Historically, our client and partner base has been deeply rooted in Web 3.0, as we have built alongside various protocols, chains, video games, and decentralized applications (dApps). However, we are increasingly exploring how Zero-Knowledge (ZK) technology can transform both Web 2.0 and traditional financial (TradFi) sectors, and are expanding our scope into this underserved market.

The Shift to Web 2.0 and TradFi: Why the Change?

Polyhedra’s mission has always been to enhance the accessibility and applicability of Zero-Knowledge technology. While Web 3.0 has shown remarkable progress, extending our focus to Web 2.0 and TradFi sectors is crucial. This shift is motivated by a desire to provide value to a broader audience, particularly those currently underserved by existing technologies. ZK technology, despite its advanced nature, remains somewhat esoteric even within the blockchain space. By targeting Web 2.0 and TradFi enterprises, we aim to enhance education and service, enabling these sectors to leverage ZK for improved security and efficiency.

Promising Sectors for Zero-Knowledge Technology

The potential applications of ZK span many industries, such as:

1. Healthcare and Data Privacy: Zero-Knowledge technology can obscure sensitive medical data, ensuring privacy while maintaining data integrity.
2. Education: ZK can streamline funding and records, increasing the integrity of tuition or grade reports.
3. Supply Chain: Tracking and tracing within supply chains are significant challenges in Web 2.0. ZK can enhance transparency and reliability.
4. Government: Applications include managing governmental transactions, contributing to greater security in public administration.

Specific Use Cases in Web 2.0 and TradFi

Several specific use cases for Zero-Knowledge technology within Web 2.0 and TradFi environments are particularly noteworthy:

1. Privacy-Preserving Transactions: Transactions often expose detailed information about senders and recipients. ZK can obfuscate this data, preserving privacy without compromising transaction integrity.
2. Proof of Reserve: This application allows individuals to demonstrate financial capacity without having to reveal the actual funds or details.
3. Cross-Border Remittances: Traditional international payments can be sluggish due to lengthy processing times. Zero-Knowledge technology can expedite these transactions significantly.
4. AI and Machine Learning: ZK can reduce the costs and overheads associated with data verification in AI and ML applications, though broader deployment is still anticipated.
5. Proof of Identity and Tokenization: In the realm of tokenization, ZK can facilitate the representation of various asset classes, from capital market securities to alternative investments. Additionally, proof of identity solutions like ZKDID can enhance the verification process.

Polyhedra’s Unique Approach

Polyhedra offers several advantages in the Zero-Knowledge space, distinguished by:

• Scalability: Achieved through distributed computing and batch proofing, allowing for extensive and efficient data processing.
• Interoperability: Facilitating transactions between isolated networks, which is crucial for integrating Web 2.0 and TradFi systems with blockchain technology.
• Cost Reductions: Implementing recursive proving and gas savings to minimize expenses.
• Compliance Frameworks: Ensuring that solutions meet regulatory standards, which is a critical concern for Web 2.0 and TradFi actors.
• Speed: Enhancing transaction processing speeds to match or exceed the performance of traditional systems, addressing concerns about blockchain’s current limitations.

Challenges and Solutions for Adoption

Despite the benefits, several challenges hinder the adoption of Zero-Knowledge technology in Web 2.0 and TradFi sectors:

• Hesitation Around Innovation: New technologies often face skepticism. The goal is to demonstrate that Zero-Knowledge solutions are not only viable, but superior in performance long-term.
• Regulatory and Settlement Concerns: Issues such as collateral requirements and settlement delays on public chains can cause slow adoption.
• Demand and Investment: Low demand for some on-chain securitized products can deter investment in technology development.
• Public Perception: Negative publicity from a few high-profile scandals can impact the reputation of innovative solutions.

Addressing Challenges and Innovations in Web3 and Blockchain Integration

Overcoming Blockchain Skepticism

The integration of blockchain and Web3 technologies into traditional Web2 enterprises has faced several challenges. Among these are concerns about blockchain features, risks associated with smart contracts, and general vulnerabilities to hacks. High-profile money laundering scandals have further exacerbated concerns about traceability. Such issues, while not prohibitive, contribute to a slower adoption rate among traditional businesses. The negative publicity surrounding these challenges can make Web2 companies cautious, impacting their willingness to explore Web3 technologies.

However, it’s essential to recognize that not all Web3 and blockchain companies are affected by these issues. Efforts to address these concerns are underway through industry-wide solutions and company-specific innovations. Proofs of concept, trials, and collaborations with established entities, such as Google Cloud’s partnership with Polyhedra, serve to build trust and demonstrate the reliability of blockchain technologies. These initiatives help mitigate hesitance and foster a more favorable environment for adoption.

Enhancements in Transaction Speed and Liquidity

Advancements in blockchain technology are addressing concerns about transaction volume and collateral restrictions. Polyhedra, for instance, has developed systems capable of handling thousands of transactions per second. This capability ensures faster settlement times and enhanced liquidity availability.

Addressing Security and Traceability

Security concerns, including the risk of hacks, are inherent in both Web2 and Web3 environments. Even major Web2 companies are not immune to data breaches. To manage these risks, Polyhedra focuses on creating highly secure systems backed by mathematical proofs rather than relying solely on middleware. This approach reduces the potential for interference and enhances security. Additionally, regarding traceability, Polyhedra is committed to incorporating oversight measures to address regulatory compliance and mitigate issues associated with bad actors.

Market Demand for Tokenization and On-Chain Assets

The perception of low retail demand for blockchain solutions can be misleading. Market research from McKinsey, Reuters, and Boston Consulting Group estimates that the market for tokenization and on-chain assets could range from $2 trillion to $16 trillion by 2030. These varying estimates highlight a significant potential for growth, indicating that demand for blockchain solutions is likely to increase. This anticipated growth offers a strong incentive for investing in blockchain infrastructure.

Current Web2 Integration Examples

Several prominent Web2 players are already experimenting with blockchain technologies. For instance, Visa recently conducted a tokenized asset trial with HSBC, emphasizing interoperability — a key area of Polyhedra’s expertise. In Germany, major enterprises such as Deutsche Bank, Mercedes, and Siemens are involved in tokenized deposit trials on permissioned DLT networks. Citi has also made strides by launching a digital assets platform and contributing to the development of the regulated liability network.

Other significant players like Santander are making substantial investments in blockchain to reduce operational costs. These examples illustrate the growing interest and practical applications of blockchain within traditional industries.

Future Developments and Innovations

Looking ahead, Polyhedra is focusing on various developments in ZK. This includes the ZKJ Chain and the application of ZK to machine learning (ZKML). These innovations are aimed at enhancing the accessibility and efficiency of zero-knowledge proofs for both Web2 and Web3 developers, and reducing the barrier to entry for developers and companies.

If you’re a Web2 company looking to see how zero knowledge might help your business grow and scale, reach out to us at bd@polyhedra.network