How Do Zero-Knowledge Proofs (ZKPs) Apply to DeFi Privacy?
ZKPs allow a user to prove they possess certain information, like having sufficient funds or meeting eligibility criteria, without disclosing the actual details. This enhances privacy in DeFi by enabling private transactions or verifying compliance without revealing sensitive data on a public ledger.
It maintains transparency of verification while preserving confidentiality of the underlying values. This is crucial for institutional adoption of decentralized systems.
Glossar
Private Transactions
Confidentiality ⎊ Private transactions, within cryptocurrency, options, and derivatives, represent agreements executed outside of public, order-book exchanges, prioritizing information asymmetry and bespoke terms.
ZKPs
Cryptography ⎊ Zero-Knowledge Proofs are a class of advanced cryptographic protocols that enable a party to demonstrate the truth of a statement to a Verifier without disclosing the underlying secret information.
Privacy
Anonymity ⎊ Privacy within cryptocurrency and derivatives contexts centers on obscuring the link between transaction origins and identifiable entities, a critical distinction from traditional finance’s reliance on Know Your Customer (KYC) protocols.