# What Is ZK-SNARK? Cryptocurrency Use, Definition, and History

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## What Is ZK-SNARK?

Zk-SNARK stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.” It is cryptographic proof that allows one party to prove it possesses certain information without revealing that information. First developed from zero-knowledge proofs in the 1980s, Zk-SNARK is now used in cryptocurrencies to enhance privacy, most notably in [Zcash](https://www.investopedia.com/terms/z/zcash.asp), where it hides transaction details unlike Bitcoin's transparent ledger. Recent upgrades, such as Halo 2, have further strengthened this trustless privacy model.

### Key Takeaways

*   Zk-SNARKs enable proof of information possession without revealing the information, enhancing user privacy in cryptocurrencies.
*   Developed in the 1980s, zk-SNARKs are now utilized by Zcash to improve anonymity compared to Bitcoin.
*   Zk-SNARKs initially used a trusted setup; this requirement was removed with Zcash's Halo 2 system in 2022.
*   Zk-SNARKs allow instant verification without interaction between the prover and verifier in the blockchain process.
*   Concerns about zk-SNARKs include potential misuse of private keys and the initial "founder's tax" on Zcash tokens.

## How ZK-SNARK Enhances Cryptocurrency Privacy

For many original members of the cryptocurrency community—primarily the Bitcoin community—privacy was an assumed aim and feature of [cryptocurrencies](https://www.investopedia.com/terms/c/cryptocurrency.asp). However, privacy was secondary due to the need for a "trustless" system ensuring transaction integrity.

In the early 2010s, [Bitcoin](https://www.investopedia.com/terms/b/bitcoin.asp) users sometimes assumed that their transactions were anonymous because their offline identities weren't associated with users' public keys. But by the decade's end, data scientists, hackers, and law enforcement showed it's easy to re-identify people from pseudonymous data.

Due to Bitcoin's perceived lack of privacy, developers began creating privacy-focused coins. The [most prominent](https://www.investopedia.com/news/edward-snowden-comes-out-favor-zcash/) of these is [Zcash](https://www.investopedia.com/terms/z/zcash.asp), backed by a privacy concept known as zk-SNARKs.

## The Concept of Zero-Knowledge Proof in Crypto

A [zk-SNARK](https://z.cash/technology/zksnarks.html) ("Zero-Knowledge Succinct Non-Interactive Argument of Knowledge") utilizes a concept known as a "zero-knowledge proof." Put simply, a zero-knowledge proof is a situation in which each of two parties in a transaction is able to verify to each other that they have a particular set of information, while at the same time not revealing what that information is.  

> **Fast Fact**
>
> These proofs were first developed in the 1980s.

In most proofs, one party must access all the information. A traditional proof can be compared to a password used to access an online network. The user submits the password, and the network checks it for accuracy. In order to do this, the network must also have access to the contents of the password.

In a zero-knowledge proof, the user shows the network they have the correct password without revealing it. The [privacy](https://www.investopedia.com/tech/five-most-private-cryptocurrencies/) and security advantages in this situation are clear: If the network does not have the password stored somewhere for verification purposes, the password cannot be stolen.

The math behind zk-SNARKS is complex. Nonetheless, proofs of this type allow one party to demonstrate not only that a particular bit of information exists but also that the party in question has awareness of that information. In the case of Zcash, zk-SNARKs can be verified nearly instantly, and the protocol does not require any interaction between the prover and the verifier.

## Practical Example of ZK-SNARK in Action

Because zk-SNARKs are tough to comprehend, it's best to use a simple example of what they are. Imagine you have a safebox with a combination lock at a bank with a note in it. The note has a signature and printed name on it. You believe you're the only one that knows what it says. You're discussing it with a friend but have not revealed anything about the note other than it exists in that safebox.

The friend tells you they know what it says and then tells you the name on the note. They have provided proof that they know the combination and what's on the note without revealing it.

On a [blockchain](https://www.investopedia.com/terms/b/blockchain.asp), it is much more complicated, but this is the general idea. Someone provides proof they know something without revealing it.  

## Potential Challenges and Criticisms of ZK-SNARKs

There are, of course, concerns related to zk-SNARKs. For instance, if someone was able to access the private key that was used to create the parameters of the proof protocol, they could create false proofs that nonetheless looked valid to verifiers. This would allow that person to create new Zcash tokens through a counterfeiting process. In order to prevent this from happening, Zcash was designed to elaborate the proving protocols and spread them out over multiple parties.

While the construction of the Zcash proving process was completed in such a way as to minimize the possibility of counterfeiting tokens via false proofs, there is at least one other concern related to the cryptocurrency as well. Zcash was created with a 20% "tax" levied on all blocks created over the first several years of the token. This tax is known as the "founder's tax," and it is used to compensate the developers of the cryptocurrency.

Critics have suggested that the founders could potentially use this facet of the system to create an infinite number of Zcash tokens without anyone else being aware of the existence of those tokens. For that reason, it's not entirely possible to know the exact number of Zcash tokens in existence at this point.

Since 2019, some developers have been working to improve zk-SNARKs by removing the trusted setup. In 2022, Zcash developers implemented the Halo 2 zero-knowledge system, eliminating one of the blockchain's most significant privacy issues. Halo 2 doesn't require a trust setup between users.

## What Is an Example of a Zk-SNARK?

In blockchains, a zk-SNARK is a proof that an entity has something (knowledge, data, and so on) but didn't reveal it to another entity. For instance, if a blockchain requires a public and secret key for a transaction, a hashed solution could be generated by one party, and the other could generate a solution that falls within a specified range, proving they have the information needed.

## What Is a ZK-SNARK Circuit?

An electronic circuit is sometimes used to describe how zk-SNARK works or when designing a zero-knowledge process because there are electronic terms like "gates" and "chips" used when creating workflows.

## What Is the Difference Between ZK-SNARK and ZK-STARK?

Zk-STARK stands for Zero-Knowledge Scalable Transparent Argument of Knowledge and is much more efficient when more witnesses are involved than zk-SNARK.

## The Bottom Line

Zk-SNARKs are zero-knowledge proofs that let one party prove possession of information without revealing it, providing fast cryptographic privacy on blockchains. They're best known for powering Zcash's private transactions, improving on Bitcoin's transparent model.

Newer systems like Halo 2 remove the need for a trusted setup, boosting security, though concerns remain over vulnerabilities and Zcash's founder's tax. Overall, zero-knowledge proofs like Zk-SNARKs mark a major step forward for blockchain privacy and security.  

> **Article Sources**
>
> 1.  Zcash. "[What Are ZK-Snarks?](https://z.cash/learn/what-are-zk-snarks/)"
>     
> 2.  JTRiley. "[Constructing ZK SNARK Circuits](https://jtriley.substack.com/p/constructing-zk-snark-circuits)."