result, a new and promising solution has emerged, the ZK oracle. It leverages the power of zero-knowledge proofs (ZKPs) to meet these challenges. This innovative approach cleverly combines the strengths of ZKP and oracles to ensure a higher level of data privacy in the blockchain space.

What is an oracle?

The oracle acts as a provider of information about trusting external sources, providing the chain with information from multiple databases, including token prices, transaction activity, wallet balances, and more. Oracles provide application programming interfaces (APIs) that allow computations to be performed based on real-world events and data. Put simply, oracles collect, query, verify, and validate data from multiple sources and pass it to smart contracts.

However, traditional oracle networks, such as Chainlink or The Graph, often rely on staking mechanisms that require nodes to stake assets in order to participate. There are inherent limitations to this approach, especially in terms of trust and vulnerability to manipulation.

This is where ZK oracles come into play, and by innovating ZKP, it promises to revolutionize the efficiency and trustworthiness of oracles.

So what is a ZK oracle?

ZK oracles, short for zero-knowledge oracles, cleverly integrate ZKP with smart contracts to build a flexible on-chain/off-chain solution. This innovative approach improves the efficiency and security of oracles in the blockchain ecosystem, enabling cost-effective off-chain computation and storage.

To meet the challenges of traditional oracles, ZK oracles provide several solutions:

Establish an autonomous network.
Improve the security of the base layer.
Adopt a 1-of-N trust model to ensure that as long as at least one node performs as expected, the system function can be guaranteed.
Enhance decentralization.
Efficient allocation of computing power designed to minimize waste.

The significant advantage of ZK oracles is that they protect data privacy while ensuring the integrity and authenticity of transmitted information. Unlike traditional oracles, which broadcast data to the blockchain publicly, ZK oracles give them a unique advantage by providing evidence of the data without exposing the data itself. This makes it particularly good in use cases where a careful balance between transparency and privacy is required.

ZK Oracle Architecture

Image courtesy of Gu and Nawab

According to Gu and Nawab, the architecture of a ZK oracle includes the following unique components:

Data Sources: These entities collect or generate raw data from a variety of sources, such as IoT devices, that act as the starting point for the computational process.
Off-chain Provers: These entities receive raw data from the data source and perform calculations. By using zk-SNARKs (zero-knowledge concise non-interactive knowledge proofs) computations, they generate evidence that is used to prove their computation.
Consumer: Interacting with the blockchain through a smart contract, the consumer submits read and write requests. They rely on the data and evidence provided by off-chain provers to make informed decisions.
Smart Contracts: Responsible for verifying and maintaining the digests associated with the calculation results and ZK proof data, the smart contract ensures the integrity of the ZK proofs. They also enforce a penalty policy if invalid attestation is found.

Accelerate ZK proof generation with advanced batch algorithms

Gu and Nawab proposed a batch algorithm designed to accelerate the generation of ZK proofs, which uses both horizontal and vertical batch processing techniques. Horizontal batching combines multiple proofs into a single proof, while vertical batching combines similar computations into a single unified proof. These strategies significantly improve the efficiency of zk proof generation, with up to 550x performance improvements compared to standard methods.

Practical areas of application

ZK oracles have demonstrated their versatility in a variety of applications, including:

Price feeds: In DeFi applications, ZK oracles simplify the operation of price feeds, eliminating the need for continuous updates and expensive storage on the blockchain.
Secure Data Sources: ZK oracles provide a secure way to obtain data sources from non-partners. For example, users can generate zero-knowledge proofs of their bank balances without revealing sensitive details. This is used as collateral to obtain loans in the decentralized finance sector, enhancing trust in financial transactions.
Confidential Voting System: ZK oracles can be applied to confidential voting systems to achieve verifiable results without exposing individual votes.
Authentication: In authentication scenarios, ZK oracles provide valuable support for authentication. They verify user identities without revealing complex details in their records, ensuring a security- and privacy-focused approach.
Supply Chain System: ZK oracles facilitate verification of product authenticity without revealing proprietary information. This application ensures trust and transparency in the supply chain process.

Overview of the Building ZK Oracle project

Hyper Oracle

Hyper Oracle is focused on building its own ZK oracle network for the Ethereum blockchain. The system efficiently extracts data from each Ethereum block, uses zkPoS for retrieval, and leverages zkWASM-powered programmable zkGraphs for data processing. The approach taken ensures secure and trust-minimized off-chain computation through ZK technology. This innovative approach not only creates the possibility to scale Ethereum smart contracts, but also gives it the ability to handle complex tasks such as automation and machine learning.

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Image courtesy of Hyper Oracle

In January 2023, Hyper Oracle successfully completed a round of funding totaling $3 million, co-led by Sequoia China’s incubation fund Dao5 and other well-known institutions and angel investors. The funding will focus on further research and development of ZK oracles as well as blockchain infrastructure.

Mina Protocol

(0) 1Labs, as a partner of the Mina Protocol ecosystem, is actively building a ZK oracle. Mina’s ZK oracle is unique in that it has a unique two-step execution model, coordinated by zkApps. The initial step involves off-chain verification, confirming the existence of specific information and completed computations. This off-chain verification makes it possible to perform localized computations on individual machines.

Take price feeds as an example – users have the flexibility to query multiple trusted APIs, calculate average prices, and perform complex off-chain operations. With ZK oracles, users can query prices without incurring fees until the desired outcome is achieved. On-chain execution is carried out only after the desired results are obtained, resulting in a more simplified and cost-effective architectural design. This unique two-step execution model, unique to ZK oracles on Mina, provides a powerful way to securely and efficiently interact with off-chain data.

Nil Foundation

In August 2023, Lido Finance, a pioneer in the liquid staking space, announced a major initiative. The company revealed that it will use the Lido Grant to fund the Nil Foundation, an Ethereum research and development company, to develop the ZK oracle. The express objective of this strategic partnership is to establish a trust-minimized soundness check for Lido Finance’s accounting reporting, ultimately enhancing Lido Finance’s liquidity. Notably, proofs of ZK oracle computation will be signed directly from the Ethereum Virtual Machine (EVM) using Proof Market, a recently introduced gateway interface that ensures provably composable composability for all EVM applications, marking a significant step forward in the field.

The future outlook of ZK oracles

As ZK oracles emerge in the oracle space, there are still some challenges that need to be addressed. The complexity involved in a three-way handshake protocol between sources, nodes, and users requires further research and development to optimize the system. Some teams, such as Mina, are actively working to address these challenges, but it will take time.

With unique advantages and a wide range of application scenarios, ZK oracles are at the forefront of revolutionizing blockchain systems. They have the potential to support trustless and decentralized applications, relying on accurate and verifiable off-chain data, marking a major leap forward in the blockchain technology space. The development of ZK oracles is not only about innovation, but also about redefining the way we recognize and interact with blockchain systems.

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