Recently, the blockchain team at investment bank JPMorgan developed an extension to the Zether protocol. Zether is a fully decentralized, cryptographic protocol that governs confidential payments and whose design adds an extra layer of anonymity to transactions. Furthermore, it is compatible with Ethereum as well as other smart contract platforms.
The popular financial institution based in New York plans to open-source the extension on Tuesday, June 4, 2019. There’s also a strong possibility of the utilization of Quorum, which is in the works right now. Quorum is the private version of Ethereum that’s homegrown by the bank.
On their website, Quorum boasts that it is, “…an open source blockchain platform that combines the innovation of the public Ethereum community with enhancements to support enterprise needs.” They provide users with consensus algorithm choices, privacy options, and deployment configurations. All of this is in one scalable platform, which will allow users to solve their business needs however they see fit.
The origin and basics of the Zether Protocol
Zether is an outcome of the efforts of a group of academics and financial technology researchers. One of the participating researchers was Dan Boneh from the University of Stanford. These individuals created Zether by using zero-knowledge proofs (ZKPs), which is a specific branch of mathematics. It allows one party to prove knowledge of a secret value or information without conveying any detail regarding the secret.
According to the Zether white paper:
“We implement Zether as an Ethereum smart contract and show the practicality of our design by measuring the amount of gas used by the Zether contract. A Zether confidential transaction costs about 0.014 ETH or approximately $1.51 (as of early Feb, 2019).”
For contextual purposes, ‘gas’ is an integral unit that Ethereum commonly uses. It refers to the pricing value that is the requirement for successfully administering a transaction. That, or carry out a smart contract on the Ethereum blockchain. The primary function of gas is to measure how much ‘work’ an action or a set of actions takes to perform. Pretty much every operation that a transaction or contract accomplishes costs a specific amount of gas. Procedures that need more computational resources cost more gas than the operations that usually require very few computational resources.
Oli Harris, the head of Quorum and JPMorgan’s crypto assets strategist, explains what exactly the new Zether extension does:
“In the basic Zether, the account balances and the transfer accounts are concealed but the participants’ identities are not. So we have solved that. In our implementation, we provide a proof protocol for the anonymous extension in which the sender may hide herself and the transactions recipients in a larger group of parties.”
JPMorgan’s recent accomplishments
The sudden development concerning blockchain and JPMorgan should come as no surprise to anyone paying attention to them. To elaborate, their year has been incredibly busy in the blockchain space, and not just for their plan for their price-stable cryptocurrency, JPM Coin.
The firm has captured the attention of an astounding 220 banks to its Quorum Interbank Information Network. Not only that, it has seen the completion of a load of integration work with Microsoft Azure. To make this more impressive, they did this while simultaneously preparing Quorum for its release as an open-source protocol.
According to Harris, the Zether confidential payments framework incorporates an approach that is account-centric that Ethereum employs. This is in contrast to the Unspent Transaction Output (UTXO) approach, which is what the Bitcoin clientele uses. The UTXO is also a feature of the cryptocurrency, Zcash, from which the original ZKP component of Quorum derives.
UTXO is a system that is accessible across the globe. It exists in a global database – the UTXO set – where you can view all spendable accounts available for Bitcoin transactions. To create a new transaction, you have to employ some unspent output deriving from the UTXO. This will effectively result in the shrinkage of the UTXO. Alternatively, if you construct a new unspent output, the UTXO will experience substantial growth.
With this in mind, it’s apparent that the Zether extension could lead to benefits for an array of groups. Not just Quorum users, but also enterprises building on top of other Ethereum variants. Alternatively – and conceivably – businesses that leverage the public Ethereum chain.
Preserving transaction facets as being between banks and other confidential sources through the use of Zether may be an advantage for certain projects. One of them, for example, is the Ethereum-based project, Komgo, which involves trading within the energy space.
“When we think about the community building on top of Quorum”, Harris states, “if anyone is looking to get an efficient trustless mechanism for trustless and anonymous payments in a consortium then that’s when it’s relevant. That’s why we wanted to open-source it back to the community so anyone can build on it further and continue enhancing it and potentially put it into their use cases as needed.”
Harris’ job is to basically strengthen Quorum efforts within the bank and everything beyond it. He adds that “When we look at our own JPMorgan applications, [the extended version of Zether] will be one choice of many that we will be looking at.”
With all of these praises being said about the extension, there is one drawback. It pertains to the complexity of the zero-knowledge proving schemes. This particular drawback is the amount of computation they eat, which has the potential to slow down blockchains.
Be that as it may, Harris believes otherwise. He said the additional cryptography for concealing participant identities does not appear to have that effect with Zether. He concludes his thoughts with the following statement:
“The performance is quite good; we had done multiple iterations to improve it and we are doing the verification in solidity smart contracts. We’ll be including in our report the performance measurements for proving and verification.”