Please describe your proposed solution

We are seeking 150,000 ADA to fund initial POC development, with the goal of creating a zero-knowledge identity (zkID) wallet that can serve as the foundation for privacy-preserving identity management in DeFi, governance, cross-chain applications and more.

Problem Statement

Current decentralized identity solutions on Cardano lack the ability to provide complete privacy for managing decentralized identifiers (DIDs) and verifiable credentials (VCs). Users are forced to disclose unnecessary personal data during verification, which poses significant privacy risks, especially in applications like DeFi and governance. Additionally, existing wallets are not optimized for user control, selective disclosure, or the integration of privacy-enhancing technologies like Zero-Knowledge Proofs (ZKPs).

Proposed Solution

The zkID Wallet will provide a privacy-preserving wallet for users to manage their DIDs and verifiable credentials on Cardano, leveraging zk-SNARKs through Midnight for secure and private identity verification. This wallet will allow users to store, manage, and selectively disclose identity credentials without exposing sensitive personal information, ensuring privacy in decentralized applications (dApps).

<u>=&gt; Wallet Components</u>:

a. Midnight Sidechain (Privacy Layer)

Midnight is the privacy-focused sidechain of Cardano, enabling privacy-preserving smart contracts with enhanced confidentiality through ZKPs. It will serve as the ZKP engine to ensure that zkID preserves privacy while still meeting identity verification requirements. It includes the following functionality:

• Generation and verification of zk-SNARK proofs.
• Execution of transactions where identity data needs to be shielded.
• Coordination with the main Cardano chain for off-chain data references and verifications.

b. Indentus (Atala Prism-based DID Layer)

Indentus manages the identifiers and VCs:

• Issuance of DIDs and verifiable credentials.
• Integration with trusted issuers (such as banks, governing bodies, universities) to create identity credentials.
• Managing selective disclosure of identity attributes using zk-SNARK proofs generated by Midnight.
• Storing encrypted credentials on off-chain storage solutions while referencing them through the main chain.

c. Aiken Smart Contracts (Execution Layer)

Aiken will manage the identity verification and credential revocation process in a privacy-preserving manner:

• Verification of zk-SNARK proofs generated by users during identity verification requests.
• Logic for managing credential lifecycle (creation, updates, revocation) via smart contracts.
• Minimal gas fees and efficient execution due to Aiken’s resource-efficient nature.

<u>=&gt; Architecture and Process Flow</u>:

Step 1: Identity Issuance (Credential Creation)

• User creates a Decentralized Identifier through Indentus.
• Issuer (Trusted Entity e.g., government, bank or other authority) verifies the user’s real-world identity and issues a VC through Indentus.
• Midnight generates a zk-SNARK proof for the credential, ensuring that the user’s identity is privately verified and the data remains confidential.
• The verifiable credential is stored off-chain as encrypted data, with a cryptographic hash stored on the Cardano blockchain for reference.
• The corresponding DID and reference to the credential are stored on Aiken smart contracts to track credential validity.

Step 2: Selective Identity Proofing (Selective Disclosure)

• When a user needs to prove a specific attribute (e.g., age, nationality) without revealing full identity details, they generate a ZKP using their zkID wallet.
• The ZKP, generated by Midnight, confirms the specific attribute without disclosing the user’s entire credential or personal data.
• The ZKP is sent to a verifier (e.g., a DeFi platform, healthcare service, etc.), who interacts with the Aiken smart contract to validate the proof.
• Aiken smart contracts validate the proof by checking it against the credential’s cryptographic hash and DID stored on the Cardano blockchain.

Step 3: Credential Verification and Revocation

• Verification: If the proof is valid, the smart contract confirms the user’s claim (e.g., age over 18) without revealing any sensitive information.
• Revocation/Update: If a user’s credential needs to be revoked (e.g., if an issuer deems it invalid), the issuer updates the Aiken smart contract, marking the credential as revoked.
• A Merkle tree structure can be used to track revocations efficiently. Each ZKP will reference this tree to ensure the credential is still valid.
• The zkID wallet fetches the updated state and informs the user if their credentials are no longer valid.

<u>=&gt; User Interface (UI) Overview</u>

1. Dashboard:

• A simplified dashboard displaying key information such as the user’s DIDs, active credentials and status of recent verifications.
• Users will have an overview of the number of credentials, their validity and any expiring soon.

2. Selective Disclosure:

• Easy-to-use toggles and sliders that allow users to selectively disclose specific attributes (e.g., proving they are over 18 without sharing their birthdate). The system will guide the user in generating zk-SNARK proofs for these attributes.
• A simple “Generate Proof” button for each credential, ensuring users can create ZK proofs effortlessly.

3. DID and VC Management:

• Issue, revoke, or update credentials directly from the wallet, with clear indicators showing the status (valid, revoked, or expired) of each credential.
• Visual cues for off-chain storage, showing how sensitive data is encrypted and securely stored.

4. Privacy Features:

• Private key management tools to securely store and manage users’ keys for their DIDs and credentials.
• Security alerts for credentials nearing expiration or that have been revoked, ensuring users can take timely action.

5. Integration with dApps:

• A built-in dApp browser for users to interact with DeFi, governance platforms, and other decentralized applications, seamlessly connecting to the zkID Wallet for identity verification.
• When interacting with dApps, the wallet will automatically suggest the most appropriate credentials or proofs to use based on the dApp’s requirements.

=&gt; Why this proposal is unique:

• Unlike current solutions, the zkID Wallet uses zk-SNARKs to enable selective disclosure, allowing users to prove identity attributes (e.g., age, nationality) without revealing unnecessary personal data.
• The zkID Wallet is designed to integrate easily with DeFi and governance platforms, providing users with secure and private identity verification without disrupting existing processes.
• By leveraging Midnight and Aiken, users can manage DIDs and VCs while ensuring maximum privacy and security through zk-SNARKs and off-chain storage.

=&gt; Related Proposal

We have proposed a complementary but independent proposal in the challenge "Developers" (https://cardano.ideascale.com/c/idea/129732)which will develop a protocol to handle the broader infrastructure for cross-chain reputation and credential management, which would allow this wallet to integrate into a wider ecosystem without requiring direct dependencies. Both proposals work independently of each other, but if both are funded, the scope of this POC can be further expanded.

Please define the positive impact your project will have on the wider Cardano community

=&gt; Benefits for Cardano:

• This wallet will enable trust-based interactions in DeFi, governance and real-world asset tokenization, expanding Cardano’s transactional diversity while maintaining privacy and compliance.
• Expanding Transactional Diversity: The wallet’s integration with DeFi and governance platforms will help diversify transactions on Cardano, enabling a range of new use cases, including reputation-based lending and private governance participation.
• Reputation in Governance: Users can leverage their reputation tokens and VCs for governance participation, including staking reputation in Project Catalyst or DRep voting, making it a critical tool for Cardano governance.

=&gt;How We Measure Success:

<u>Quantitative Metrics:</u>

• User Adoption:
• Metric: Number of zkID wallets created.
• Goal: Achieve 500 wallet creations within the first year.
• Transaction Volume:
• Metric: Number of zkID-based transactions (e.g., reputation or identity verifications).
• Goal: Track wallet usage by measuring transactions monthly, aiming for 2,000 transactions in the first year.
• dApp Integrations:
• Metric: Number of dApps that integrate the zkID wallet.
• Goal: Achieve integration with at least 5 dApps across different sectors within the first year.

<u>Qualitative Metrics:</u>

• Community Feedback:
• Metric: Gather feedback from users on their experience with the zkID wallet and its privacy features.
• Goal: Reach 80% or higher satisfaction based on surveys.

==&gt; Sharing Outputs:

• Open-Source: All code and development will be shared on GitHub, with comprehensive documentation.
• Reporting: We will provide regular updates through Project Catalyst and blog posts.
• Education: We will provide education material to make the simplify use and adoption of the wallet.

What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

=&gt; Previous Funding and Experience:

TrustLevel and Dominik Tilman have a proven track record of delivering successful Catalyst-funded projects since Fund 3. Over several Catalyst rounds, we’ve be awarded with complex blockchain project such as Aiken Smart Contract Library in F11 (will be implemented here: https://MeshJS.dev/) and zero-knowledge protocols in F12 (link: https://projectcatalyst.io/funds/12/f12-cardano-open-developers/zero-knowledge-zksnark-voting-protocol-on-cardano-for-dao-governance-open-source

=&gt; Team Capabilities:

• Technical expertise: We are experts in Cardano's blockchain, Aiken smart contracts and zk protocols.
• Catalyst Experience: Our experience in implementing funded projects with strong community engagement demonstrates our ability to manage resources and meet deadlines.
• Community engagement: We have strong connections within the Cardano ecosystem and work will continue to work with relevant teams to ensure adoption and value creation of our projects

=&gt; Active Ecosystem Collaborations:

We are currently engaged in several collaborations across the Cardano ecosystem:

• SidanLab and MeshJS: We are collaborating on smart contract development, particularly within the open-source Aiken Smart Contract Library, a project funded in Fund 11.
• LidoNation: Working on reputation scores for Catalyst reviewers, where we focus on analyzing user behavior and building models to assess reputation and trustworthiness in the Cardano Catalyst ecosystem.
• Photrek: Involved in the development of a community tool for voting calculations and community engagement in SingularityNet, building and testing decentralized voting mechanisms (https://proposals.deepfunding.ai/graduated/accepted/ed600af3-885c-45bc-a874-56d2dde371ce).

What are the key milestones you need to achieve in order to complete your project successfully?

Milestone 1: System and Wallet Design

Goal: Establish a clear and detailed system architecture for the reputation wallet, including ZKP integration and smart contract interactions.

Deliverable:

• Detailed system architecture document outlining on-chain/off-chain storage, ZKP proof generation and submission, and smart contract design for reputation verification.

• Design of cross-chain compatibility to ensure reputation tokens and VCs.

• Wireframes for the user interface (UI) covering reputation management, ZKP generation.

Acceptance Criteria:

• Architecture must clearly outline how ZKPs will be integrated and verified on Cardano’s Midnight sidechain using Aiken smart contracts.

• The design must cover both technical components and user interactions for managing reputation and VCs.

Evidence:

• Published system design and architecture document on Github or a shared platform.

Milestone 2: Smart Contract Development and ZKP Integration

Goal: Develop and deploy smart contracts for privacy-preserving reputation verification, and integrate ZKPs for secure, off-chain proof generation and on-chain verification.

Deliverable:

• Smart contracts in Aiken to handle ZKP-based reputation and VC verification.

• Integration of ZKP for off-chain proof generation and submission to smart contracts.

• Testing and validation of ZKP functionality to ensure accurate, private verification.

Acceptance Criteria:

• Smart contracts must allow for reputation token and VC verification without revealing sensitive data.

• ZKP integration must allow users to generate off-chain proofs that can be submitted and verified on-chain.

Evidence:

• Published smart contract code on Github.

• Demo video showcasing proof generation and submission through ZKP integration.

Milestone 3: User Interface (UI) Development

Goal: Develop a user interface for managing reputation, VCs, and ZKPs.

Deliverable:

• A functional web interface for users to view and manage their reputation tokens, VCs and generate ZKPs for selective disclosure.

• Key management functionality (seed phrase backup, private key handling) for secure credential management.

Acceptance Criteria:

• The UI must allow users to manage their reputation and credentials securely and easily.

Evidence:

• Deployed web interface or prototype for user testing.

• Published UI code on Github, along with demo videos showing key features (reputation management, cross-chain interactions).

Final Milestone: Project Close-Out Report

Goal: Summarize the project’s outcomes, technical achievements, and future potential for scaling and improvements.

Deliverable:

• A comprehensive project close-out report detailing the completion of milestones, technical achievements, and recommendations for future development.

• Final documentation for developers and users, including system architecture, smart contracts, and UI guide.

Acceptance Criteria:

• The report must cover all completed milestones, lessons learned, and next steps for community engagement and future improvements.

• All relevant code, documentation, and feedback must be publicly accessible.

Evidence:

• Published project close-out report on Github.

• All relevant code and documentation available publicly.

Who is in the project team and what are their roles?

TrustLevel, founded by Dominik Tilman in 2023, develops tools and protocols to measure the reliability of data, information and reputation in decentralized ecosystems. Supported by grants from Cardano, SingularityNet and Arbitrum, our main focus is on creating a Decentralized Reputation Layer (DRL). Our tools, including the Voting Calculation for DeepFunding and a ZK Voting Protocol, enable privacy-preserving reputation management across governance, DeFi, and cross-chain applications. All outputs are open-source.

=&gt; TrustLevel Core Team:

• Dominik Tilman: Project and Technical Lead. Dominik has been actively engaged since Fund 3 in Project Catalyst and involved in multiple funded projects. All proposals are either successfully delivered or on track. He is founder of TrustLevel.io &amp; Conu21.com and has 15+ years experience in innovation management and company building.
• Roman Preuss: Full-Stack Developer
• Josch Rossa: Full-stack developer and LLMs
• Alex Ramalho: Full Stack AI Developer
• Sergey K: Blockchain Developer

Please provide a cost breakdown of the proposed work and resources

Budget Breakdown (150,000 ADA Total)

Milestone 1: Architecture and System Design – 50,000 ADA

• Design of the reputation wallet system, including ZKP integration, cross-chain compatibility, and smart contract interactions.

Milestone 2: Smart Contract Development and ZKP Integration – 50,000 ADA

• Development of Aiken smart contracts for privacy-preserving reputation verification.

• Integration of ZKP protocols for secure proof generation and on-chain verification.

Milestone 3: User Interface (UI) Development – 30,000 ADA

• Development of the user interface for managing reputation, VCs.

• Key management features for secure credential handling.

Milestone 4: Project Close-Out Report – 20,000 ADA

• Final project report summarizing achievements, feedback, and recommendations for future improvements.

• Publication of all relevant code, documentation, and deliverables.

No dependencies.

How does the cost of the project represent value for money for the Cardano ecosystem?

Strategic Investment:

This wallet will drive increased privacy, scalability, and cross-chain transactions on Cardano by enabling users to manage reputation and verifiable credentials. The growth in trust-based interactions will attract new dApp use cases, increasing transaction diversity and fostering a more secure and compliant ecosystem, crucial for expanding Cardano’s appeal to institutional investors and growing community confidence.

Expertise and Complexity:

Our budget ensures fair compensation for experts in blockchain, decentralized identity (DID), and Zero-Knowledge Proof (ZKP) technologies. These roles require a deep understanding of Cardano’s infrastructure and experience with complex cryptographic solutions to ensure that the wallet meets the highest standards of security, privacy, and scalability.

Risk Mitigation:

We acknowledge the risk of ADA price fluctuations during the project. In the case of a price drop, we will manage any shortfall without additional funding requests. If ADA’s value increases, we will invest any surplus into further enhancing the wallet’s features, ensuring maximum value for the Cardano community.