The blockchain technology has thoroughly revolutionized various industries, enabling secure and transparent transactions without the need for intermediaries. Despite its far-reaching transformative impact, integrating real-world data into blockchain systems remains a persistent challenge. Oracles play a crucial intermediary role in this process, seamlessly connecting 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, known as ZK Oracle. It fully leverages the powerful capabilities of Zero-Knowledge Proofs (ZKP) to address these challenges. This innovative approach cleverly combines the strengths of ZKP and oracles, ensuring a higher level of data privacy in the blockchain space.
What is an Oracle?
Oracles act as trusted providers of information from external sources, supplying the chain with data from multiple databases, including token prices, transaction activities, wallet balances, and more. Oracles provide application programming interfaces (APIs) that allow for computations based on real-world events and data. In short, oracles collect, query, verify, and validate data from multiple sources and pass it on to smart contracts.
However, traditional oracle networks, such as Chainlink or The Graph, often rely on staking mechanisms, requiring nodes to stake assets to participate. This approach has inherent limitations, especially in terms of trust and susceptibility to manipulation.
This is where ZK Oracle comes into play, aiming to fundamentally improve the efficiency and trustworthiness of oracles by innovatively integrating ZKP.
What is a ZK Oracle?
ZK Oracle, short for Zero-Knowledge Oracle, cleverly integrates ZKP with smart contracts, creating a flexible on-chain/off-chain solution. This innovative approach enhances the efficiency and security of oracles in the blockchain ecosystem, achieving cost-effective off-chain computation and storage.
To address the challenges of traditional oracles, ZK Oracle provides several solutions:
Establishing autonomous networks.
Enhancing base-layer security.
Adopting a 1-of-N trust model to ensure system functionality as long as at least one node behaves as expected.
Reinforcing decentralization.
Efficiently allocating computational power, aiming to minimize waste.
A significant advantage of ZK Oracle is its ability to protect data privacy while ensuring the integrity and authenticity of transmitted information. Unlike traditional oracles that publicly broadcast data to the blockchain, ZK Oracle provides evidence of the data without exposing the data itself, giving it a unique advantage. This makes it particularly outstanding in applications that require a careful balance between transparency and privacy.
Architecture of ZK Oracle
Image source: Gu and Nawab
According to Gu and Nawab, the architecture of ZK Oracle includes the following unique components:
Data Sources: These entities collect or generate raw data from various sources, such as IoT devices, serving as the starting point for the computation process.
Off-chain Provers: These entities receive raw data from data sources and perform computations. By using zk-SNARK (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) computations, they generate evidence to prove their computations.
Consumers: Interacting with the blockchain through smart contracts, consumers submit 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 digests associated with computation results and ZK proof data, smart contracts ensure the integrity of ZK proofs. They also execute penalty strategies if invalid proofs are detected.
Utilizing Advanced Batch Processing Algorithms to Accelerate ZK Proof Generation
Gu and Nawab proposed a batch processing algorithm designed to accelerate ZK proof generation, utilizing both horizontal and vertical batch processing techniques. Horizontal batch processing merges multiple proofs into a single proof, while vertical batch processing integrates similar computations into a unified proof. These strategies significantly improve the efficiency of ZK proof generation, achieving a performance improvement of up to 550 times compared to standard methods.
Practical Application Areas
ZK Oracle demonstrates its versatility in various fields, with specific applications including:
Price Feeds: In DeFi applications, ZK Oracle simplifies the operation of price feeds, eliminating the need for continuous updates and expensive storage on the blockchain.
Secure Data Sources: ZK Oracle provides a secure way to obtain data from untrusted parties. For example, users can generate zero-knowledge proofs of their bank balances without revealing sensitive details. This is used as collateral for obtaining loans in decentralized finance, enhancing trust in financial transactions.
Secure Voting Systems: ZK Oracle can be applied to secure voting systems, achieving verifiable results without exposing individual votes.
Identity Verification: In identity verification scenarios, ZK Oracle provides valuable support for verifying user identities without disclosing complex details in their records, ensuring a security- and privacy-centric approach.
Supply Chain Systems: ZK Oracle facilitates the verification of product authenticity without revealing proprietary information, ensuring trust and transparency in supply chain processes.
Overview of Building ZK Oracle Projects
Hyper Oracle
Hyper Oracle focuses on creating a dedicated ZK Oracle network for the Ethereum blockchain. The system efficiently extracts data from each Ethereum block, retrieves using zkPoS, and processes data using zkWASM-supported programmable zkGraphs. The approach adopted ensures secure and minimally trusted off-chain computation through ZK technology. This innovative approach not only creates possibilities for expanding Ethereum smart contracts but also empowers them to handle complex tasks such as automation and machine learning.
Image source: Hyper Oracle
In January 2023, Hyper Oracle successfully completed a funding round, raising a total of $3 million, led by the incubation fund Dao5 of Sequoia China, along with other prominent institutions and angel investors. This funding will be dedicated to further research and development of ZK Oracle and blockchain infrastructure.
Mina Protocol
(0)1Labs, as a partner of the Mina Protocol ecosystem, is actively building a ZK Oracle. The unique aspect of Mina's ZK Oracle lies in its 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 enables localized computation on individual machines.
Using price feeds as an example—users can flexibly query multiple trusted APIs, calculate average prices, and perform complex off-chain operations. Through ZK Oracle, users can query prices without incurring costs until the desired result is achieved. Only after obtaining the expected result will on-chain execution take place, thereby achieving a more simplified and cost-effective architectural design. This unique two-step execution model is unique to ZK Oracle on Mina, providing a powerful method for secure and efficient interaction with off-chain data.
Nil Foundation
In August 2023, pioneering in the liquidity staking space, Lido Finance announced a significant initiative. The company revealed that it will fund Nil Foundation, an Ethereum research and development company, for the development of ZK Oracle, as part of the Lido Grant. The clear objective of this strategic collaboration is to establish minimal-trust soundness checks for Lido Finance's accounting reports, ultimately strengthening Lido Finance's liquidity. Notably, the proofs of ZK Oracle computations will be signed directly from the Ethereum Virtual Machine (EVM) using Proof Market, a recently launched gateway interface ensuring provable computation composability for all EVM applications, marking significant progress in the field.
Future Prospects of ZK Oracle
As ZK Oracle emerges in the oracle space, there are still some challenges that need to be addressed. The complexity involving sources, nodes, and users in the three-party handshake protocol 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 its unique advantages and wide-ranging applications, ZK Oracle is at the forefront of fundamentally changing blockchain systems. They have the potential to support trustless and decentralized applications, relying on accurate and verifiable off-chain data, marking a significant leap in the field of blockchain technology. The development path of ZK Oracle not only represents innovation but also signifies a redefinition of our understanding and interaction with blockchain systems.
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