Blockchain technology has revolutionized industries by enabling secure and transparent transactions without intermediaries. Despite its transformative impact, incorporating real-world data into blockchain systems remains a persistent challenge. Oracles play a pivotal role as intermediaries, linking blockchains with external data sources. However, traditional oracles often hinge on trusted third parties, introducing concerns about reliability and security.
Enter zkOracles, a promising solution addressing these challenges by harnessing the power of zero-knowledge proofs (ZKPs). This innovative approach seamlessly integrates the strengths of ZKPs and oracles, ensuring a heightened level of data privacy within the blockchain landscape.
What are Oracles?
An Oracle serves as a trusted external source that furnishes chains with information obtained from various databases. The range of data encompasses token prices, transaction activity, wallet balances, and more. Oracles provide an Application Programming Interface (API) that allows the execution of computations based on real-world events and data. In essence, oracles gather, query, verify, and validate data from diverse sources, delivering them to smart contracts.
Yet, traditional oracle networks like Chainlink or The Graph often rely on staking mechanisms that mandate nodes to stake collateral to participate. This method presents inherent limitations, particularly in terms of trust and vulnerability to manipulation.
This is where zkOracles come into play, poised to revolutionize oracle efficiency and trustworthiness through the innovative integration of ZKPs.
What About zkOracles?
zkOracles, an abbreviation for zero-knowledge oracles, seamlessly integrate ZKPs and smart contracts, creating a dynamic on-chain/off-chain solution. This innovative approach enhances both the efficiency and security of oracles within the blockchain ecosystem, enabling cost-effective off-chain computing and storage.
Addressing the challenges of traditional oracles, zkOracles offer several solutions:
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Establishment of an autonomous network.
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Improved base layer security.
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Adopting a 1-of-N trust model, ensuring system functionality as long as at least one node behaves as expected.
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Enhanced decentralization.
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Efficient allocation of computing power, aiming to minimize waste.
A notable strength of zkOracles is their ability to safeguard data privacy while ensuring the integrity and authenticity of transmitted information. In contrast to traditional oracles that openly broadcast data to the blockchain, zkOracles offer a unique advantage by providing evidence of data without exposing the data itself. This makes them particularly well-suited for applications requiring a careful balance between transparency and privacy.
Architecture of zkOracles
Image via Gu and Nawab
As outlined by Gu and Nawab, the architecture of zkOracles consists of these distinct components:
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Sources: These entities collect or generate raw data from various sources such as IoT devices. They act as the origin point for the computation process.
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Off-chain Provers: These entities receive raw data from sources and conduct computations. Using zk-SNARK (zero knowledge Succinct Non-Interactive Argument of Knowledge) computations, they produce proofs for their computations.
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Consumers: Engaging with the blockchain through smart contracts, consumers submit read and write requests. They rely on data and proofs furnished by off-chain provers to make informed decisions.
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Smart Contracts: Responsible for verifying and maintaining digests linked to computation results and zk-proof data, smart contracts ensure the integrity of zk-proofs. They also execute a punishment strategy if an invalid proof is identified.
Accelerating zk-Proof Generation with Advanced Batching Algorithm
Gu and Nawab put forth a batching algorithm designed to accelerate zk-proof generation. This algorithm employs both horizontal and vertical batching techniques. Horizontal batching consolidates multiple proofs into a singular proof, and vertical batching merges similar computations into a unified proof. These strategies enhance the efficiency of zk-proof generation, delivering a remarkable performance improvement of up to 550 times compared to standard methods.
Real World Applications
There are many practical applications for zkOracles, showcasing their versatility across diverse domains:
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Price Feeds: In DeFi applications, zkOracles streamline price feed operations, eradicating the need for continuous updates and expensive storage on the blockchain.
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Secured Data Feeds: zkOracles offer a secure avenue to acquire data feeds from uncooperative parties. For instance, users can generate ZKPs of their bank balance without divulging sensitive details. This serves as collateral for acquiring loans in the decentralized finance sector, bolstering trust in financial transactions.
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Confidential Voting Systems: zkOracles can be applied to confidential voting systems, enabling verifiable results without revealing individual votes.
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Identity Verification: zkOracles prove valuable for identity verification scenarios. They authenticate a user's identity without exposing intricate details from their records, ensuring a secure and privacy-centric approach.
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Supply Chain Systems: zkOracles facilitate the validation of product authenticity without revealing proprietary information. This application ensures trust and transparency within supply chain processes.
Overview of Projects Building zkOracles
Hyper Oracle
Hyper Oracle is developing a zkOracle network exclusively tailored for the Ethereum blockchain. This system efficiently extracts data from every Ethereum blockchain block, utilizing zkPoS for retrieval and programmable zkGraphs powered by zkWASM for data processing. The method employed ensures a secure and trust-minimized off-chain computation through zk technology. This innovative approach not only paves the way for scaling Ethereum smart contracts but also empowers them to tackle intricate tasks like automation and machine learning.
Image via Hyper Oracle
In January 2023, Hyper Oracle successfully secured $3 million in funding through a round co-led by Sequoia China's seed fund, Dao5, and other prominent institutions as well as angel investors. This funding will be dedicated to further research and development of the ZK oracle and blockchain infrastructure.
Mina Protocol
(0)1Labs, a Mina Protocol ecosystem partner, is actively constructing a zkOracle. What sets Mina's zkOracles apart is their unique two-step execution model, orchestrated by zkApps. The initial step entails off-chain verification, affirming the existence of specific information and completed computations. This off-chain verification enables localized computation on individual machines.
Consider the scenario of price feeds—users have the flexibility to query multiple trusted APIs, compute average prices, and conduct intricate off-chain operations. With zkOracles, users can inquire about prices without incurring costs until they achieve the desired outcome. The on-chain execution only takes place once the desired result is obtained, leading to a more streamlined and cost-effective architectural design. This distinctive two-step execution model, unique to zkOracles on Mina, presents a robust and efficient method for secure interactions with off-chain data.
Nil Foundation
In August 2023, Lido Finance, a pioneer in liquidity staking, made a significant announcement. The company revealed its commitment to financing the development of a zkOracle by Nil Foundation, an Ethereum research and development firm, utilizing the Lido Grant. This strategic collaboration has a clear objective: to establish trust-minimized soundness checks for Lido's accounting reports, ultimately fortifying the liquidity of Lido Finance. Notably, the proofs of zkOracle computations will be directly signed from the Ethereum Virtual Machine (EVM) using Proof Market, a recently launched gateway interface that ensures provable computational composability for all EVM applications, marking a noteworthy advancement in the field.
The road ahead for zkOracles
As zkOracles emerge as a beacon of innovation in the oracle space, there are still several challenges to tackle. The intricacies of the three-party handshake between sources, nodes and users are complex and it will take further research and development to iron out the kinks in the system. Several teams like Mina are actively working on addressing these challenges but that will require time.
Armed with distinctive advantages and versatile applications, zkOracles stand on the brink of revolutionizing blockchain systems. Their potential to support trustless and decentralized applications, relying on accurate and verifiable off-chain data, marks a groundbreaking leap in the realm of blockchain technology. The journey of zkOracles is one that promises not just innovation, but a redefinition of how we perceive and interact with blockchain systems.
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