Abstract
I created a modular system that uses zero-knowledge proofs to certify the tax statements of companies. The system works by leveraging an oracle network (Blocksense) to perform currency conversions in a trusted manner. I use the oracle both to obtain current currency conversion rates and to store a private key for computing a signature, ensuring that the output values provided by the network can be trusted by the Zero Knowledge Proof (ZKP), which is the next step.
The ZKP is performed using the homomorphic properties of the account balances. I encrypt these balances so the government only knows the total amount of money transferred (since taxes are based on income) and can infer that I have more than one account (currently supporting up to five accounts). The government cannot read individual account values, but thanks to the chosen homomorphism, additions can still be performed, allowing some calculations and verification of the zero-knowledge proof.
Once the proof is generated, the government verifies it and allows me to pay the taxes.
Value Proposition
The following elements were utilized:
- ZKP: Zero knowledge proofs and encryption.
- zkverify: I used their services to generate, validate and store ZKP.
- blocksense: I used their oracle to perform currency conversion in a trusted manner. With regular blockchains I couldn't have: called custom REST endpoints, performed a private key encryption of the output value. This signature is important because it's being used in the ZKP to trust the value I'm giving in.
Blockchain for the Good Alliance: my project is compliant with the UN17 vision and I appended a UN17.md file on the github where I explain more in detail.
This use case can be interesting for the European union vision and I added on the github a file ISO.md where I explain the advantages (see the live github link in the "Use Case URL" field of this item in order to access the full file). For the interested reader, the table of contents of that ISO.md file is listed here:
- Scope. A summary of the overall purpose and scope of the system.
- Normative References. A complete list of the standards and documents that have essential relevance.
- Terms and Definitions. Rigorous definitions of terminology such as ZKP, oracle network, homomorphic encryption, etc.
- System Overview and Description. A description of the general architecture, interfaces, and components.
- Functional Requirements. Requirements on tax statement certification, trusted oracle for currency conversion, and privacy and data security.
- Use Case Description. Specific data flows, roles, and component interactions described through a spreadsheet.
- Use Case Visualization toolkit. Illustrates the architecture, data flows, and the key interfaces.
- Conformance Requirements. Both general requirements and requirements on verification and validation.
- Compliance and Auditability. Requirements on auditability logs and third-party audits.
Data Provenance
Token and asset creation and exchange
Automation