Zero-Knowledge Technology Has Great Potential: FS Insight

Zero-knowledge (ZK) technology has the potential to revolutionize a number of sectors by providing a safe and efficient way to verify information while maintaining privacy and security, FS Insight said in a report Tuesday.

The technology has a range of uses in areas including privacy, security, scalability, interoperability and sovereign identity, the report said. “ZK-tech has already seen product market fit in use cases such as privacy and authentication,” and it is expected that the ways in which the technology is implemented will increase over time.

Zero-knowledge proofs allow one party to prove to another that something is true without revealing any information.

“It is also a promising way to scale Ethereum to the masses” because it allows thousands of transactions to be bundled off-chain into one, giving greater efficiency, the note said, adding that protocols such as Polygon, Aztec and ZK-Sync have successfully implemented zero-knowledge technology. Zero-knowledge rollups are Ethereum layer 2 protocols that process transactions separately from the main blockchain to increase speed and lower fees.

FS Insight says ZK tech’s ability to make transactions on the blockchain anonymous may put it in the “crosshairs of regulators and law enforcement” looking to crack down on illegal activity such as money laundering. It notes that regulators have already targeted Tornado Cash, which uses ZK technology.

Regulators could continue to target ZK technology and may apply anti-money laundering (AML) and know-your-customer (KYC) measures to ensure that transactions are legal, the report added.

Read more: Zero-Knowledge Cryptography in 2023: The Year Privacy Becomes Practical