2023 Prediction: The Era of Zero Knowledge

Author: Mina Protocol

2023 will be a milestone year for zero-knowledge proofs.

In 2021, my predictions focused on the recent rapid advancements in ZK and its transition from developer playgrounds to developer-ready environments.

In 2022, I concentrated on the macro trends we should expect ZKP to participate in within Web3 (privacy and scalability).
These predictions were originally published in The Defiant.

By 2023, I predict that the potential impact of ZK on crypto and crypto applications will become more concrete. We are already beginning to see this in zkEVM. But zkEVM is just the tip of the iceberg of what zero-knowledge proofs could concretely achieve.

As we enter 2023, we have already seen the emergence of new trends that highlight the practical applications of zero-knowledge. These are more specific than privacy and security and demonstrate the integration of ZK's fundamental principles with the real world.

Fixing Computational Trust in Crypto

A significant challenge that cryptocurrency has faced from the beginning is: how can we achieve large-scale trusted computation? This is one of the main reasons we launched Mina Protocol—building a blockchain centered around this principle.

In the previous cycle, we saw how crucial scalable computational trust remains in cryptocurrency. It appeared in two main areas:

• The first is the well-known issue of time. When applications using the chain at any practical scale, limited throughput leads to transactions becoming prohibitively expensive. One of the main ways to address this issue is to develop zkEVM, which will make fully validating a large number of EVM transactions very cheap. I expect these projects to launch sooner than people imagine, and they are deeper than people realize, with zkEVM companies rushing to launch and establish themselves, after which people will believe they will return to a high-activity, high-fee market. For example: Polygon plans to launch Beta zkEVM this spring, while Matter Labs' zkSync solution opened its mainnet for deployment this winter.
• The second is bridging. Unsafe bridging was also a prevalent theme in the last cycle. If the risk tolerance is high, using multi-signature connections between chains is fine—but ideally, we should have some secure, verifiable way to connect multiple chains. ZKPs are starting to apply here, in zkBridging. The first public operation might be the zkBridge from =nil; Foundation, connecting Mina and Ethereum. But hopefully, others will follow suit, as cryptocurrency prepares to establish trusted, secure connections between all L1s in crypto.
• The third, which has yet to emerge (but we believe is important and has been in preparation), is providing decentralized wallet clients. At the end of the last bull market, we began to see more privacy and censorship risks from centralized providers like MetaMask and Infura, with MetaMask collecting IPs and Infura blocking applications and geolocations.

If everyone ran a full node, all of this could be resolved; although the computational and logical costs of doing so are typically too high for users to bear, recursive ZKPs for efficient verification provide an elegant solution, which is what we offer at Mina.

I expect all of this (except for decentralized wallet clients) to happen soon. Projects dedicated to zkEVM and ZK bridging have been established and funded for quite some time, with several projects having been around for over a year, and many projects have begun releasing beta products. Due to their outstanding trust properties, 2023 may see them launch and take over.

I anticipate that the demand for trustless full nodes may begin during the next bull market. The drawbacks of relying on centralized wallets and data providers are becoming increasingly evident, making the need for secure and decentralized node solutions more apparent and urgent.

Financial Use Cases for Cryptocurrency Becoming More Serious

Another trend expected in this cycle is that cryptocurrencies are becoming increasingly ready to participate in traditional finance. Many powerful players are working towards this goal, and they will need verifiability and privacy to achieve it. Many of these may build using ZKP as one of the best solutions to achieve the necessary functionalities.

These are starting to appear in KYC, private transactions, and private voting. Traditional financial institutions seek a compliant environment that protects privacy. As these existing financial participants get closer to cryptocurrency due to its interoperability and efficiency, they will want to interact with these protocols in a way that respects their traditional ways of working. This means that technologies like zkKYC, private, scalable order books, and private voting for key on-chain decisions will be needed to create a regulatory-compliant environment.

This set of use cases also has tight synergies and enhances computational trust. For example, secure bridging is an improvement that can increase certainty for financial institutions. Clearly, the $3.1B stolen from bridging hacks last year made this necessary.

All of these unlocks will bring existing participants and significant liquidity into cryptocurrency, solidifying its position as a new pillar of global finance.

I hope to see changes in this set of use cases and functionalities during this bear market. While the wave of computational trust companies has been funded in previous years and is now launching, the wave of serious financial use case functionalities is likely to come from companies funded in the last cycle that are now receiving funding. Therefore, as these services go live, with the presence of these new functionalities, the credibility of cryptocurrency will increase, and financial institutions will gradually increase their participation, leading to slow but steady noticeable progress.

Building More User-Aligned Platforms Using Privacy and zkIdentity

The last place I hope to see more use of ZK is in building better trustless, user-owned platforms.

The centralized nature of monolithic platform companies creates a significant disconnect with the users they intend to serve. Most of the time, each platform works as expected—but we are increasingly seeing that the frequency of platform failures is rising due to a lack of intrinsic alignment with users.

Just last year, we had a massive instance in the crypto space, one of which was FTX. It is well known that centralized exchanges carry risks. Allegedly, FTX exploited its users' scale in unprecedented ways.

Outside of cryptocurrency, we have an outcome that remains a question mark, while the risks of platform failures are still significantly increasing: Elon Musk's acquisition of Twitter as a single stakeholder. It is still unclear where this will lead—changing a system can sometimes yield positive results—but it is evident that it poses risks to the value and user interests that Twitter has created thus far. Due to these risks, even if the experimental outcomes are unclear, it distances itself from user alignment.

Other examples, such as Facebook's amplification algorithm optimizing profits over social welfare, help fill in this picture.

The power and risks of a single digital platform will only increase. We are living increasingly digital lives and relying on digital platforms to organize and participate in our lives. This growing usage will only heighten the necessity for these platforms to become reliable and aligned with us, the users.
This points us toward decentralized systems based on cryptocurrency as a way to achieve alternative platforms. However, previously, decentralized systems could not achieve large-scale verifiable computation or user privacy. Zero-knowledge proofs have changed that and provide the missing functionalities needed to build decentralized platforms.

However, when this will happen is a question. On one hand, it seems logical that these decentralized systems will only have a real chance to gain market share and be worth pursuing when they are disruptive, and we have not fully achieved that yet.

On the other hand, the speed at which platform power accumulates will only increase, leading to further failures and apparent misalignments, making public awareness increasingly evident that user-owned platforms are more viable.

AI may further accelerate this process. Due to the high costs of training the most influential models and the organizational demands of building and deploying them, AI systems are particularly subject to centralized control.

The further development of AI will increase the demand for aligned platforms, as they begin to leverage the ability to profit from existing misalignments within current platforms, and the centralized control of powerful AI systems becomes questionable. The demand for decentralized systems that respect user privacy and provide verifiable computation seems increasingly useful in this upcoming environment.

Use Cases and Trust

One common theme should be noted; it is not just about privacy and security, but also about leveraging these to enhance trust. This should make sense in the context of cryptocurrency. Perhaps the main added value of blockchain is being a trust machine. ZKP, given its capabilities for trusted computation, can complement this well and will greatly assist cryptocurrency in succeeding in this possibility.
What comes next?

If these are the trends, what will happen next with protocols like Mina? These applications are all very exciting and have become possible due to new technologies. This means our goal must be…

Our direction is to continue supporting developers with the best tools—we believe we have that in SnarkyJS—enhancing the protocol's capabilities for effective funding and decision-making (as we are doing with zkIgnite Cohort 1 and Mina Improvement Proposals)—and continuing to support improvements to the core protocol.

Conclusion

I am excited to see how these predictions will be validated in the coming months and years, and how the Mina Foundation will provide support.

One lingering question I have is: how does all of this enter the real world, into real people? And not just indirectly through finance, but directly. If possible, this seems most likely to happen through platform disruption. As the misalignments of existing platforms become more apparent, this seems increasingly feasible. But what can we do to support these things?

One request I have is that if you have any thoughts on this or have seen good research, I would love to hear your opinions. I believe this is one of the greatest opportunities for Mina, cryptocurrency, and ZKP to make a positive impact on ordinary people, and I am eager to know how I and our foundation can provide support. So, if you have any leads, please reach out on Telegram or Twitter! I would love to hear your thoughts.