An Introduction to zkNFTs and Three Key Use Cases

An Introduction to zkNFTs and Three Key Use Cases

How zk will take NFTs to the next level.

The internet feels infinite: apps can be downloaded and websites can be viewed as many times as servers will allow, and everything is endlessly reproducible and accessible. But in the midst of this digital super-abundance, it was scarcity, ironically, that became the most valuable asset/feature/aspect/property/characteristic.

The pivotal innovation of blockchains is digital scarcity. Tokens, and especially NFTs, introduce digital uniqueness in the age of ctrl+c and ctrl+v. The ability to have a unique digital existence has made NFTs highly valuable, but the full scope of their application and utility has yet to be explored. 

NFTs started as digital collectibles and in-game assets but are now being used for digital identities, proof of intellectual property ownership, and can even represent financial positions. As they have leveled up, new token standards and NFT types have been developed, but one thing all these new standards lacked was on-chain protection.

When NFTs represent a company’s IP or an investor's financial position, total transparency on an open ledger becomes a liability. For NFTs to realize their full potential, their next upgrade must be to zkNFTs: NFTs that, through zero-knowledge proofs, can selectively reveal metadata and keep user and contract addresses hidden.

As NFTs embrace zk technology, they can become more than digital collectibles. Instead, they become the foundation for our future digital identities and property, allowing us to own our personal data. user-ownership of personal data.

Starting from the Beginning: What are NFTs?

NFT stands for “non-fungible tokens,” or meaning that one NFT doesn’t equal another. Unlike fungible tokens like Bitcoin or Ethereum, which are interchangeable and divisible, each NFT is unique and indivisible, resembling digital collectibles or trading cards. Famous projects like CryptoPunks, Bored Ape Yacht Club, and Azukis fall into this category. 

Because NFTs occupy a unique spot on the blockchain, they can act like digital real estate, and in fact, many NFT projects are using NFTs to represent actual land. 

But NFTs have progressed far past the point of being digital trading cards and weird generative art. They can now serve as passes to gated online communities, representations of financial position, and digital identities. NFTs are used as Web3 domain names. Games often mint assets as NFTs for a new avenue of monetization, and musicians and filmmakers are beginning to tokenize their work as NFTs. And as they take on new use cases, it has been necessary to update their underlying tech.

The Development of NFT Standards

As NFTs took on my use cases, they also gained new token standards and token types.

The first NFT token standard, ERC-721, was introduced in 2018 and is used for digital collectibles and in-game assets. The ERC-1155 token standard is a more flexible standard for both non-fungible and “semi-fungible” tokens. The ERC-1155 allows both token types can be issued using a single contract and lets developers enable batch transfers. Though ERC-1155 contracts are more complicated, they are more gas-efficient and scalable.

SBTs, or soul-bound tokens, are non-transferrable NFTs, forever tied to the wallet that mints them. They can follow various token standards, including ERC-5114, ERC-5484, and ERC-6239. Since they are not transferrable, they don’t derive their value from a market price; instead, they are typically earned tokens that denote some kind of achievement. They’re often used for credentials, KYC, voting, and other digital identity use cases.

The Next Step: ZkNFTs

As NFTs move from collectibles to markers of IP ownership and on-chain identity, the total transparency of a blockchain ledger becomes a liability. The more sensitive data lives on-chain, the greater the need for on-chain confidentiality – and zkNFTs.

Zero-knowledge cryptography can prove certain data without revealing specific details about that data. For example, a zkNFT holder could prove they hold an NFT without revealing their wallet address. In other cases, they could store their credentials in a zkNFT and prove they meet certain requirements – e.g. they are over a certain age or have a credit score over 750 – without revealing specific numbers. A zkNFT protects the holder and gives them more control over their personal data.

Many of the use cases mentioned above, like digital identities, need this type of zkNFT confidentiality. Users won’t want sensitive information, like their medical history or investment assets, publicly available, and storing them publicly is likely illegal for projects. Companies also won’t want to broadcast on an immutable ledger that they own specific IPs since that is often a closely guarded corporate secret. 

Through zkNFTs, users can discreetly hold assets, enjoy incognito permissions, and better protect their personal data. ZkNFTs are even essential for on-chain gaming, allowing for the creation of on-chain card games, RTS games, and more.

Below are some of the top use cases of zkNFTs.

Three ZkNFT Use Cases

Improving On-Chain Gaming

Many types of games depend on not knowing what assets your opponent holds. Imagine a game of UNO or Poker where everyone’s hands are open. Casual games and RTS games are the same way: players want to be able to hold assets their opponents can’t detect to gain a strategic advantage. This kind of surprise and unpredictability is only possible with zkNFTs.

ZkNFTs will enhance Web3 gaming, enabling many different types of games to be played on-chain with the same functionality Web2 offers. ZkNFTs will help make Web3 gaming fun.

IP Protections

Companies will spend millions of dollars protecting their intellectual property and often keep their ownership of these properties a secret. ZkNFTs facilitate confidential on-chain IP registration, providing companies a means to establish immutable ownership proof while keeping the IP details hidden. This helps safeguard strategic corporate assets, expanding the use cases for NFTs and blockchain.

Confidential On-Chain ID

NFTs are often used as badges or tokens of on-chain achievement. But not all on-chain achievement needs to be public.

ZkNFT will become increasingly important as more personally identifying information is stored on the blockchain. Companies will need zkNFTs to comply with consumer protection laws and privacy regulations. Users themselves are coming to demand confidentiality and expect to be able to grant selective access to their data. 

ZkNFTs give users true ownership of the data, allowing them to selectively grant permissions instead of giving an app or company total ownership of their personal information.

What’s Next for zkNFTs

ZkNFTs are the next logical step for NFTs. Just as the transparency of open ledgers created new, unanticipated use cases, so will the confidentiality of zkNFTs. However, even based solely on what we know now, we know there is a need for unite NFTs with on-chain encryption.  

ZkNFTs will expand our ability to control our on-chain data. They will reduce the liability associated with owning data on a blockchain and improve consumer protections in Web3.

Findora (and other projects like Aleo and Manta) is exploring the future potential of zkNFTs. We’re following the same path for zkNFTs that regular NFTs took: applying them to fun-oriented use cases like gaming before graduating them to identity and giving them financial responsibilities. We are certain that, for NFTs to take on these roles fully, they will need the confidentiality of zero-knowledge cryptography.

We are excited to explore those abilities and pioneer new use cases with the Web3 community.

About Findora

Findora is a Layer-1 protocol delivering zero-knowledge solutions to Web3.

Findora integrates two ledgers into a single chain: an EVM ledger for interoperability and a UXTO ledger optimized for zk operations. This dual-layer architecture lets Findora encrypt blockchain data for programmable transparency and public use. By providing new use cases, Findora’s zk tech prepares Web3 for real-world adoption.

We appreciate our developers and would love to onboard you to the Findora ecosystem. Please reach out, and join our social channels for more.

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