Zero-knowledge proof investments surge as practical use cases emerge

Zero-knowledge proof is set to revolutionize privacy and trust in digital interactions. Protocol Labs report reveals its shift towards real-world business applications.

What is zero-knowledge proof

Zero-knowledge proof is a powerful cryptographic technique that allows parties to prove information without revealing underlying data. A new report released today by Protocol Labs finds that ZK proofs are reaching an inflection point as research projects transition into real-world business applications across industries.

Zero-knowledge proof allows one party, the prover, to demonstrate knowledge of certain information to another party, the verifier, without disclosing the actual data. This establishes trust and enhances privacy in digital interactions. For example, ZKPs could enable someone to prove they have sufficient funds to make a purchase without revealing their bank balance.

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The report highlights major recent funding, over $725 million invested in 2022, patent filings, rising public interest, and traction in core use cases like blockchain, decentralized finance (defi), and machine learning as signs of momentum. It also explores technical challenges around efficiency, scalability, and security assumptions.

“ZK proofs will help dissolve the boundaries between web2 and web3, particularly within the identity space as it is currently the only technology that sits across both realms. More generally, zk proofs will massively reduce computation complexity and help deliver truly performant blockchains.”

Kitty Horlick, director at blockchain interoperability development firm Rarify Labs

Market projections for zero-knowledge proof

Cryptocurrencies like Zcash (ZEC) rely on ZKPs for private transactions. The report cites projections that the market for zero-knowledge proof will reach $75 million in revenue in 2024 and exceed $10 billion by 2030, with nearly 90 billion proofs required for web3 alone that year.

Researchers see particular promise in combining ZK proofs with artificial intelligence and machine learning models to enable training and utilization without exposing underlying data. Efficiency improvements like recursive proofs are making ZKPs more practical at scale.

After many years, we finally have efficient proof schemes. By efficient, I mean that the prover time versus the normal computation time is getting closer and closer. The closer we get, the more we can have more applications that can be verified. In 2023, it’s close enough to verify blockchain transactions. And maybe in the future, it can be closer to verify any computation.

Nicola Greco, a scientist at distributed research lab CryptoNet

While optimism abounds, researchers caution work remains to address limitations around computational complexity, scalability, security assumptions, and hardware needs. Standards development and education are also critical for adoption.

Protocol Labs convened input from over a dozen teams within their 250+ company innovation network, advancing ZK proofs and related technologies like Polygon, StarkWare, and Aleo. Researchers stressed that real-world applications will drive evolution beyond the crypto sphere.

Read more: Zero-knowledge protocols and the rise of a decentralization index