Ethereum Co-Founder Buterin Criticizes ZKP-Based Digital Identity Systems

Ethereum co-founder Vitalik Buterin has ignited a debate about the use of zero-knowledge proofs (ZKP) in digital identity systems. In his latest blog post, Buterin critically examined ZKP-based digital identity systems, highlighting several concerns. He argued that attempting to maintain a one-identity-per-person property poses risks such as loss of privacy and vulnerability to coercion. Additionally, he pointed out that ZKPs do not address non-privacy risks like errors.

Buterin's critique extended to World ID, a biometric-based project that requires users to scan their eyeballs for cryptocurrency access. He dismissed the idea that such projects could serve as a viable Universal Basic Income (UBI) solution, stating that the tokens issued by these projects would not be sufficient to cover a person's subsistence needs. Instead, he suggested that these tokens could only provide enough cryptocurrency for a few basic on-chain transactions and online purchases.

The concept of linking secure digital IDs to financial or humanitarian aid has gained traction, with various entities exploring its potential. However, Buterin's criticisms have raised questions about the effectiveness and security of ZKP-based digital identity systems. Shady El Damaty, co-founder of the decentralized identity project Holonym, noted that ZKPs are not a panacea and still leave data traces, especially on public blockchains. He emphasized the importance of private state, unlinked addresses, and careful data management to enhance privacy.

Holonym's approach differs from World ID in that it aims to integrate existing aid systems with identity verification rather than combining the two. El Damaty questioned the practicality of using UBI as a marketing tool to justify a token's utility or valuation, suggesting that upgrading existing humanitarian aid networks would be more effective. Nanak Nihal Singh Khalsa, another co-founder of Holonym, echoed this sentiment, stating that token-based UBI models are disconnected from the real-world needs of those requiring basic support.

Holonym's 'human.tech' framework allows aid recipients to create digital wallets from their social accounts, secure them with simple biometrics, and receive payments in stablecoins. This system also enables aid programs to request identity proofs to measure proof of impact and reduce false claims, while partnering with local off-ramps to keep fees low for users. Buterin's concerns about the one-person-one-ID model resonate with Singh Khalsa, who noted that such a design typically serves centralized systems aiming to control or capture the value of identity.

El Damaty and Singh Khalsa both emphasized that ZKPs can be designed to generate multiple identities, enhancing user freedom and flexibility. They highlighted the importance of revocation, control over privately linked addresses, and private addresses in extending the pluralism of ZKPs. Buterin's warnings have sparked a lively debate about the applicability of ZK-wrapped identities in aid distribution, particularly regarding privacy and security. This debate is likely to continue, with alternative approaches to token-based UBIs like World ID presenting their arguments.