Decentralization can at times be tricky. It may happen that you sometimes sacrifice privacy to attain a certain level of transparency. By broadcasting your transaction details on the ledger, which happens on almost every blockchain, the transaction is publicly validated but you are not in control of your privacy.
Despite its revolutionary impact on the world, people who are aware of its data privacy risks choose to refrain from it or look for more privacy-oriented alternatives. Privacy has become a huge challenge for decentralized applications to tackle.
It’s time companies start focusing on privacy concerns and come up with alternatives. One such solution is developed by Celsius and Horizen Labs.
Celsius, the leading global cryptocurrency yield-earning platform, and the blockchain-building technology company Horizen Labs have launched zkAudit, a fully decentralized and independent proof-of-reserve blockchain built on the Horizen platform.
In this blog, we will explore what is zkAudit and what makes it so unique!
What are zkAudits?
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zkAudit is built to solve the inefficiency and lack of transparency in traditional auditing processes. zkAudit can secure, verify, and validate proof of community assets in near-real-time without relying on third-party validators.
zkAudit is equipped with zk-SNARKs, a privacy technology that allows verification without revealing any identifiable information. This implies that all transactions can remain confidential, meaning, all of the information is encrypted, enabling privacy and at the same time upholding validity in near-real-time.
More on zk-SNARKs
zk-SNARKs is an acronym for zero-knowledge, Succinct, Non-interactive Argument for Knowledge.
The underlying technology falls under the umbrella of zero-knowledge cryptography which proves the possession of information without revealing the information without having the prover and verifier interact with each other.
zk-SNARKs allow proofs to be much more efficient and use fewer data. Considering the fact that it requires no interaction between the two parties, it is comparatively faster, enabling them to be verified nearly instantly.
Celsius and Horizen’s zkAudit
?Traditional double-entry auditing processes are slow and lack transparency. The process of auditing happens at the end of the year and can take months from inception to completion and rely on one to two auditing firms and trusting their information is accurate,? said Alex Mashinsky, CEO of Celsius Network.
?zkAudit enables triple entry audit by using the blockchain and making auditing transparent and removes the need for the slow antiquated process of traditional auditing. We’re thrilled to collaborate with Horizen Labs in this endeavor to bring Proof of Community to life and set the standard for transparency in blockchain finance.?, added Alex.
Horizen
Launched in 2017, Horizen is the most secure and scalable interoperable blockchain platform that enables the deployment of its own public or private blockchains on the largest multi-tiered node network.
Celsius
Built on the belief that financial services should only do what is in the best interest of the customers and community, Celsius is a blockchain-based fee-free platform where membership provides access to curated financial services that are not available through traditional financial institutions.
The Horizen and Celsius partnership was announced in November 2020 and zkAudit is the first major milestone that they’ve conquered together.
How zkAudit works
zkAudit is a perfect example of how projects can utilize the open ledger technology with zero-knowledge privacy technology to verify information without relying on any third parties while preserving privacy. Let’s see how it works!
- Organizations send zero-knowledge proofs of private data to zkAudit for verification using the built-in software.
- zkAudit has access to the transactions that occurred on different blockchains and processes them in an encrypted and aggregated format.
- The private data is verified against the aggregated transactions and added to the zkAudit ledger as proof of reserves/liquidity.
- ZEN is transferred back and forth between the Horizen blockchain and zkAudit, maintaining decentralization and data integrity.
zkAudit will:
- Help prove that Celsius is the owner of particular (but hidden) blockchain addresses.
- Demonstrate that the transactions associated with those addresses are real blockchain transactions.
- Confirm that the sum of those transactions adds up to a certain amount.
Therefore Celsius can unequivocally prove facts such as income/revenue and liquidity without revealing any sensitive information about the underlying transactions that lead to those results. This ensures transparency to users without any compromises on security.
In a nutshell, zkAudit will allow Celsius to conduct audits in near-real-time without dependencies on centralized entities. This allows the community and users everywhere to verify transactions for themselves whenever they wish.
zkAudit brings the best of both worlds, providing critical transparency efficiently while preserving the security and privacy of our users.
Final Thoughts
It is thrilling to see companies come up with such unique and privacy-focused initiatives. One makes way and others follow. It will be interesting to see other companies develop such solutions to the crypto community has a pool to pick from.
Until then, get your smart contracts audit done. It is better to mitigate the risk beforehand than to wait for the hack to happen!?
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