ZKP Enabled Identity and Reputation Verification in P2P Marketplaces

In the realm of Distributed Ledger Technology, privacy and regulatory challenges loom large for marketplaces. Regulation requires to conduct Know Your Customer (KYC) procedures to verify the identity of participants, while privacy concerns necessitate the protection of personal data. Current approaches to KYC are inefficient and are potentially even harmful to privacy due to centralization and data exposure. This paper proposes a zero-knowledge proof enabled KYC scheme, utilizing Soulbound Tokens (SBT) to create a discreet, compliant, and secure KYC process. We present a privacy-preserving mechanism that shares only essential information while adhering to Self-Sovereign Identity (SSI) principles, placing users in the full control of their data. The proposed scheme further introduces the usage of SBTs for reputation to incentivize good conduct and build trust within marketplaces.