• The Electric Coin Company (ECC) has developed a new technology called “Halo”, which allows ZCash (ZEC) to solve the biggest problem of the cryptocurrency.
• ZCash might no longer need a trusted setup due to “Halo”.

The cryptographer Sean Bowe of Electric Coin Company (ECC) has developed a new technology called “Halo” which will allow ZCash to solve the biggest problem of the cryptocurrency: Previously, ZCash needed a trusted setup from a trusted party to confirm the zero knowledge proof. Halo could eliminate this problem by eliminating the need for a trusted party.

The Trusted setup was a highly criticized issue even before ZCash’s Genesis Block was generated, which still exists and is a single point of failure. If the setup is compromised, hackers or owners could use the keys created during Genesis block creation to control and manipulate the entire ZEC block chain.

Bowe’s new technique, published in a paper co-authored by colleagues Jack Grigg and Daira Hopwood, uses proofs to verify other proofs without the need for third parties. Halo achieves a recursive proof composition without knowledge and without the need for a trusted party. In an official statement the Electric Coin Company says (freely translated):

Trusted setups are difficult to coordinate, present a systemic risk, and must be repeated for each major protocol upgrade. Removing them presents a substantial improvement in safety for upgradeable protocols.

Halo is a result of ECC’s strategic orientation, which announced at ZCon1 in June 2019 that both the security and Layer 1 scalability of ZCash would be improved. While Halo is not yet implemented, ECC has high expectations of this new technology.

ECC is exploring the use of Halo for Zcash to both eliminate trusted setup and to scale Zcash at Layer 1 using nested proof composition.

— zooko (@zooko) September 10, 2019

What is the “Trusted Setup” in detail?

ZCash is a privacy coin that promises complete anonymity by concealing not only the sender and recipient, but also the amount of the transaction. Like any cryptocurrency, ZCash was generated using a Genesis block. The “Trusted Setup” was an important part of the Genesis block generation.

The technical background is that ZCash uses a simplified implementation of zk-SNARKs for the anonymization of user data. This differs from other zk-SNARK implementations (such as Ethereum’s) in that it requires a one-time setup, which must be repeated when creating the Genesis block, as well as each subsequent system upgrade.

The reason this setup is called “Trusted Setup” is because you have to trust that the one who generated these keys will destroy them. If they are not destroyed, the owners can manipulate the ZCash blockchain at will or create new ZECs.

The inventors of ZCash chose this variant of zk-SNARKs because it is lighter and can verify transactions faster and more efficiently. “Trusted Setup” is therefore still very important today for creating zero knowledge proofs and enabling private transactions.

The new “Halo” technology could therefore be a very important step for ZCash to solve this “trust problem”. Meanwhile, the ZEC rate has responded slightly to the news, increasing by 2.80 percent in the last 24 hours. Currently the ZEC price is 45.24 USD.