There is little room for debate about the phenomenal growth of digital currencies seen in recent times. The use of crypto-currencies, such as Bitcoin (BTC) and Ethereum (ETH), has only grown over the past few years, further fueling the colossal expansion of the crypto-currency industry.
Crypto-currency offerings for Web3 and beyond
The crypto-currency industry has brought cutting-edge technological innovations to the world that have been widely applauded and adopted to some extent. These include the introduction of tokenization, decentralized swaps, stablecoins, staking and farming, as well as the minting of digital collectibles, commonly known as NFT collections.
Amidst all the excitement surrounding these innovations, there have been substantial developments in establishing and improving the underlying blockchain infrastructure. ZK Rollups, which use zero-knowledge proofs, often referred to as ZK proofs, are one such example that has gained widespread popularity in the Web3 world and beyond.
What are zero-knowledge proofs?
This technology enables a form of proof that verifies the authenticity of data without revealing the data itself. In the context of the blockchain, ZK proofs can help solve a key problem: privacy. By using ZK proofs, individuals can authenticate their identity and transactions without revealing additional information.
In simple terms, for example, a user can prove that they have enough funds to make a purchase without revealing their balance. To do this, the information is broken down into small parts, each of which is encrypted so that only the user can decrypt it. By decrypting these small pieces and verifying them, the system can be certain that the user has the necessary funds without revealing the user’s actual balance.
The potential of ZK proofs is vast, as it provides a level of privacy unmatched in traditional forms of authentication. This has attracted the attention of many in the crypto-currency space, as it could lead to significant improvements in transaction privacy and security. Polygon’s (MATIC) price recently saw a spike after the announcement of the launch of the zkEVM backbone, which uses this same technology to bring new use cases and utility to the blockchain.
ZK proofs accepted by the EU
Nevertheless, crypto is not the only area where ZK proofs are gaining popularity. It has also made its way into the European Parliament. The use of such proofs has been officially incorporated by the EU laws in its negotiating positions with the Council on the regulation of digital identity and related applications.
Zero-knowledge proofs will be incorporated into EU legislation on digital ID and future EU applications, unless vehemently opposed by the Council – giving citizens more control over their personal data. This would enhance trust in digital transactions and simplify cross-border interoperability of European e-ID solutions. The proposal also promotes the use of privacy technologies across the EU, which will help create a more secure and privacy-friendly online ecosystem for all users.
In addition, the European Digital Identity Portfolio will allow for the verification of claims inferred from the identification of personal data or the attestation of attributes without the user having to provide the source data. This will ensure the privacy of the user.
The EU’s decision to incorporate zero-knowledge proofs into its digital identity laws sets a precedent and validates the use of such protocols in the conventional world as well. As the crypto-currency market continues to grow and evolve, the potential for ZK proofs to play a key role in its development is becoming increasingly apparent. With the potential to improve scalability, reduce costs and provide new opportunities for both DeFi growth and government initiatives – ZK proofs could be the next big thing in the crypto-currency world.