Verification Dilemmas in Law and the Promise of Zero-Knowledge Proofs
66 Pages Posted: 18 Feb 2021 Last revised: 10 Jan 2022
Date Written: February 7, 2021
Individuals who wish to access a website or qualify for a loan are expected to expose personally identifying information, undermining privacy and security. Firms share proprietary information in deal-making negotiations that, if the deal fails, may be used by the negotiating partner for a competitive advantage. Regulators are expected to disclose their algorithmic tools to comply with public transparency and oversight requirements, which risks rendering these tools circumventable and ineffective. Litigants might have to reveal trade secrets in court proceedings to prove a claim or defense. Such “verification dilemmas”—costly choices between opportunities that require the verification of some fact and risks of exposing sensitive information in order to perform that verification—appear across the legal landscape. Yet, existing legal responses to them are imperfect. Legal responses often depend on ex post litigation procedures that can be prohibitively expensive for those most in need or otherwise ineffective.
Zero-knowledge proofs (ZKPs)—a class of cryptographic protocols that enables verification of a fact or characteristic of secret information without learning the actual secret—can help avoid these verification dilemmas. ZKPs can provide a feasible means for a party holding secret information to demonstrate desirable properties of this information while keeping the information otherwise hidden. Yet ZKPs have received scant notice in the legal literature. This Article fills that gap by providing the first deep dive into ZKPs’ broad relevance for law. It explains ZKPs’ conceptual power and technical operation to a legal audience. It then demonstrates howZKPs can be applied as a governance tool to transform verification dilemmas in multiple legal contexts. Finally, the Article surfaces and provides a framework to address the policy issues implicated by the potential substitution of ZKP governance tools in place of existing law and practice.
Keywords: Zero-Knowledge Proof, ZKP, Verification, Disclosure, Privacy, Accountability, Due Diligence, Trade Secrets, Cryptography
JEL Classification: K22, K23, K42, K12, K41, C00, C02, C65
Suggested Citation: Suggested Citation