With the rise of digital finance, privacy and security have emerged as key concerns for stakeholders. Users of digital financial tools, especially in crypto, require a way to be able to perform transactions confidentially, while still sharing sensitive information to verify those transactions, and it is a major challenge for the industry.
Luckily, a technique known as Zero-Knowledge Proofs (ZK-proofs) has emerged as a novel solution. Using ZK-proofs, it’s possible for one entity, known as the prover, to demonstrate the validity of a transaction or statement to another party, without revealing any of the key details of that transaction or statement. It’s a revolutionary concept that promises to transform transaction security.
ZK-proofs have obvious applications in crypto, where transactions take place on public networks that anyone can see. Using this technique, we can build private blockchain networks where transactions can be verified in a provable way. Interestingly though, ZK-proofs can also be used for many more varied applications.
Decentralized Identities
One of the most useful applications for ZK-proofs is to verify someone’s identity without revealing any of their personally identifiable information. Using ZK-proofs, someone can simply verify they are who they say they are without showing their passport or driving license as proof. This paves the way for so-called decentralized identities, where individuals retain full control of their data.
This is especially useful for DeFi applications that may want to check their user’s nationality for regulatory purposes. Usually, the user would have to provide some kind of government-issued ID to demonstrate who they are. The problem is that this goes against the whole decentralized ethos of crypto and it can also take days to process. But by using ZK-proofs, users can prove they come from an allowed country, without revealing who they are, or even the country they come from.
Users therefore maintain full privacy, protecting themselves from identity theft. Personally identifiable information is the main target of phishing attacks, but if the user knows they never provided this information, they surely shouldn’t be asked for it at a later date. Meanwhile, organizations are absolved of the responsibility that comes with securing such valuable data. The result is a more nuanced identity system that enables companies to ensure compliance while better protecting user privacy.
One of the leading payers in the decentralized identity space is cheqd, which enables users to create “Creds” that can be shared with any organization to prove who they are. In addition, Kilt Protocol has taken this concept and extended it to documents, creating a decentralized, private and secure method of signing and verifying files. With Kilt’s system, it’s possible to demonstrate that a photo or video has not been edited or altered in any way.
Advertising
A more original application is targeted advertising. Using ZK-proofs, advertising networks can avoid collecting and storing their user’s personal details and browsing habits, eliminating one of the major headaches for users who are uncomfortable with brands collecting such data.
AdEx is a pioneer of ZK-targeting in advertising, with an ad network that operates on the basis that all data is stored locally on the user’s device, where it cannot be accessed. It merely uses ZK-proofs to provide it knows what this information is. In this way, AdEx can enable ad targeting and matching entirely on the user’s device to ensure that they’ll only see beneficial ads, without giving up their browsing history.
With AdEx, users have full control over what sorts of ads they wish to see, with the ability to block those they’re not interested in. They can even block ads entirely, but by doing so, they won’t be able to earn any rewards. That’s because AdEx compensates users with its $ADX cryptocurrency for opting in and viewing ads. Users can also stake the $ADX tokens they earn as rewards to obtain additional rewards. Meanwhile, the advertisers are required to use $ADX to pay for their targeted ads, ensuring the token has economic value.
Voting systems
ZK-proofs can be used to create more secure and verifiable voting systems, where individuals can cast their votes without revealing their identity or the person or choice they voted for.
Traditional voting systems generally require that users must bring along some form of ID to prove they’re eligible to vote. The problem is that election administrators must be trusted to protect the voter’s identity and also keep their vote confidential. But with ZK-proof-based voting protocols, such as Voatz’s mobile election platform, users won’t need to reveal their identity in the first place. They can simply use the app to demonstrate they own a valid identity document.
What’s more, ZK-proofs can help to prove the integrity of the actual election. Voters can independently verify that their vote was counted in the final election tally without revealing to anyone else who they voted for.
Supply chains
In modern economies it has become vital to prove the origins and authenticity of many kinds of products and materials to ensure compliance standards are met. However, the need for transparency causes conflicts, as many organizations want to be able to protect their business processes and trade secrets, including the identities of their suppliers and customers.
ZK-proofs can help to enable organizations to prove the origin and authenticity of any product and ensure they meet regulatory requirements, without revealing such secrets. In this way, they can help to introduce more transparency into supply chains, without compromising privacy.
As an example, ZK-proofs can allow an auditor to verify that a shipment of fruit was transported and stored correctly, at the right temperature and in an appropriate time frame, without providing any information about how it was shipped or where exactly it was stored. This allows companies to prove to regulators that they’re in compliance with industry standards, without revealing key details of their logistics operations. Moreover, end users can also verify the origin of products, without having to know the entire ins and outs of the supply chain.
ZK-proofs FTW!
With growing adoption, ZK-proofs can transform how individuals and businesses alike approach data management and privacy. They provide a way for every stakeholder to meet compliance standards or verify specific information, without exposing any confidential data.
ZK-proofs have already seen growing adoption in the blockchain industry, boosting transaction privacy for users. But ultimately, this technology promises to have a much wider impact, enhancing secrecy in almost any kind of digital system or network.
Featured image credit: Arthur Mazi / Unsplash
