Lido Finance partners with Nil Foundation to build a 'zkOracle'

Lido Finance, the largest liquidity staking provider, has teamed up with Nil Foundation, a project specializing in zero-knowledge technology, to fund the development of a zero-knowledge oracle system. This system, referred to as a "zkOracle," will be supported via a Lido developer grant.

This zkOracle will create a trust-minimized verification system for users to validate Lido’s asset accounting, particularly concerning funds within the liquid staking protocol.  “Through a Lido grant, Nil Foundation will build a zkOracle to provide Lido’s accounting report with a trust-minimized sanity check,” Lido stated.

Liquid staking, popularized by Lido and similar protocols, simplifies user deposits and stakes on Ethereum. Users obtain a derivative token representing their deposit, which can be used as collateral in the DeFi ecosystem, allowing additional income beyond Ethereum staking alone. The system currently has 8.23 million ether staked, valued at over $15 billion.

“nil; is building a solution to secure $15B in Lido Finance staked Ethereum liquidity with a zkOracle that enables trustless data access to in-EVM historical data,” Nil Foundation said.

Understanding zkOracle

A zkOracle is described as a specific type of zero-knowledge-based oracle solution, where zero-knowledge technology provides proof of information without revealing the underlying data. This approach aims to facilitate verification without compromising privacy or security — a contrast to some traditional oracle services like Chainlink.

Traditional oracles, which integrate off-chain information with the blockchain, may rely on human-driven data feeds and lack the inherent capability to authenticate information privately using cryptographic proofs.

The zkOracle intends to employ Nil’s ‘proof market’ system, which allows developers to privately verify data across various applications on the Ethereum network.