Why Zero-Knowledge Proofs Can Protect Royalty Privacy

Every royalty payment on public blockchains like Ethereum or Solana is a transparent transaction. This exposes a creator's entire revenue stream, per-sale pricing, and partner splits to competitors and the public.

• Data Leakage: Reveals exact sales volume and buyer identities.
• Negotiation Handicap: Weakens a creator's position in private licensing deals.
• Front-Running Risk: Competitors can instantly copy successful monetization strategies.

Solutions like off-chain royalty registries (e.g., Manifold, EIP-2981) or marketplace-specific rules (e.g., OpenSea, Blur) centralize trust and fragment enforcement.

• Trust Assumption: Relies on the registry operator's honesty and uptime.
• Inconsistent Enforcement: Royalties are a policy choice, not a protocol guarantee.
• Lack of Auditability: Cannot cryptographically verify total royalties owed across all sales.

Zero-Knowledge Proofs (ZKPs) allow a marketplace to prove a royalty was paid correctly without revealing the payment amount or recipient.

• Selective Disclosure: Creators can prove revenue to auditors/partners without public exposure.
• Universal Enforcement: A ZK-verified rule can be embedded in any marketplace or intent-based system (e.g., UniswapX, CowSwap).
• On-Chain Finality: The proof is settled on a base layer (e.g., Ethereum, zkSync), making compliance decentralized and verifiable.

Custom ZK-circuits (using frameworks like Circom, Halo2) can encode complex, private royalty logic.

• Dynamic Rates: Logic for tiered royalties or time-based decays remains confidential.
• Multi-Party Splits: Distribute funds to multiple parties without revealing individual shares.
• Cross-Chain Privacy: Protocols like LayerZero or Axelar could use ZK-proofs to privately attest to royalty payments across ecosystems.

Public blockchains expose all transaction data, making royalty payment logic and recipient addresses visible. This creates a massive attack surface for front-running bots and targeted phishing, eroding the financial privacy that is foundational for professional creators.

• Attack Vector: Bots can snipe or manipulate sales to avoid royalties.
• Privacy Failure: Creator wallet addresses and income are fully doxxed.

Projects like Aztec Network and Aleo provide frameworks for private smart contracts. A creator can deploy a royalty contract where the payment logic and recipient are hidden, proven correct by a ZK proof.

• Core Tech: A zk-SNARK proves a royalty was paid correctly without revealing the amount or destination.
• Market Fit: Enables Sotheby's-level discreet transactions on public chains.

RISC Zero and Espresso Systems enable zero-knowledge proofs of general computation. A marketplace can prove it executed a correct royalty split from a sale, using the private input of the recipient address, while keeping that input hidden on-chain.

• Key Benefit: Leverages public sale data (NFT transfer) as a public input to the proof.
• Integration Path: Can be used by platforms like OpenSea to offer privacy-enhanced royalties.

Emerging standards aim to bake ZK privacy into the NFT itself. Think ERC-721 with a ZK extension, where the royaltyInfo function returns a ZK proof instead of plain data.

• Architecture Shift: Moves privacy from the application layer to the asset standard.
• Ecosystem Effect: Forces all marketplaces to respect private royalty logic or lose liquidity.

Axiom and Brevis act as ZK coprocessors, allowing smart contracts to trustlessly compute over historical chain data. A royalty contract can privately verify a creator's past sales volume to enable tiered royalty rates, all proven in ZK.

• Key Innovation: Enables complex, privacy-preserving business logic based on private historical data.
• Use Case: Dynamic royalties that reward loyal collectors without exposing their identities.

Generating ZK proofs is computationally expensive (~2-10 seconds and ~$0.01-$0.10 per tx on L2). This creates a UX barrier for real-time NFT sales. Solutions rely on proof aggregation (like Nebra) and dedicated prover marketplaces.

• Bottleneck: Proof generation latency conflicts with sub-second NFT trade settlement.
• Roadmap: Prover costs must fall below royalty amounts to be viable for micro-transactions.

On-chain royalty payments broadcast exact revenue figures, creating exploitable data. This transparency is a liability for creators.

• Front-running: Competitors can reverse-engineer sales velocity and pricing strategies.
• Weakened Negotiation: Partners see exact earnings, destroying leverage for future deals.
• Security Risk: High-value wallets become public targets for phishing and hacking.

Protocols like Aztec and zkSync use zero-knowledge proofs to aggregate and hide transaction details. Royalty logic is verified without revealing the underlying data.

• Selective Disclosure: Prove total revenue met a threshold without showing individual transactions.
• On-Chain Compliance: The proof is verified on-chain, maintaining trustless guarantees.
• Privacy-Preserving Audits: Creators can share verified financials with select parties via proof sharing.

Private systems often rely on off-chain data oracles to trigger payments, introducing a central point of failure and trust.

• Data Feeds Can Be Gamed: Malicious or compromised oracles can falsify sales data.
• Censorship Risk: Oracle operators could selectively exclude transactions.
• Breaks Trustlessness: Reverts to a model requiring faith in third-party data providers.

Instead of oracles, use ZK proofs generated directly by the marketplace's validators or a dedicated prover network (e.g., RISC Zero).

• Cryptographic Truth: The proof cryptographically attests that the royalty calculation followed the agreed rules.
• No Trusted Third Parties: Verification is mathematical, not social.
• Interoperable: The proof can be verified on any chain, enabling private cross-chain royalties via Polygon zkEVM or StarkNet.

Generating ZK proofs is computationally intensive. Relying on a single prover service recreates centralization risks and can make micro-transactions economically unviable.

• Prover Censorship: A centralized prover could refuse to generate proofs for certain sales.
• High Fixed Costs: Proof generation can cost $0.01-$0.10+, prohibitive for small NFT sales.
• Hardware Advantage: Leads to prover market dominance by a few entities with specialized hardware (ASICs, GPUs).

Networks like Espresso Systems and Nebra are building decentralized prover networks. Techniques like recursive proofs (e.g., Plonky2) batch thousands of transactions into one final proof.

• Cost Amortization: Batch 10k transactions into one proof, reducing per-transaction cost to <$0.001.
• Decentralized Proving: A network of provers ensures liveness and censorship resistance.
• Sustainable Economics: Creates a competitive market for proof generation, driving efficiency.

Transparent blockchains like Ethereum expose final sale prices, allowing buyers to negotiate down by revealing their true willingness to pay. This destroys the information asymmetry creators rely on for premium pricing.

• Erodes Margins: Public data enables price discrimination against the seller.
• Limits Models: Prevents dynamic, tiered, or negotiated royalty structures.
• Competitive Risk: Reveals sensitive commercial terms to rivals.

Protocols like Aztec or zkSync use ZK proofs to verify a royalty payment was made correctly without revealing the payment amount or the parties' full state.

• Selective Disclosure: Prove payment met a minimum threshold (e.g., >1 ETH) without showing the exact figure.
• Composability: Private payment proofs can be verified by public smart contracts (e.g., an NFT transfer function).
• Auditability: Creators or designated verifiers can cryptographically audit revenue streams.

Systems like UniswapX or CowSwap demonstrate the intent-based pattern. Apply this to royalties: users submit private intents to buy, and a solver matches them off-chain, generating a ZK proof of fair royalty distribution.

• Off-Chain Matching: Price discovery happens in private order books.
• On-Chain Settlement: Only the ZK proof and final state root are posted, protecting deal terms.
• Solver Competition: Ensures creators get optimal royalty via MEV capture redirection.

This isn't just for NFTs. ZK-royalty rails enable private enterprise licensing on-chain—think software, media rights, or IP. Use zk-proof of license payment as access credentials.

• New Revenue Streams: Monetize IP with complex, confidential terms.
• Regulatory Edge: Achieve financial privacy while maintaining KYC/AML at the application layer.
• Interoperability: Proofs can bridge to LayerZero or Axelar for cross-chain private royalties.