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

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  • Sophie Meralli

    (Massachusetts Institute of Technology (MIT) Digital Currency Initiative)

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.

Suggested Citation

  • Sophie Meralli, 2020. "Privacy-preserving analytics for the securitization market: a zero-knowledge distributed ledger technology application," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-20, December.
    • Handle: RePEc:spr:fininn:v:6:y:2020:i:1:d:10.1186_s40854-020-0172-y
    DOI: 10.1186/s40854-020-0172-y
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    Cited by:

    1. Muhammad Owais Qarni & Saiqb Gulzar, 2021. "Portfolio diversification benefits of alternative currency investment in Bitcoin and foreign exchange markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-37, December.

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