What Are Zero-Knowledge Proofs in Cryptocurrency? A Clear Guide to Privacy and Scalability

What Are Zero-Knowledge Proofs in Cryptocurrency? A Clear Guide to Privacy and Scalability
6 December 2025 0 Comments Michael Jones

ZKP Comparison Tool

Zero-Knowledge Proof Comparison

Compare the key characteristics of different zero-knowledge proof implementations used in cryptocurrency. Select one or more options to see side-by-side differences.

Comparison Results

Feature zk-SNARKs zk-STARKs Bulletproofs
Proof Size ~288 bytes ~45 KB ~1–2 KB
Trusted Setup Yes No No
Verification Speed 3–10 ms 10–20 ms 15–30 ms
Used By Zcash, zkSync, StarkNet StarkNet, Polygon zkEVM Monero
Key Takeaway: zk-SNARKs offer the smallest proofs and fastest verification but require a trusted setup. zk-STARKs are trustless but slower and larger. Bulletproofs provide a middle ground with strong privacy for Monero.

Imagine sending money to someone without ever telling anyone who you are, who they are, or how much you sent. No public ledger showing your balance. No trail for anyone to follow. That’s not science fiction-it’s what zero-knowledge proofs make possible in cryptocurrency.

What Exactly Is a Zero-Knowledge Proof?

A zero-knowledge proof (ZKP) lets one person prove they know something-like a password or a secret-without actually saying what that thing is. Think of it like proving you’re over 21 to enter a bar without showing your ID. You just say, "I am," and the bouncer believes you because of how you answer their questions.

In math terms, a ZKP must satisfy three rules:

  • Completeness: If you’re telling the truth, the system will confirm it.
  • Soundness: If you’re lying, you can’t trick the system.
  • Zero-knowledge: The verifier learns nothing except that the statement is true.
These aren’t just theoretical ideas. They were first described in a 1985 paper by cryptographers Shafi Goldwasser, Silvio Micali, and Charles Rackoff. But they didn’t become practical in crypto until 2013, when the Zerocoin project tried to add privacy to Bitcoin. That led to Zcash in 2016-the first major cryptocurrency to use ZKPs at scale.

How ZKPs Work in Crypto Transactions

Most blockchains are public. Every transaction is visible. If you send 5 ETH to someone, anyone can see your address, their address, and the amount. That’s fine for some use cases-but not for people who want true financial privacy.

Zcash solved this with zk-SNARKs (Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge). Here’s how it works in simple terms:

  • You create a shielded transaction-hiding sender, receiver, and amount.
  • Your wallet runs a complex math process to generate a tiny proof (about 288 bytes).
  • The network checks that proof in under 10 milliseconds.
  • If the proof is valid, the transaction is added to the blockchain-without ever revealing the details.
The magic is that the proof doesn’t contain any data about the transaction itself. It’s just a mathematical certificate saying, "This transaction follows all the rules. Trust me." This is why Zcash users report being able to conduct over 100 shielded transactions without any traceable links between addresses. Tools like BlockSci, used by researchers, can’t connect the dots because there are no dots to connect.

zk-SNARKs vs. zk-STARKs vs. Bulletproofs

Not all ZKPs are the same. Three main types dominate crypto today:

Comparison of Zero-Knowledge Proof Types in Cryptocurrency
Type Proof Size Trusted Setup? Verification Speed Used By
zk-SNARKs ~288 bytes Yes 3-10 ms Zcash, zkSync, StarkNet
zk-STARKs ~45 KB No 10-20 ms StarkNet (future), Polygon zkEVM
Bulletproofs ~1-2 KB No 15-30 ms Monero
zk-SNARKs are the most popular because they’re small and fast. But they need a "trusted setup"-a one-time ceremony where multiple people generate secret keys. If even one person keeps their key, they could forge transactions. Zcash solved this by having six people from six countries each destroy their part of the key after contributing. It’s like burning the master password after making copies.

zk-STARKs don’t need that setup. They’re more secure in theory, but their proofs are bigger and slower to verify. Bulletproofs, used by Monero, are a middle ground: no trusted setup, decent size, and strong privacy through ring signatures. Monero’s 2018 upgrade cut transaction sizes by 80% and verification time by 97%.

Superhero with zero-knowledge cloak turns high gas fees into pennies as transaction trails vanish in confetti clouds.

Why ZKPs Are Changing Ethereum

Ethereum’s biggest problem isn’t security-it’s cost and speed. The base chain can only handle 15-45 transactions per second. Gas fees spike during busy times.

Enter zk-Rollups. These are layer-2 solutions that bundle hundreds of transactions into one proof, then submit it to Ethereum. The network doesn’t check each transaction-it just checks the proof. That means:

  • 2,000+ transactions per second (vs. Ethereum’s 45)
  • Gas fees drop from $1.50 to $0.02 per transaction
  • Security stays the same-Ethereum still validates the proof
zkSync and StarkNet are leading this charge. As of December 2023, they held over $3.4 billion in total value locked. Ethereum’s own ZK-EVMs-versions of its smart contract system built for ZKPs-are expected to handle over half of all Ethereum transactions by 2027, according to Vitalik Buterin.

This isn’t just about scaling. It’s about making crypto usable for everyday payments, DeFi, and even NFTs without the headaches of high fees and slow confirmations.

Real-World Use Cases Beyond Privacy

ZKPs aren’t just for hiding money. They’re being used to solve bigger problems:

  • Identity verification: Prove you’re a citizen without showing your passport.
  • Supply chain tracking: Prove a product is ethically sourced without revealing supplier names.
  • Vote verification: Prove you voted without revealing who you voted for.
  • Compliance: JPMorgan’s Onyx system uses ZKPs to verify transactions for regulators while keeping client data private.
Even regulators are adapting. The Financial Action Task Force (FATF) now says privacy tech like ZKPs must comply with anti-money laundering rules-but without breaking privacy. Zcash’s "Zfuture" upgrade, announced in February 2024, is one of the first attempts to meet this balance.

Characters at a picnic table burn a 'Toxic Waste' key while one holds a map with no dots, symbolizing privacy.

Challenges and Criticisms

ZKPs aren’t perfect. Here are the real issues:

  • Computational power: Generating a proof can take over a minute on a regular laptop. That’s why most users rely on cloud-based provers.
  • Centralization risk: 67% of zkSync’s proving power comes from just three data centers. That’s a single point of failure.
  • Metadata leaks: Even if amounts are hidden, timing, frequency, and address patterns can still be analyzed. Researchers like Dr. Sarah Jamie Lewis warn that "privacy is not guaranteed-just obfuscated."
  • Developer complexity: Writing ZKP-enabled smart contracts takes 3-4 times longer than regular ones. Only about 2,147 developers worldwide are actively building with ZKPs as of 2024.
And then there’s the learning curve. To work with zk-SNARKs, you need to understand elliptic curves, polynomial commitments, and finite fields. Tools like Circom and ZoKrates help-but they’re not beginner-friendly.

What’s Next for Zero-Knowledge Proofs?

The roadmap is aggressive:

  • By late 2025, ZK-EVMs will fully match Ethereum’s execution environment, removing compatibility issues.
  • Quantum-resistant ZKPs are being developed for 2026-2027 to protect against future attacks.
  • Specialized hardware chips for ZK proving are in early testing-this could cut proof times from minutes to seconds.
  • Decentralized proving networks like Espresso Systems are launching to reduce reliance on centralized providers.
Market analysts at Messari predict ZKP-based solutions will control 35-40% of the Layer-2 market by 2026. That’s a $12.8 billion opportunity.

The biggest shift? ZKPs are moving from a privacy feature to foundational infrastructure-like SSL for the web. Just as HTTPS became standard for secure browsing, ZKPs are becoming standard for secure, private, scalable blockchain transactions.

How to Get Started

If you’re curious about using ZKPs:

  • Try Zcash: Send a shielded transaction using the Zcash wallet. You’ll see the difference in privacy.
  • Use zkSync: Send a small amount of ETH on zkSync Era. You’ll pay pennies and get instant confirmations.
  • Explore open-source tools: 0xPARC offers free weekly ZK coding workshops with hundreds of participants.
You don’t need to be a cryptographer to benefit. Just like you don’t need to know how your phone encrypts data to use iMessage securely.

Are zero-knowledge proofs completely anonymous?

No. ZKPs hide transaction details like sender, receiver, and amount, but they don’t eliminate all metadata. Timing, frequency, and address usage patterns can still be analyzed. For true anonymity, ZKPs need to be combined with other techniques like mixing or ring signatures-as Monero does.

Can I use ZKPs with Bitcoin?

Not natively. Bitcoin’s design doesn’t support complex ZKPs like zk-SNARKs. But projects like Taro and Taproot have laid groundwork for future privacy upgrades. Zcash, which started as a Bitcoin fork, is the closest real-world example of Bitcoin-style privacy using ZKPs.

Why do some ZKPs need a trusted setup?

zk-SNARKs require a one-time setup to generate public parameters used in proving. If someone keeps the private part of those parameters (called "toxic waste"), they could create fake proofs. The trusted setup spreads this risk across multiple people-each destroys their part. Zcash’s 2016 ceremony involved six people from six countries, all publicly verifying each step.

Are ZKPs faster than regular blockchain transactions?

Verification is extremely fast-under 10 milliseconds. But generating the proof can be slow, especially on consumer hardware. That’s why most users rely on cloud provers. On layer-2 solutions like zkSync, the whole process is optimized so users feel near-instant results.

Do ZKPs make crypto more secure?

They don’t prevent hacks or bugs in code, but they add a layer of cryptographic integrity. A ZK proof guarantees that a transaction followed all rules without needing to reveal the data. This reduces attack surfaces and makes fraud detection more reliable, especially in complex smart contracts.

What’s the difference between ZK-Rollups and Optimistic Rollups?

ZK-Rollups use zero-knowledge proofs to prove transactions are valid before they’re added to Ethereum. Optimistic Rollups assume they’re valid and only check if someone disputes them-requiring a 7-day waiting period to withdraw funds. ZK-Rollups are faster to withdraw and more secure, but harder to build.