[The Secret of Zcash ③] What if Zero-Knowledge Proofs Fail?…The Revolving Door Blocks It

The core of Zcash's verification technique is Zero-Knowledge Proofs.

What if counterfeit money is hidden in a 'black room'?

It is protected at the door with an Ironwood upgrade.

The privacy coin Zcash (ZEC) has a fixed supply of 21 million coins, just like Bitcoin. It maintains anonymity through triple and quadruple cryptographic mechanisms.

It is like gathering coins in a black room that cannot be seen into. What happens if someone maliciously creates and adds more coins to this black room? Due to its strong privacy features, it would be impossible to identify the culprit, and if the problematic coins cannot be blocked, what then?

Zcash has safety mechanisms in place for when the verification device itself fails. To understand this structure, one must first grasp Zero-Knowledge Proofs.

Zero-Knowledge Proofs: Proving "I know it!" without revealing the password

In typical bank transactions or when using Bitcoin, everything is publicly recorded, including "who sent what amount to whom." In contrast, Zcash uses the cryptographic technique known as Zero-Knowledge Proofs to protect transaction information.

Zero-Knowledge Proofs are akin to "opening the door of a secret room and stepping out." Even if you don't directly tell your friend the password to the room, by showing them that you can enter the secret room and walk out through the opposite door, they will believe you know the password.

Zcash mathematically verifies that "this transaction is a legitimate transaction" without disclosing the sender, receiver, or transaction amount at all.

The Hole in the Proof System: Counterfeit Money Hidden in the 'Secret Room'

If the 'proof system (Zero-Knowledge Proof circuit)' that determines whether a transaction is genuine has errors or vulnerabilities, the situation becomes very dangerous.

In a blockchain like Bitcoin, where the ledger is public, fake coins can be detected immediately. However, Zcash stores transaction histories and balances in a 'Shielded Pool,' a black room that cannot be viewed from the outside.

If there is a hole in the soundness, an attacker could create fake proofs that appear to meet conditions that are not actually satisfied, allowing them to pass network verification. If this issue is exploited, it could lead to the creation of counterfeit ZEC that should not exist.

In fact, such vulnerabilities for counterfeiting were discovered in Zcash's proof system called Orchard. At this time, a problem known as the 'privacy paradox' arose. Because the ledger was sealed tightly to hide the transaction information of honest users, it became impossible to open the ledger and trace whether someone had actually created fake coins using this hole in the past.

Blocking the Entrance and Installing a Revolving Door at the Exit: The 'Ironwood' and 'Turnstile' Solutions

To solve this problem, the Zcash development team phased out the Orchard Pool and opened a new shielded pool called 'Ironwood.' They also installed a special accounting checkpoint called 'Turnstile' at the junction where funds are moved from the old Orchard room to the new Ironwood room.

The operation of the Turnstile is similar to the entrance gates at amusement parks or subway stations.

• Entrance Seal: Prevents new shield outputs from being created in Orchard, ensuring that new value does not accumulate in the pool.
• Exit Limit Setting: The Turnstile sets a cap on the total value that can exit based on the total amount of value that has previously entered the Orchard pool normally.
• Blocking Excess Supply: Even if counterfeit ZEC is created inside the room, it prevents the unlimited extraction of that counterfeit amount outside of Ironwood by adding it to the normal supply.

The Turnstile does not distinguish between real coins and counterfeit coins. Instead, it limits the total amount of value that can exit from Orchard, preventing any additional supply from spreading outside, even if counterfeit ZEC has been created.

Securing Safety with Mathematics: 'Formal Verification'

In building the new Ironwood system, Zcash applied Formal Verification technology.

While the previous method involved "security experts visually inspecting the code but failing to find bugs," formal verification proves the security properties that the system must satisfy as mathematical propositions. This is akin to solving a test problem and verifying it by substituting it into a predetermined mathematical formula to check for potential errors.

Zcash has unidirectionally emptied the Orchard Pool and set a cap on the total value exiting through the Turnstile while introducing the Ironwood Pool, which has been mathematically verified for key security features. This effectively establishes a multi-layered safety mechanism to restore trust in the supply amount in a situation where the past ledger cannot be directly examined due to privacy. Thus, it has regained the trust that "while protecting user privacy, the total supply of 21 million ZEC is safely secured."