Blockchains promise faster, cheaper, and borderless transactions, but when it comes to global payment adoption, privacy stands out as a challenge.
For financial institutions and payment services, the full transparency of transaction details on a public ledger can introduce conflicts with confidentiality and compliance requirements.
Zero-knowledge proofs (ZKPs) can provide a way for public ledgers to be utilized on a large scale with payment services without having to provide private sidechains. Stellar and the XRP Ledger are exploring such opportunities.
ZK Proofs allow a transaction to be verified without revealing the underlying details to unnecessary 3rd parties. When applied to payment networks like Stellar and the XRP Ledger, this technology can solve one of the last tough hurdles preventing large-scale payment providers from using public ledgers.
As confirmed by Steller Development Foundation CEO Denelle Dixon in a recent interview, the Stellar network is carving out an enhanced position with ZK proofs as a leader in cross-border payments and tokenization.
With ZKPs, Stellar can add a powerful new way of gaining private transactions and throughput, something that has yet to be achieved in the crypto industry outside of delegating private transactions to a different sidechain.
Cardano aims to introduce private transactions for institutions, but will be using the Midnight sidechain to do so. Hedera Hashgraph has also promised private transactions, but these will be funneled through HashSpehre, a private sidechain connected to Hedera’s mainnet.
ZK proofs allow users to stay on layer 1 and take advantage of all its benefits. For Ripple and Stellar, this is huge.
With ZK proofs, payment companies building on Stellar and the XRPL would be able to:
For remittance providers and financial applications in emerging markets, ZKPs on Stellar would unlock new services that can meet regulatory standards while protecting end-user privacy. This balance of compliance and discretion in payments can go a long way toward mainstream adoption of public ledgers.
The XRP Ledger has been building out its institutional DeFi roadmap, with features such as permissioned domains, credentials tied to decentralized identifiers (DIDs), and upcoming lending protocols.
Adding zero-knowledge proofs to its toolkit can take the XRPL to levels that outshine the rest of the market, positioning the XRPL as a potential go-to network for enterprises of all scales.
With ZK proofs on the XRPL, a payment provider could prove regulatory checks were completed without disclosing sensitive personal data.
Stablecoin issuers or RLUSD issuances on XRPL could demonstrate compliance while hiding sensitive transaction details.
With ZK proofs, institutional lenders could also verify the creditworthiness of something on-chain. By combining speed, low fees, and privacy, the XRPL could become the settlement layer of choice for banks.
Governments may also show interest as public ledgers have been blindsided by governments due to their openness for information to be made public and easily accessible.
Bringing ZK proofs into the mix could prompt government digital currency issuers, such as the European Central Bank, to reconsider the use of public ledgers for its digital euro.
Both Stellar and XRP Ledger are positioning themselves as strong, institutional-grade payment networks with Ripple already close to the finishing line as banks, such as SBI Holdings, promise to integrate RLUSD into finanical services in Japan.
The integration of zero-knowledge proofs could cement could create a future where private, compliant, and lightning-fast blockchain payments are standard practice for extended use cases.
The post Zero-Knowledge Proofs on Stellar and XRP Will Unlocking New Possibilites first appeared on AllinCrypto.
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