Zero-Knowledge Proofs: The Future of Crypto Privacy

Upcoming Zerolend TGE - one protocol, many airdrops! (zkSync, Linea, Blast)

Hello anon!

We've been exploring the Bitcoin ecosystem recently, diving into Bitcoin DeFi and Layer 2 platforms. Today, let's pivot to something different: zero-knowledge proofs (ZKPs).

ZKPs have become a core part of crypto. They offer a way to conduct transactions and computations securely and privately, which is crucial given that traditional public blockchains offer little to no privacy.

Among the champions of this technology is Ethereum's co-founder, Vitalik Buterin, who has expressed strong optimism about its potential to enhance privacy and scalability in blockchain networks making it one of the hottest narratives in the crypto space.

A key player in this arena is Zerolend, set for its upcoming Token Generation Event (TGE). 

Zerolend is a powerful gateway to multiple zk chains, allowing users to interact seamlessly with platforms like zkSync, Linea, Blast and others. 

By using Zerolend, participants can bridge between these chains, qualifying for multiple airdrops through a single protocol.

However, before we get into all that, let's start with the basics.

What exactly are ZKPs? How do they function, and what makes them so crucial? 

We'll uncover all of this in today’s newsletter.

We'll also guide you on how to effectively engage with leading zk platforms, with a special focus on leveraging Zerolend to maximize your benefits across various zk chains.

Ready to dive into the rabbit hole? Let's roll, Anon! 🎩✨

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WTF are ZKPs? 🤔

The concept of ZKPs has been around since the 1980s, thanks to the pioneering work by MIT researchers Shafi Goldwasser, Silvio Micali, and Charles Rackoff. Oh yeah, that’s the same Silvio Micali who created Algorand.

So, what exactly are ZKPs?

Imagine Alice, the “prover,” has a secret, and she wants to prove to Bob, “the verified,” that she knows the secret without revealing it. That, in a nutshell, are ZKPs.

One real-world implication of this is in password protection. Typically, you input your password, which the server hashes and checks against a stored hash to grant access. But this method exposes your password to the server, and if the server is compromised, so is your password. 

ZKPs can address this vulnerability by proving knowledge of the password without ever revealing the password itself.

A proper ZKP must meet three criteria:

  • Completeness: If the statement is true, an honest verifier will be convinced by an honest prover.

  • Soundness: A dishonest prover cannot convince the verifier of a false statement.

  • Zero-Knowledge: The verifier learns nothing about the statement itself, just that it is true.

ZKP Thought Experiments🧫

Let’s break this down with a few examples so that you can understand what this means👇

Case #1: Alibaba's Cave

Imagine a prover claiming to know the password to a secret door in a cave. The verifier waits at the entrance while the prover enters one of two paths, A or B. The verifier asks them to exit through the opposite path without seeing which path the prover took.

 If the prover truly knows the password, they can repeatedly meet the verifier's challenge, demonstrating their knowledge without revealing the password. 

This satisfies all three ZKP properties:

  • Completeness: The honest prover convinces the honest verifier.

  • Soundness: Repeated tests prevent a lucky guess from misleading the verifier.

  • Zero-Knowledge: The verifier confirms the claim without ever learning the password.

Case #2: The Colorblind Friend

In another scenario, two friends, one of whom is colorblind, use two differently colored balls—red and green. The friend with normal vision proves the balls are distinguishable without revealing which is which. 

By repeatedly challenging the colorblind friend to identify if the balls were switched, and consistently identifying correctly, the color-seeing friend convinces the other of the balls' distinctness without disclosing specific colors. 

This also effectively demonstrates the principles of zero-knowledge.

  • Completeness: The honest prover convinces the honest verifier.

  • Soundness: Repeated tests prevent a lucky guess from misleading the verifier.

  • Zero-Knowledge: The verifier confirms the claim without ever learning the real colour of the balls.

These examples highlight how ZKPs can protect privacy and verify claims without compromising sensitive information, a cornerstone in today's digital and increasingly privacy-conscious world. 

Now, let’s see how ZKPs are being used in crypto in various platforms like L2 and lending. Read on anon! 👇

Making It Rain With ZeroLend 

Alright, let's dive into the details of one of the most anticipated protocols. While the opportunities to farm the token launch have passed, ZeroLend still presents numerous other avenues for potential gains. First, we'll provide an overview of what ZeroLend is all about. Then, we'll offer a guide on how to profit from utilizing ZeroLend.

Full disclosure: Momentum 6 has invested in ZeroLend.

What Is ZeroLend?

ZeroLend is much more than just a decentralized lending protocol; it is a pioneer in the ever-evolving DeFi landscape. On April 29, ZeroLend will launch its eagerly awaited token, ZERO. By offering a secure, transparent, and efficient platform for borrowing and lending digital assets, ZeroLend aims to usher in a new era of financial services. 

At its heart, ZeroLend is built on the values of transparency, security, and efficiency. Leveraging blockchain technology, ZeroLend removes intermediaries like banks or conventional financial bodies, providing users with direct lending and borrowing services. 

This peer-to-peer approach not only cuts down on needless costs and waiting times but also enables individuals and businesses to manage their financial futures autonomously.

The TVL has seen a significant increase over the course of this year, reflecting its rising popularity among users.

The rise in TVL has been accompanied by a surge in user activity since last year. However, activity has seen a recent decline, attributed to farmers shifting their focus away due to the token launch and a downturn in recent market conditions.

The Tech Behind ZeroLend 🧑‍💻

What truly distinguishes ZeroLend is its integration of zkSync, an L2 scaling solution powered by zero-knowledge-proof technology. This integration significantly enhances the platform's scalability, privacy, and cost-efficiency, effectively mitigating the limitations of Ethereum's mainnet. With zkSync, ZeroLend can process transactions faster and at a fraction of the cost, making lending and borrowing more accessible to a broader crypto audience.

  • Scalability has long been a stumbling block for Ethereum, often resulting in network congestion and exorbitant transaction fees. However, with zkSync, ZeroLend surmounts these obstacles, creating a scalable ecosystem capable of accommodating a growing user base without compromising on performance.

  • ZeroLend's Account Abstraction (AA) technology simplifies blockchain processes, ensuring smoother user experiences and heightened security. It eliminates the need for storing seed phrases and streamlines transactions, making the platform more user-friendly and efficient.

  • Privacy and security are paramount in the world of DeFi, and ZeroLend prioritizes these aspects by leveraging zkSync's zero-knowledge-proof technology. This ensures the confidentiality of user data, fostering trust and confidence within the ZeroLend community.

  • ZeroLend's integration of Real World Asset (RWA) lending introduces new opportunities. By tokenizing assets like stocks and real estate, ZeroLend enables businesses worldwide to access capital without traditional banking hurdles. 

  • Additionally, ZeroLend introduced the concept of High Efficiency Mode (E-Mode), a novel approach to capital efficiency in DeFi lending. E-Mode empowers borrowers to maximize their borrowing capacity by utilizing correlated assets within the same category as collateral, thereby optimizing capital utilization and rewarding responsible borrowing behavior. With features like higher Loan-to-Value ratios and liquidation bonuses, E-Mode offers users greater control over risk exposure and financial flexibility, further cementing ZeroLend's position as a trailblazer in the DeFi space.

Furthermore, ZeroLend has prioritized security by subjecting its smart contracts to audits by multiple entities. This rigorous approach aims to bolster the platform's security measures and instill confidence in its financial products among users. View the full report here.

How To Profit With ZeroLend

Now that we have the foundations in place and have an idea of what ZeroLend is all about, let’s explore how you can use this protocol to benefit.

ZeroLend has put a lot of groundwork in, and they have launched their protocol on zkSync, Linea, Blast, and Manta. This section will dive specifically into Linea, Blast, and zkSync.

Let’s first give a brief description of what each does.

zkSync, Blast, and Linea represent innovative Layer 2 scaling solutions for Ethereum, each addressing the network's challenges in their unique way. zkSync employs zero-knowledge rollups to bundle transactions off-chain, significantly reducing costs and enhancing transaction efficiency while maintaining security through Ethereum Mainnet verification. 

In contrast, Blast operates under an Optimistic Rollup infrastructure, where transactions are optimistically executed on the Blast network but settled and verified on Ethereum, offering native yield to users. On the other hand, Linea, developed by ConsenSys, offers a fully equivalent EVM (Ethereum Virtual Machine) L2 network, combining scalability, low gas fees, and familiar Ethereum infrastructure for developers. 

These Layer 2 solutions exemplify the ongoing innovation in Ethereum scalability, offering users and developers efficient, cost-effective alternatives to the Ethereum Mainnet. Additionally, it's worth noting that all these L2s are conducting airdrops, providing further incentives for users to explore and engage with these platforms.

Through its user-friendly interface, users can consolidate their transaction history across these L2s into one central and secure platform.

First, we need to bridge funds from the Ethereum Mainnet to these L2s. You can easily accomplish this by using deBridge which has an ongoing points program.

Alternative tokenless bridges you should also be farming👇

Once the funds have been successfully transferred and reflected on the L2 network you want to farm on, head over to ZeroLend. Navigate to the app and connect your wallet.

Navigate to the Dashboard section. Here, you can monitor your positions and provide take-out loans or liquidity. Use the dropdown menu next to the "zkSync Market" label to select the desired L2 network you want to operate on.

If you're looking to provide liquidity, make sure to review the available tokens beforehand to ensure you have them on hand before proceeding to ZeroLend. Let's take Linea as an example. On Linea, you can provide liquidity for tokens like USDC, MAI, and USDT, among others, and earn a competitive APY, take note of the 35% APY for providing liquidity for MAI. Conversely, you can borrow tokens such as USDC, USDT, WBTC, and ETH.

Let’s take a look at the APYs on Blast and zkSync.

While the overall APYs may currently be low, various points programs are being conducted for liquidity provision or borrowing activities. By engaging in these activities across different protocols like Linea, Blast, and zkSync, users can qualify for multiple airdrop events. It's worth noting that Eigenlayer points can also be earned through these activities, further enhancing the potential rewards for participants.

In summary, to prepare for the upcoming airdrops It's advisable to provide liquidity for various tokens and then withdraw these funds, repeating the cycle. The same approach applies to borrowing—start with small amounts and repay the loans after a few days. This ensures multiple transactions are recorded, increasing eligibility for airdrops on these L2s.

Moreover, with gas fees reduced and transaction costs significantly lowered on these L2 solutions, the process is far more cost-effective than in the past. This makes it more accessible for users to engage in liquidity provision, borrowing, and other activities on these platforms without incurring exorbitant fees.

Have you ever used any zero-knowledge tech before?

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That wraps it up for today, anon! We trust you found this issue insightful and that it sets you on course for your venture into the zk universe!

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