How did Bolt Labs come to be? What was the problem you were trying to solve?
Existing cryptocurrencies like Bitcoin have scalability and latency problems that limit their use as a medium of exchange (can take up to 1 hour to confirm a transaction on the blockchain). The Lightning Network was designed to address these scalability and latency issues by using the blockchain to escrow funds and resolve disputes while moving the bulk of transactions off-chain. However, the Lightning protocol does not offer privacy by default.
To address this problem, Matthew Green and Ian Miers conceived of a protocol in 2016 that addresses the privacy limitations of Lightning: Blind Off-chain Lightweight Transactions (or BOLT). It offers a strong privacy solution while preserving the efficiency of off-chain payments.
The importance of strong privacy protections to the development and adoption of blockchain technology is not always obvious or intuitive. In fact, the battle against privacy-related protocols has existed since the beginning of the internet era. The HTTPS protocol, for example, is an essential infrastructure that enables secure banking or e-commerce today. Yet as it was being developed in 1995, many overemphasized how the technology-enabled criminal or terrorist activity over the privacy protections for honest customers buying or selling goods online. But just as the HTTPS protocol has proven to be a critical building block for secure internet communication, strong privacy protections are required for cryptocurrencies to be suitable for many use cases.
Fortunately, because early use cases of blockchain tech are financial in nature (versus chat or sharing files on the original internet), the need for privacy is more obvious. Furthermore, as the internet age has matured, we as a society are increasingly aware of the importance of the privacy and ownership of even our personal communication data.
The initial BOLT research was designed for Zcash, but showed significant promise for use across blockchain protocols. Bolt Labs has extended this initial research beyond Zcash to Bitcoin, and our team is working towards a chain-agnostic approach that will bring the benefits of privacy and scalability to blockchains across the ecosystem.
What is zkChannels?
zkChannels extends the initial BOLT research and is a second layer protocol that enables privacy-preserving, off-chain transactions between customers and merchants. The protocol allows customers to transact with a merchant without revealing their identity and allows merchants to securely authenticate customer transactions without needing to “see” their personal identifying data. Our protocol fundamentally decouples the customer’s identity from the service itself.
What drew you to build on Tezos?
Tezos offers a number of unique features that make it particularly well-suited to a zkChannels implementation. For one, Tezos provides upgradability without contention due to its efficient governance mechanism. This on-chain governance mechanism reduces the friction for extending Tezos with the necessary features to support zkChannels.
Tezos also offers a secure-by-design smart contract language with formal verification properties. This means we are able to prove that smart contracts perform correctly with respect to the intended specification. This is particularly important for financial smart contracts (e.g., tokenized assets, loans, etc) which require guarantees that funds will not be lost or frozen due to bugs in the code.
Anything else that you would like to share?
In addition to implementing zkChannels on Tezos, we are also interested in building a cross-chain bridge for connecting Zcash or Bitcoin to Tezos. This bridge, built via zkChannels, would provide censorship-resistance to decentralized finance (DeFi) applications.