[The Secret of Zcash ②] Preventing Double Spending While Concealing Transactions

[By Ham Ji-hyun, Block Media] The reason why the privacy coin Zcash (ZEC) is gaining attention on Wall Street is due to strong partners like JP Morgan, but the technology itself cannot be overlooked. Zcash is a digital asset (virtual asset) that can conceal transaction details. It allows transactions to be verified as legitimate without revealing who sent money to whom and how much was sent.

This raises a question. If transaction details are concealed, can one secretly engage in 'double spending' with the same money? Zcash addresses this issue by employing various cryptographic techniques. The key is to hide the identity of the money while allowing verification of whether the money has already been spent or if it is counterfeit.

Zcash's Money is Contained in Non-Public 'Notes'

First, Zcash represents money in the form of 'notes'.

In a typical blockchain, it is relatively easy to verify how much digital asset has been issued and when it has been used. In contrast, in Zcash's so-called 'shielded transactions', information such as the amount of money and the recipient is not disclosed.

Instead, Zcash does not show the contents of the notes directly but leaves only an encrypted representation called a 'note commitment' on the blockchain. A note commitment can be likened to a 'sealed box'. The contents inside the box are hidden, but once sealed, it cannot be changed to something else, allowing verification that the information remains in its originally promised state.

The problem arises when using this money.

In a typical blockchain, the usage of specific assets is public, making it easy to detect if the same asset is reused. In contrast, if Zcash were to disclose which notes were used, it would allow transactions to be linked, weakening privacy.

The solution to this is the 'nullifier'.

When a user uses a note, instead of revealing the note itself, they disclose a unique value generated from that note. This is the nullifier. In simple terms, it creates and publicly displays a 'used stamp' when spending money. It shows only the stamp while concealing information about which money was used and who the owner is. If someone attempts to reuse the same money, the same stamp will appear again, allowing the network to detect a double spending attempt. If a previously generated nullifier appears again, that transaction is rejected.

In this way, Zcash hides which money was spent while preventing the same money from being used twice.

However, another problem arises. If it does not disclose which note is being used, how can the network verify that the person actually owns that money?

This is where Zero-Knowledge Proofs come into play.

The user mathematically proves that they possess a real note, have the right to use it, and have adhered to the transaction rules. At the same time, they do not disclose how much money is involved or which note it is. Instead of showing the money they possess, they only need to prove that they are entitled to use that money.

What if Someone Tries to Secretly Increase 10 ZEC to 20 ZEC?

Preventing double spending does not solve all problems. If the transaction amount is also concealed, someone could spend 10 ZEC while secretly creating 20 ZEC.

To prevent this, Zcash uses 'value commitment' and 'binding signature'.

Value commitment is a mechanism that cryptographically fixes the amount without revealing the actual amount. This can also be likened to an envelope. While the number written inside the envelope cannot be seen, it can be verified that the sum of the numbers in multiple envelopes is correct without opening them.

For example, if a transaction involves sending 10 ZEC while possessing 10 ZEC, the calculation is correct. However, if someone tries to send 20 ZEC while only having 10 ZEC, the calculation will not match. This mechanism allows verification of whether the calculations before and after the transaction are correct without revealing the actual amounts, preventing someone from creating new ZEC during the transaction process.

In other words, it hides the amount while ensuring that no more value is created than what was received.

The binding signature enforces this calculation relationship in the transaction, establishing the rule that "more money cannot be created than what was input." Due to value commitment and binding signature, if the calculations do not match, a valid signature cannot be created, and the transaction is rejected.

Zcash Verifies Three Things

Ultimately, for Zcash's shielded transactions to proceed, they must pass through three gateways.

• "Is it money that has already been spent once? (Double Spending)" ➤ Nullifier
• "Is it real money, and do you have the right to use it?" ➤ Zero-Knowledge Proof
• "Has money been secretly increased during the transaction?" ➤ Value Commitment & Binding Signature

Bitcoin prevents double spending by showing which money was spent through a public transaction ledger. In contrast, Zcash uses a method that conceals which money is involved while proving whether the money has already been used.

In essence, Zcash's technology is about not giving up verification for privacy but rather revealing only the necessary information for verification while concealing the rest. What happens if there is a vulnerability in the verification system, which is the core technology of Zcash? This issue will be addressed in the third article of the series.

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