a16z crypto policy experts Aiden Slaven and David Sverdlov argue that zero-knowledge proofs (ZK-proofs) can strike a balance between privacy and regulation.
In a report published on August 19, they explained that this cryptographic method can confirm facts, such as the origin of funds, without forcing users to reveal all transaction details.
They see this as especially relevant when digital assets are exchanged for traditional money. If users present ZK-proofs at these points, banks and exchanges would gain confidence that funds are legitimate while individuals keep their on-chain activity private.
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Slaven and Sverdlov highlight that ZK-proofs could also handle everyday verifications, like confirming citizenship, without requiring sensitive documents. Instead of sharing a passport or license, a proof could confirm status while hiding unnecessary details such as address or date of birth.
Some critics worry that privacy-preserving tools are too complex or heavy for large-scale use. The two authors responded that ongoing improvements are reducing these limits. They noted that researchers and developers are making ZK-proofs faster and easier to use.
They also encourage looking beyond ZK-proofs. Homomorphic encryption, for example, allows certain data points to be processed without unlocking other information. Multiparty computation lets groups calculate results together without disclosing their own inputs. Differential privacy protects people when survey or usage data is aggregated.
Meanwhile, SoFi Technologies recently announced plans to launch a Bitcoin Lightning and UMA-powered transfer service. How does it work? Read the full story.
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