The next stage of Web3 evolution will be powered by zero-knowledge technologies
The blockchain industry has rightly pointed out key problems in the world of legacy technology, finance, arts and culture, but the promised revolution has not yet materialized and the tools designed to solve these problems have not yet reached the standards needed.
Technical inefficiencies have hindered the development of truly decentralized systems, and decentralized finance (DeFi) platforms have demonstrated vulnerabilities to their own data breaches. From January to November 2023, Over $1.7 million in assets It has been lost due to hacking, with nearly 300 specific incidents occurring.
As 2024 begins, things look brighter thanks to the continued development of zero-knowledge (ZK) technologies, which could be the key to unlocking the benefits of truly decentralized digital platforms. After gaining momentum in 2023 primarily through scaling solution innovation, the ZK industry’s continued growth this year will see use cases diversify and spread, including significant advancements in data protection, privacy and compliance. .
By providing blockchain developers with more secure and efficient tools, the broader benefits of ZK technology will begin to be felt, with a wider range of applications emerging across a variety of industries in 2024. Rather than being deployed in isolated Web3 native use cases to compete with traditional finance and technology, ZK technology can be integrated into legacy systems and platforms to deliver the benefits of cryptocurrency’s decentralized value. Significantly improves user authorization. It achieves this by ensuring strong data controls and privacy protection, promoting a freer and safer usage experience without compromising users’ peace of mind.
Zero knowledge scalability continues to evolve.
Simply put, a zero-knowledge proof (ZKP) allows one of the provers to verify a statement to the verifier without revealing anything other than the specific truth. In fact, ZKP allows complex computations to be performed off-chain, reducing congestion on the blockchain.
This has proven to be revolutionary for the Ethereum ecosystem, where increasing demand for blockspace has led to increasingly congested networks and high fees, creating barriers to mass adoption. Scaling solutions such as sharding, sidechains, state channels, and rollups have helped address scalability issues, improving developer and user experience while maintaining Ethereum’s well-known security and transparency values.
The same properties that make ZK ideal for reducing congestion in decentralized networks also provide greater data protection benefits. In the future, we expect to see more projects leveraging ZK technology for a variety of use cases for data protection and compliance as well as scaling, which will serve as the foundation for major changes in Web2 and Web3.
ZKP expands the scope of user data protection.
All the benefits of scalability aside, it will be data protection that proves to be the killer use case for ZKP, underpinning all other features of blockchain applications. For context, data protection is a broader term than privacy. Security, integrity, accessibility.
Data protection and privacy are often an afterthought for people interacting online. This is by design. Traditional digital platforms lure users with free access and services and hide in the fine print the real costs of collecting and leveraging valuable user data for analytics, targeting, and advertising purposes.
However, recent research shows that consumers are increasingly concerned about the risks of data breaches and privacy violations posed by technology devices. three quarters Survey respondents agreed that more needs to be done to protect themselves.
The more costly a data breach is – 4.45 million Average USD 2023 – Projects across a variety of industries are seeking innovative solutions to prevent and reduce the impact of hacks and attacks. By allowing users to store personal information off-chain and securely disclose sensitive data, ZKP reduces vulnerabilities caused by collective storage of data, which has been a prime target for hackers.
By 2024, the industry expects a variety of ZK-based privacy tools to have evolved and become available to users, including ZK login tools that streamline access to DeFi platforms and ZK-based decentralized voting mechanisms that balance integrity and anonymity. can.
ZK use cases outside the blockchain space
ZK technology can also solve key data management problems in other fields, proving to be a groundbreaking tool for the mass adoption of blockchain technology.
As concerns about user data leaks increase, existing social media and Web2 platforms built on data mining models can integrate privacy-enhancing features for users powered by ZK technology, such as secure end-to-end messaging. there is.
In other cases, institutions that first adopt ZKP for privacy reasons may need to protect sensitive data sets. For example, in supply chain management, logistics, and telemetry, ZKP can be used to verify activity while disclosing the minimum amount of data required between two parties. Not only is this efficient, but it can also be important for maintaining intellectual property rights and reducing the data management burden on either party.
Likewise, governments and other organizations that handle sensitive data can adopt decentralized identifiers (DiD), which can be used to verify identity and other information while optimizing privacy protection. Since 2014, residents Estonia They are given a state-issued digital identity to access public services. european union It is being pursued and several countries are on a path to emulate.
ZKP enables DeFi on a path toward regulatory compliance.
Collaborating with traditional financial institutions could bring much-needed liquidity to DeFi, but contradictions between the anonymity and privacy principles previously associated with DeFi and the KYC requirements that banks and large investment firms must adhere to across multiple jurisdictions have led to consolidation. This has been suppressed. Likewise, traditional businesses may not want the details of every transaction to be documented on a public ledger due to the transparent nature of blockchain.
DeFi platforms can use ZKP to balance DeFi value and TradFi liability by verifying that users meet KYC requirements and confirming transactions without revealing identifying information or other unnecessary information. for example, Etonian Demonstrates how ZKP can be used for compliance in a privacy-preserving fiat stablecoin system.
Similar to Privacy Optimization solutions, ZKP can provide more customized compliance options tailored to user needs. This is important because each person has unique preferences when it comes to convenience and data protection. To provide financial freedom to the masses, DeFi platforms must provide users with a variety of options.
Accelerate innovation in every way with developer-friendly tools.
ZKP supports the modular evolution of blockchains, providing building blocks that enable key features such as scalability, privacy, compliance, and critical interoperability.
Unlike monolithic blockchains like Bitcoin, where all transactions are executed on a single layer, modular blockchains delegate functionality to specific modules that form an interoperable system. Modular blockchains reduce the likelihood of bugs and enable more efficient development by reducing the workload of specific components.
In the current environment, layer 1 protocols appear to be competing, but the modular evolution of blockchain will further transform the concept of blockchain layers into that of modular building blocks. ZKPs, small proofs of data that can be inexpensively verified and linked across chains, will be the glue that holds interconnected systems together.
Specializing in tasks allows each module to advance more quickly. For example, extensions are already handled, increasing experimentation and innovation on all fronts, allowing developers to focus on improving compliance.
What will happen in 2024?
In a constantly changing industrial and macroeconomic environment, adaptability is the key to the survival of any technology. Zero-knowledge proofs have proven to be infinitely adaptable tools for solving a wide range of problems. Over the next year, we will see use cases expand beyond scale, leveraging the power of ZK to focus on data management, attestation, and applications across a variety of fields.