An intuitive explanation is that of proving you can find Waldo in a picture without revealing his exact location. Digital wallets can be interpreted as fancy signature schemes that operate on third-party issued commitments C instead of public keys that directly link users to their identities.
A simple signature scheme is based on proof of knowledge PoK{x : pk = g^x}, which is transformed into a noninteractive variant via the Fiat-Shamir transformation, where the message is appended to the hash. Range proofs work similarly, with the simplest form being for a single bit: PoK{(b,r) : C = g^b * h^r & b(b−1)=0}. This proves that commitment C contains a bit b in {0,1} without revealing which value it is.
Arbitrary ranges can then be constructed using the homomorphic properties of commitments. For an n-bit range, this requires n individual bit proofs. Bulletproofs optimize this to O(log n) proof size, enabling practical applications.
The commitment C can be issued by a trusted third party that signs it, and the user can then prove certain properties to a service provider, such as age ranges or location zones (constructed from latitude and longitude bounds).
A key challenge is that reusing the same commitment C creates a tracking identifier, potentially compromising user privacy.