Why zero-knowledge KYC won't work
The emergence of blockchain technology presents an opportunity to reexamine and innovate solutions used in our day-to-day life. Blockchains and, broadly speaking, the digital space fuelled by an artificial intelligence revolution urgently need to establish verifiable human identities to ensure trust, accountability and regulatory compliance.
There are a variety of emerging technologies, both on- and off-chain, that could serve as the basis for a functioning trust framework. One solution, in particular, is often referred to as the holy grail of verifications — zero-knowledge Know Your Customer (zkKYC) verification.
ZK stands for zero-knowledge, a cryptography term used to create cryptographic proofs without revealing the underlying confidential information. Z-based solutions are pioneering privacy across the web. The blockchain industry fueled the innovation of ZK technologies due to their minimal transaction size and privacy-preserving nature.
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Know Your Customer, or KYC, is a set of processes and procedures businesses use to verify their customers’ identities. It is also used in the financial sector to assess any potential risks for money laundering or terrorism financing. It is a requirement for businesses to diligently understand their customers before establishing a relationship with them.
Zero-knowledge proofs, when created, are linked to a wallet address through a signature. These proofs are not publicly discoverable by design. Yet when a blockchain address interacts with a public smart contract that requires such a proof, the proof’s existence becomes public, negating the privacy benefits of a zero-knowledge proof. It is
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