Intro

Zero Knowledge technology is finding its way into most key blockchain ecosystems. The pace of adoption of this technology, whether for privacy or scalability, has been gaining steam in the last year. ZKV is a team that deeply believes in the game-changing potential ZK has for the blockchain space. And so, we will be writing a series on the projects, working in different ecosystems, who are tapping into the power of Zero Knowledge.

We will be starting with Cosmos, an ecosystem we hold close to our heart, and where we not only validate on multiple sovereign chains but also have been an active participant in its governance and community discussions.

The state of Zero Knowledge in Cosmos

Implementations of ZK tech are still at an early stage in Cosmos. Still, there are already three projects in the ecosystem that are fully zk-based: Penumbra, zkIBC and Anoma. What’s more, uses for zk, as well as techniques, libraries and tools, are making their way into many additional Cosmos chains.

While promising, there is still a scarcity of ZK projects in the Cosmos ecosystem when compared to other ecosystems. There are several reasons for why this is. Privacy is a key attribute and association with ZK. But from a privacy perspective, the Cosmos-based project most heavily marketing privacy has been Secret Network, which uses Trusted Execution Environments (TEE), an alternative to ZK. So while they did educate the community about the need for privacy, they weren’t advocating for ZK tech specifically. In fact, these are in some cases competing technologies and the source of some debate.

Another reason is timing. Cosmos fully launched in 2019, and its main Unique Selling Proposition has been interoperability. The rollout of the Inter-Blockchain Protocol (IBC), which led to a big bang, brought to life dozens of new sovereign zones. However, we are still only recently in a post-IBC world, and we know it will take time for projects to emerge that can take advantage of this!

Still, the speed at which new ideas are being developed using ZK tech in the ecosystem makes us optimists about the future of ZK in the greater Cosmos ecosystem.

Here is a deep dive into some of the aforementioned Zk-focused projects:

Penumbra, the shielded zone.

Still in the testnet phase is Penumbra, a shielded zone, private by default, built with zero-knowledge proofs. Although popularly known as a privacy-first Decentralised Exchange, Penumbra is also building some primitives beyond trading assets. For example, the protocol will allow users to stake their tokens and vote with privacy-preserving capabilities. 

Thanks to being connected to the rest of the ecosystem via IBC, Penumbra will act as a multi-asset shielded pool for the whole Cosmos. The zone uses the Zcash Sapling design to operate. Initially, in the case of IBC transactions, inbound ones will be shielded at arrival, and outbound ones will be unshielded at departure. As time goes on though, we expect more exploration into how IBC and the shielded environment work together.

One novel concept Penumbra introduces to Cosmos is it’s account-less architecture. Due to its privacy-first nature, there will not be any notion of accounts, allowing for private staking through a dual token mechanism. Bonded tokens will have a different denomination from those unbonded with an “epoch-varying exchange rate that prices in what would be a staking reward in other systems.” On the DEX side, it’s using ZSwap, which does not reveal individual traded amounts, allowing for front-running protection. 

As of October 2022, Penumbra is in the 4th out of 5 phases of its pre-launch development, and it’s expected to launch mainnet sometime during the first half of 2023.

zkIBC, IBC to Ethereum

In recent conferences, one hot topic has been around bringing IBC to other ecosystems. Some projects like Composable Finance are doing this work on Polkadot, while the Interchain Foundation is working with other chains like Near. However, an independent project, zkIBC, is working on making this interoperability protocol available in Ethereum via zk-Snarks. 

This messaging protocol uses the zk-Snarks to prove transactions on Ethereum while maintaining the block production time of Tendermint chains. This will allow the trustless transfer of assets between Cosmos and Ethereum, opening up a door of interoperability between the two leading ecosystems. 

Currently, they are working on their testnet launch, which is still not announced yet. 

Anoma, privacy in exchange

Anoma is a privacy-preserving protocol and “a fabric of protocols and mechanisms for self-contained and self-sovereign coordination.” They use zero-knowledge proofs to allow for fungible privacy across their ecosystem. 

Besides the Anoma protocol, they also are about to launch Namada, a sovereign Layer 1

for asset-agnostic shielded transfers. Like Anoma, Namada also has privacy at its core through zero-knowledge proofs. They will incentivise the use of its privacy feature by rewarding those who contribute to the multi-asset shielded set. Technically speaking, the shielded transfers are made using the Multi-Asset Shielded Pool (MASP), an extension of the Zcash Sapling circuit that adds support for sending arbitrary assets. 

Namada is supposed to launch their testnet’s incentivised trusted setup in Q4 2022 and will begin researching private bridges in Q1 2023. According to their presentation during Dappcon ‘22, it could be expanded to Polkadot and Near as well, as soon as IBC is enabled on those chains. 

Conclusion

The ZK ecosystem is still in its infancy in the Cosmos ecosystem. Today, it represents 6% of the active sovereign chains and less than 3% of the chains under development. As the ecosystem grows, and IBC, interchain security and other features are improved or rolled out, more use cases will inevitably emerge. And so we look forward what’s set to come out of the growing ZK Tech community.