Identity verification is a crucial aspect of many online services, ranging from social media platforms to financial institutions. Ensuring that users are who they claim to be helps to prevent fraud and other malicious activities, but it also raises important privacy concerns. How can we verify someone's identity without revealing sensitive personal information, such as their name, date of birth, or government-issued identification numbers?

One solution to this problem is the use of zero-knowledge proofs (ZKPs). These are cryptographic protocols that allow a person to prove that they are a member of a specific set or group, without revealing their specific identity or any other personal information. For example, they could prove that they are a citizen of a particular country or hold a valid driver's license, without disclosing their passport number or other sensitive information.

One way to implement this type of protocol would be to use a "know your customer" (KYC) provider. This is a third party that verifies the authenticity of government-issued identification, such as passports or driver's licenses. The KYC provider could then add individuals to one or more ZKP sets, depending on the types of identification they possess. For example, someone with a valid Australian passport could be added to the "Australian citizen" set, while someone with a valid Australian mobile number could be added to a different set.

A service that wants to ensure Sybil resistance (preventing the creation of fake identities) could then trust the KYC provider to handle identity verification, and require users to prove that they are members of certain sets (such as "Australian citizens") but not members of other sets (such as "Users already registered on this service") without revealing their specific identities or other sensitive information. The proofs could be granular where needed, providing flexibility while still maintaining privacy. For example, a name or date of birth could be tied to a passport, allowing someone to prove that the name/date of birth provided during sign-up is linked to a valid passport in the set, without disclosing the passport number. (The technical implementation of this could use a keyed-hash for the name/date of birth.)

Another option would be to generate a scoped, per-service unique identifier when signing up to a service, which only the KYC provider would be able to link back to a specific user or member of the set. This would allow law enforcement to look up customer information from the KYC provider if needed, while still preserving the privacy of individual users.

In conclusion, zero-knowledge proofs offer an opportunity for developing novel privacy-preserving identity-proving protocols. By allowing individuals to prove that they are members of specific sets without disclosing their specific identities, these protocols can help to prevent fraud, comply with KYC/AML laws and ensure Sybil resistance, while still protecting sensitive personal information. There are many potential variations and considerations for designing such a protocol, but with the right approach, it is possible to strike a balance between security and privacy, requiring users to disclose only the minimum amount of information needed for identification or legal compliance.