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.