Zero-Knowledge (ZK) technology is one of the most fundamental types of infrastructure in today’s Decentralized Finance (DeFi) landscape. While the concept dates back to a 1985 MIT paper “The Knowledge Complexity of Interactive Proof Systems,” ZK-powered applications have become more popular in recent years following the rise of the DeFi ecosystem. Prior to this, most of the ZK use cases were solely focused on authentication and security systems.
So, what is ZK and how is it transforming DeFi? Let’s start with the definition; A zero-knowledge proof (ZKP) is a cryptographic approach to encrypting private information while still facilitating interaction or information exchange between multiple parties. The idea is that two or more communicating parties can verify a statement’s truth without disclosing any information beyond the statement itself.
As such, for ZK technology to function, there needs to be a prover and verifier. The prover in this case is the one tasked with providing a mathematical proof or performing a series of actions to convince the verifier of a specific statement’s validity. In return, the verifier examines the evidence provided and chooses to accept or reject it. All this is done without any of the parties disclosing their personal information or any other detail that is not part of the statement.
More importantly, three fundamental criterias have to be met for in the structure of any ZKP;
- Completeness: If a statement is true, an honest verifier should be able to verify that an honest prover possesses accurate knowledge about the input.
- Soundness: If a statement is false, a dishonest prover should not be able to bypass an honest verifier checks’.
- Zero-knowledge: More importantly, neither party should be able to extract personal or private information about the other.
The Value Proposition of ZK Technology in DeFi
Obviously, one of the primary roles of ZK in DeFi is to introduce the aspect of privacy given the public nature of DeFi most blockchains, including Ethereum and Solana. But before highlighting the other value proposition ‘scalability’, it is worth noting that there are two major forms of ZKPs; interactive and non-interactive.
The latter is more widely used given its flexibility and the fact that interacting parties don’t have to be online at the same time. It also comes in two main setups which include the Zero-Knowledge Succinct Non-Interactive Arguments of Knowledge (zk-SNARKs) and Zero-Knowledge Scalable Transparent Arguments of Knowledge (zk-STARKs) technologies.
As the name suggests, zk-SNARKs allows DeFi users to verify succinct proofs or smaller size transactions; it was originally developed by the private cryptocurrency project, ZCash, to support on-chain transactions without revealing the private information of interacting parties such as the sender’s or receiver’s details and amounts being transferred.
On the other hand, zk-STARKs is designed to operate in a similar fashion but with added aspects of scalability and transparency. This allows zk-STARKs blockchains or DApps to handle larger computations.
State of ZK-Powered DApps and Rollups
As far as ZK-powered DApps are concerned, there are quite a number. One of the upcoming DApps that is leveraging this tech and worth taking note of is SONEX, an AI-powered DEX built on Sony’s blockchain solution, Soneium. This DEX uses a ZK Coprocessor to enhance its smart contract hooks for speed, security and scalability.
At its core, the SONEX ecosystem is a convergence of three major themes in crypto; DeFi, GameFi and the meme culture. The DEX also taps into AI to enable DeFi users to optimize capital efficiency by providing data-driven strategies and insights tailored to maximize the yield opportunities across the larger DeFi market.
It is also interesting to observe the growth of the ZK-Rollup ecosystem which is currently valued at a market cap of $7 billion, according to Coingecko metrics. This is quite impressive for a niche that was mostly experimental until 2020 – 2021 when we started seeing the debut of earlier iterations of ZK projects such as Loopring and zkSync.
Fast forward to 2025, there are several DeFi blockchains or layer-2 scaling solutions that have integrated ZK infrastructure into their architecture; notable names include Immutable X, Polygon and Starknet. What particularly stands out about these platforms is the amount of on-chain traction they are getting, both from developers and DeFi users.
To provide some more perspective, DeFi Llama stats indicate that the Immutable zk-EVM enjoys a total value locked (TVL) of $12.3 million, this figure is up from around $2.3 million just a year ago. Meanwhile, Starknet is one of the most active DeFi chains when it comes to development, boasting a significant number of core developers as well as commits.
Of course, the numbers are nowhere near Ethereum’s activity but it is worth noting that a good number of ZK infrastructures are being designed with EVM-compatibility to tap into the already established DeFi market on Ethereum blockchain.
Conclusion
As the DeFi ecosystem continues to grow, the most prevalent issues have to be tackled for mainstream adoption to take place. This includes the hurdles in scalability and privacy; while ZK tech does not promise to entirely solve these challenges, the DApps and blockchains launched more recently are proving to be more efficient than the earlier iterations.
That being the case, it is likely that as we enter the next era of DeFi innovation, we will see more developers leveraging ZK technology to introduce privacy and room for scalability to accommodate more DeFi users in future. The few examples in this article are just a glimpse of what’s happening in the ZK DeFi space, but what’s more important is the untapped potential of this technology.
