[PART 2] Here's how Zero Knowledge could be more impactful than the blockchain
Is it about to be Zero Knowledge's time to shine?
This is Robin here, reporting in from the 31st century. I hope that Part 1 was insightful and helped you understand the technical aspects of Zero Knowledge— now it’s time to explain why we need Zero Knowledge more than ever and just a few possible applications.
Why we need Zero Knowledge applications more than ever
The current broken business model of Web 2.0 is as follows:
Provide free services in exchange for personal data.
Users either give away this data or are unable to use the application.
Sell this personal data to advertisers.
Use this data to personalize applications for users.
Naturally, the initial response in solving this problem was to turn to the government and ask them to develop a solution with the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). The problem with these laws and regulations is that visiting a website and getting a giant banner with words consumers probably don’t understand is just a really long way of saying, “hey, we’re going to give you the option, and decline being tracked, but we doubt that you really understand what we’re saying. Instead, just use the default and trust us.” It’s simply giving consent to something you don’t understand, and having the person pressuring you to sign is then championing themselves as transparent.
We currently live in something of a hellish nightmare for user privacy—if I go onto Facebook and look at dog food, I’ll be bombarded by advertisements for dog food for weeks. This web is broken and encourages users to handle every detail of their personal data in exchange for convenience.
Now, it is clear that these incentives must change to end the monopoly on data that a few corporations have over the world, and to prevent a future monopoly on biometric data.
It’s well known that personalized medicine will become the norm thanks to advances in mRNA and telehealth. However, it’s not as well discussed just how much new personal data will be produced on people—this presents a dangerous reality where this data could be sold and exploited by nefarious state or private actors.
Furthermore, it’s clear that DeFi has cemented its place in the future of the world as being the future of payments with crypto. Along with DeFi, we’re also seeing the rise of Web 3.0 and the Metaverse offering to change the way we use the internet and experience entertainment. The key piece to enable this change will be blockchain itself.
However, there’s a substantially less discussed aspect of Blockchains—their privacy. Blockchains are pseudonymous—they expose the state of all accounts to all participants in the network. This presents a severe problem in the future when DeFi and Web 3 take the world by storm and suddenly everyone has a complete ledger of every transaction you have ever made and ever will make. All it will take is someone pulling up your wallet address to find out what you buy—this can even result in people being doxxed. While we may be taking power away from banks we are increasingly sacrificing our privacy as a caveat.
Here’s how Zero Knowledge can solve it
In the case of changing the web, I believe that Web 3.0’s rise of serverless computing on the blockchain—coupled with Zero Knowledge—could fundamentally change the web, in the very near future, for the better.
At the heart of the serverless computing rise is a history of consumer devices shifting their applications directly on device thanks to Moore’s Law. Furthermore, blockchains are key to this shift. This is because they enable the proper ownership of the data, and allow for users to interact with other users on a network without the need for centralized servers or third parties to broker and facilitate any services. It’s truly revolutionary, as it enables this new web to have direct ownership of their financial assets, game items, and NFTs to be managed and owned by themselves.
There is also something far more revolutionary here aside from true user ownership of their digital assets—it’s in killing traditional server architecture. Current server architecture for the Web in 2021 is prone to prolonged outages, data leaks, and centralization. However, Web 3.0 promises a vision of the web where—for the first time ever—services running on blockchains can achieve 100% uptime and availability, enabling a user experience that is truly seamless and can be accessed anywhere in the world.
This new Web will be enabled by the blockchain, but the blockchain has some key drawbacks that are being solved by the absolute magic of Zero Knowledge.
Scaling Challenges. These open networks require all participants to store and validate the ledger. This deeply inhibits the ability of the network to scale and process large amounts of transactions like with Ethereum. For example, while building Blockchain-based games, developers like Axie Infinity opted to create their own ETH based sidechain named Ronin to help scale the game. Zero Knowledge can help scale networks like Ethereum with Layer 2 Rollups. This solution reduces fees for users and fast transaction throughput.
Loss of Privacy. In their current form, blockchains are not very privacy friendly. As mentioned prior, we are being transparent at the sake of our privacy, but what if there was a way we could be transparent and private at the same time? Currently, the rise of DeFi, The Metaverese, and Web 3 are radically transparent in the sense that everyone can see every transaction you have ever made and will ever make. If we’re going to be going out and using DeFi as the vision intends—using tools like Celo to go out and buy flowers for a date then go to a restaurant—would enable heinous entities to track every single transaction we make. In the case of Zero Knowledge, MinaandAleoare two of the key systems pioneering this new technology where we would never need to worry about that since our transactions will be hidden. We can keep the promises of decentralized technology with privacy.
A gateway of new applications
In the case of DeFi, we do not need to speculate on the potential applications of Zero Knowledge as there is one brave company trying to change finance forever. This dreaming company is known as Teller Finance. Backed by proven DeFi investors—ParaFi Capital and Framework Ventures—Teller Finance seeks to connect to your bank account to offer risk-assessed loans without the need for collateral. The true game changing aspect of this project is how they can calculate credit scores despite not viewing your entire financial history, and then can then disclose your data in a way that does not disclose your actual credit score. This protocol also works with traditional blue chip DeFi lenders like Aave and Compound. Talk about revolutionary! Furthermore, their protocol is also partnered with Plaid. (Yes, that Plaid, the Plaid that was set to be acquired by Visa, but walked away at a $13.4 billion valuation, and Fintech trailblazer that forever changed finance by being the engine behind companies like Venmo, Acorns, Chime, and Betterment, who changed finance in their own regards).
However, in the case of Web 3 and the Metaverse, there have not been many strides to implement Zero Knowledge due to it’s incredibly nascent nature, but it’s clear that its impact will be realized very soon due to the money beginning to be baked into the shift with companies like A16z and Galaxy Digital backing Aleo. I can only imagine what new billion dollar unicorns will be made. However, I believe that there can be great strides made in a proof of identity documents such as a Driver’s license that can be scanned on a government website to verify its authenticity, and then be assigned to a wallet with the address of user, along with hash of the photo of the ID. If you needed to show this ID then you could just share the ID proof, along with a hash of their ID and never need to show the actual ID itself.
That’s all for this two part series on Zero Knowledge applications—I’m confident that I explained this radical new technology and backed up my title with its incredible impact. I view it as the missing key that enables privacy and transparency. We can have the efficiencies of centralization and the privacy of decentralization while being completely decentralized at the same time for a better functioning world.
Thank you for reading and do good in the world.
Thank you for the upload
If you do a paid substack with content like this Robin, I will buy it. Great stuff.