There is little room for debate on the phenomenal growth of digital currencies seen in recent times. The use of cryptocurrencies, such as Bitcoin (BTC) and Ethereum (ETH), has only continued to develop over the past few years, which has further fuelled the crypto industry’s mammoth expansion.
Crypto’s Offerings For Web3 & Beyond
The cryptocurrency sector has provided the world with cutting-edge technological innovations that have been widely applauded and embraced to a certain extent. These include the introduction of tokenization, decentralized swaps, stablecoins, staking, and farming, as well as the minting of digital collectibles, commonly referred to as NFT collections.
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Amidst all of the excitement surrounding these innovations, there have been substantial developments in establishing and enhancing the underlying blockchain infrastructure as well. ZK Rollups, which make use of zero-knowledge proofs, often known as ZK proofs in short, is one such example that has been widely gaining traction both in the Web3 world and outside.
What Are Zero-Knowledge Proofs?
The technology enables a form of proof that verifies the authenticity of data without actually revealing the data itself. In the context of blockchain, ZK proofs can help address a key issue: privacy. By using ZK proofs, individuals can authenticate their identity and transactions without revealing any additional information.
To break it down in simpler terms, a user for instance can prove that he has enough funds to make a purchase without actually revealing his balance. This is achieved by breaking down the information into smaller parts, and each part is encrypted in such a way that only the user can decrypt them. By decrypting these smaller parts and verifying them, the system can be certain that the user has the necessary funds without revealing the user’s actual balance.
The potential for ZK proofs is vast, as it enables a level of privacy that is unparalleled in traditional forms of authentication. This has attracted the attention of many in the cryptocurrency space, as it could lead to significant improvements in transaction privacy and security. Polygon’s (MATIC) price recently witnessed a massive surge after it announced the zkEVM mainnet launch this March which utilizes this very technology to bring further use-cases and utility for the blockchain.
ZK Proofs Get EU Acceptance
Nevertheless, crypto isn’t the only area where ZK proofs are gaining traction. They’ve also made their way into the European Parliament. The use of such proofs has been formally incorporated by the EU laws into its negotiating positions with the Council on the regulation of digital identity and related apps.
Zero-knowledge proofs will be incorporated into EU law on digital identification and future EU apps, unless the Council vehemently disagrees — providing people more control over their personal data. This would in turn boost trust in digital transactions, and simplify the cross-border interoperability of EU eID solutions. The proposal also encourages the use of privacy-enhancing technology across the EU, which will help to create a safer and more privacy-compliant online ecosystem for all users.
Additionally, the European Digital Identity wallet will enable the capability of verifying claims that are deduced from personal data identification or attestation of attributes without requiring the user to give the source data. This would ensure that the user’s privacy is maintained.
The EU’s decision to incorporate zero-knowledge proofs into its laws for digital identity sets precedent and also validates the use of such protocols in the conventional world. As the cryptocurrency market continues to grow and evolve, the potential for ZK proofs to play a key role in its development is becoming increasingly clear. With the potential to improve scalability, reduce costs, and provide new opportunities for both the growth DeFi and governmental initiatives — ZK proofs could be the next big thing in the world of cryptocurrency.
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