Zero-Knowledge Proof-Based Identity Verification in Distributed Financial Networks

Abstract

In the context of a growing shift towards DeFi, the challenge of user identity verification while maintaining privacy remains a daunting task. This paper proposes a model for identity verification based on Zero-Knowledge Proofs (ZKPs) tailored for distributed financial contexts. The model implemented uses cryptographic methods to verify identity claims while maintaining the confidentiality of the personal information, achieving a delicate equilibrium between privacy and financial compliance. The privacy-compliant framework increases security while satisfying legal compliance by removing the need to trust a single party and decreasing exposure of personal information and data. The proposed model improves privacy, verification speed, and fraud resistance compared to conventional and baseline systems.