The innovative Zero-knowledge technology (Zk) enables verification of statements without disclosing any extra information except for the statement's validity. While Zk is known for its potential to speed up the transfer of crypto assets and provide greater security, it has multiple other use cases.
Zero-knowledge proofs are an excellent solution for tasks that require privacy, security, efficiency, and fairness. With their unique properties, Zk proofs can help overcome various challenges in the crypto industry. For example, they can be used to protect identities, authenticate users, prevent voting manipulations, and more.
Let's take a closer look at some of these use cases.
Zero-knowledge proofs offer an efficient and secure way to verify user identities and authorize their use of dApps and services without disclosing any sensitive information. Instead of providing personal details, users can confirm that they meet specific criteria, such as being a citizen of a country or over a certain age, without sharing their name or passport number. Thus, Zk-proof-based protocols can give individuals more control over their data and limit the amount of information that is being disclosed on the Internet.
For example, a DeFi app may need to check that a new user is an adult and can use offered services. The application can either ask to provide a passport (or driver's license) or use Zk-proof-based protocols that can verify the user's age without revealing personal details. The app will not know the user's age, only that it is above 18 and eligible to access the services. Such an approach eliminates the need for users to provide documents, which can take days to process.
Additionally, it reduces the responsibility of organizations to hold and protect valuable user data. This responsibility can make them targets of cyberattacks and require them to comply with strict privacy laws. As Zk proofs do not transfer personal information, they streamline data storage and help meet compliance requirements more easily.
Another example is logging in apps. With Zk, users can easily confirm who they are and log in. Similarly, Zk proofs can also lessen users' reliance on passwords, which hackers often try to obtain for malicious purposes like credential stuffing. With Zk proofs, users can verify that they know their passwords without revealing them, which helps protect against identity theft and preserve privacy.
Cryptocurrencies were created initially to allow for private, peer-to-peer transactions. However, most cryptocurrency transactions are visible on public blockchains, and users' identities can sometimes be revealed through data analysis.
Some cryptocurrency projects have been working on creating privacy coins explicitly designed to maintain anonymity, and one way of doing it is by implementing zero-knowledge technology, such as Zk proofs. This technology allows nodes to validate transactions without accessing any transaction data that could potentially de-anonymize them.
Zk proofs conceal addresses of both sender and recipient, amounts, transaction times, and other transaction details from validator nodes that verify transactions and blockchain ledgers that record them. This way, users can be confident that no one will have a chance to figure out who they are.
Decentralized dark pools utilize a similar concept to anonymous trading. This form of trading lets traders maintain their privacy and anonymity, reducing their need for intermediaries and offering greater control over their assets. All trading details are kept concealed until the completion of the trade, which helps traders exchange assets without any influence or bias from the market, hide their trading strategies, and avoid manipulations like front-running.
Dark pool trading is especially advantageous for large institutional investors, such as hedge funds, as it enables them to execute large orders without causing significant price movements on centralized or decentralized public exchanges. By keeping the order flow hidden, dark pools can minimize market impact and prevent slippage.
Zk proofs can provide a secure and trustworthy way to conduct verifiable voting. In traditional voting systems, voters must disclose their identity and trust the election administrators to keep their vote confidential. With Zk-proof-based voting protocols, individuals can cast their votes without compromising their identity or revealing their voting preferences. Zk proofs enable vote participants to confirm their identity and right to vote without sending any documents, ensuring their privacy and security are protected.
MACI (short for "Minimal Anti-Collusion Infrastructure") is a newer solution that uses Ethereum smart contracts and zero-knowledge proofs for on-chain voting. Vitalik Buterin first proposed it. In MACI, Asymmetric encryption ensures unforgeability, and Zk-SNARK proofs deliver collusion resistance, increased privacy, and a guarantee of vote authenticity. It allows the so-called coordinator to process all votes without revealing how each individual voted and ensuring no vote is tampered with.
Zero-knowledge technology is a potent tool for secure, fast, and private data sharing. As companies and governments continue to handle and process more data, the demand for efficient and robust solutions will increase. Zero-knowledge technology is expected to play a vital role in meeting this demand. It provides individuals and organizations with a faster and more secure way to exchange and verify sensitive information.
The Kinetex team will utilize Zero-knowledge proofs in the second mode of the Kinetex dApp, Flash Trade. The use of Zk proofs will eliminate the need for third-party validators, thus enhancing the security of cross-chain transactions.