Sometimes the most important thing is easy to miss.
That’s because a lot of the time, something that seems trivial turns out to be nothing of the sort.
Take the problems facing 5G right now. This can all be boiled down to the fact that Western governments don’t believe that Huawei can be trusted with their citizens’ data.
Take the backlash against Facebook. This can all be boiled down to the fact people don’t trust Facebook with their personal data.
Take the 500 million customer details that were stolen by hackers from Marriott Hotels last December – the equivalent to 7.5 times the population of the UK. This can all be boiled down the fact that Marriott Hotels can’t be trusted with people’s personal data.
Safeguarding data sounds like a fairly trivial matter. It’s not something most people think about until something goes wrong.
But all the systems we rely on require data to be kept private. And what’s more, they require that people trust they are keeping this data private.
This is why the two developments I’m going to share with you today are so significant.
On the surface they may sound trivial, but they certainly are not. In fact, they could mark a turning point in the way the world operates.
Why zero-knowledge proofs will change everything
At the moment companies store your data in big centralised databases. So when the database gets hacked, the hacker gets access to everything.
One way of making this information less hackable is to store it on a blockchain such as Ethereum. Once data is on the blockchain, you can’t tamper with it.
The network is secured by thousands of independent computers all around the world.
In order to hack it, you’d need to control more than 51% of its network, which on a big blockchain like Ethereum is essentially impossible.
However, the strength of this network is also its weakness. All the data is public and accessible to anyone. You can see the data without hacking it. True, you can’t tamper with it, but you can still see it.
Enter zero-knowledge proofs.
Zero-knowledge proofs basically let you prove you have certain data without ever showing anyone that data.
So, say you want to prove you’re allowed to leave the country to British Airways, but you don’t want it to have your passport details on file, in case BA gets hacked again.
Instead of giving BA your passport details, you give proof that you own your passport and are able to fly.
Without giving your actual passport details, this may sound impossible, but it’s not.
Or say you ring a call centre to transfer money between your bank accounts.
Instead of giving the call operator your name, address, account number, etc, you just give them proof you have all of that information, but you never give them any of the information itself.
If the call operator is looking to steal your money or sell your information on, they can’t. They don’t actually have any information on you.
This proof all happens automatically, you don’t have to do anything. You just log in to your identity dApp (decentralised app) running on the blockchain.
This means you can prove your identity to any company without ever giving them any information about yourself.
If they get hacked, it doesn’t matter. They don’t actually have any of your personal information, just a line of computer code that proved you are who you say you are. The hacker can’t use it for anything.
This has even wider uses for financial and accounting firms. Zero-knowledge proofs will let them put their records on to the public blockchain without ever really putting them there.
I’ll admit, it’s a hard concept to get your head around, but it’s an important one.
It’s so important in fact, that JPMorgan and big four accounting firm EY have created their own zero-knowledge proof tools for use with Ethereum.
Last week two of finance’s biggest companies, JPMorgan and EY released free zero-knowledge proof tools for use on Ethereum
This is how you know crypto is going mainstream. When the biggest developments are coming from major industry players, not just crypto teams.
And last week, both JPMorgan and EY release their zero-knowledge proof tools for free.
JPMorgan went with an open source licence. And EY went one better, releasing its tools as public domain.
From Coin Desk:
JPMorgan has built an extension to the Zether protocol, a fully decentralized, cryptographic protocol for confidential payments, compatible with ethereum and other smart contract platforms and designed to add a further layer of anonymity to transactions. The New York-based financial institution will open-source the extension Tuesday, and is likely to use it with Quorum, the bank’s homegrown, private version of ethereum.<
Zether, which was built by a group of academics and financial technology researchers including Dan Boneh from Stanford University, uses zero-knowledge proofs (ZKPs), a branch of mathematics which allows one party to prove knowledge of some secret value or information without conveying any detail about that secret.
Again, from Coin Desk (emphasis mine):
Announced Tuesday, EY’s protocol, internally code-named Nightfall, has been developed over the last year by the consulting firm’s team of over 200 blockchain developers and will be published in May. The protocol was created for such use cases as supply chains, food tracing, transactions between branches of a company and public finance.
Like other enterprise blockchain platforms, Nightfall takes advantage of a technology called zero-knowledge proofs to allow private transactions on a shared ledger. But unlike most such endeavors, EY’s software is intended to run on top of the public ethereum network, not a private variant.
Further setting the project apart is the unusual approach EY is taking to intellectual property. The firm said it will not merely open-source the code – that is, release it with a permissive copyright license – but put it in the public domain, with no license at all.
“We want to maximize adoption and community involvement, we want people to adopt it, and adapt it, and improve it. If we retain ownership, people may not invest that much time and energy in something they might not control,” EY’s global innovation leader for blockchain, Paul Brody, explained at a press briefing. “The cleanest way to make everybody use it is just to give it away with no strings attached.”
Nevertheless, Brody suggested this was a difficult decision, telling reporters:
“A year of coding work. This is a million dollars’ worth of stuff we’re giving away.”
The fact that EY’s tools are designed for use on the public Ethereum network is hugely significant. If you want to know why, take a look at my private vs public blockchain article.
EY’s tools are being released as I type this on 31 Ma
So to sum up: much of today’s tech problems come from a lack of privacy and a lack of trust in networks. Blockchain, and Ethereum in particular, has just solved both of these problems.
This is the future, and it’s happening now.
Today, Eoin Treacy is releasing his first ever crypto play, here’s how to get in on it
And on that note, I wanted to let you know that Eoin Treacy is airing his first ever crypto webcast this week.
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But this time is different. Eoin is making a full recommendation on one crypto he believes will go on to make life-changing gains.
You can watch his webcast right now by clicking here. But be quick, it’s only online until 12pm tomorrow.
Until next time,
Editor, Exponential Investor