Privacy-preserving analytics for the securitization market: a zero-knowledge distributed ledger technology application

Sophie Meralli ()
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Sophie Meralli: Massachusetts Institute of Technology (MIT) Digital Currency Initiative

Financial Innovation, 2020, vol. 6, issue 1, 1-20

Abstract: Abstract A zero-knowledge proof or protocol is a cryptographic technique for verifying private data without revealing it in its clear form. In this paper, we evaluate the potential for zero-knowledge distributed ledger technology to alleviate asymmetry of information in the asset-backed securitization market. To frame this inquiry, we conducted market data analyses, a review of prior literature, stakeholder interviews with investors, originators and security issuers and collaboration with blockchain engineers and researchers. We introduce a new system which could enable all market participants in the securitization lifecycle (e.g. investors, rating agencies, regulators and security issuers) to interact on a unique decentralized platform while maintaining the privacy of loan-level data, therefore providing the industry with timely analytics and performance data. Our platform is powered by zkLedger (Narula et al. 2018), a zero-knowledge protocol developed by the MIT Media Lab and the first system that enables participants of a distributed ledger to run publicly verifiable analytics on masked data.

Keywords: Structured finance; Securitization; Blockchain; Zero-knowledge proofs; Distributed ledger technology; Privacy; Data analytics (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (2)

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DOI: 10.1186/s40854-020-0172-y

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