[nowayno583]

Imagine you are Goldman Sachs and a client wants to make a 100mm USD wire transfer to one of their accounts at Citibank. How does citibank know that the account at GS has the money to cover this transfer?

Right now, the way this works is essentially through a lot of trust and some guarantees by the fed. This has some downsides: because you need a lot of confirmations, it makes transfers take longer. Also, small players can't really get in on this system, so some regional banks are at a disadvantage.

How do you make this safer and more robust? GS obviously can't send info on all of its clients accounts and balances to Citi. You could imagine a protocol where the client/GS sends Citi a zkp to prove that the client has the money (as long as all inputs are agreed upon).

Of course, you don't really need zkps. You could also have the fed keep a database on all money in all accounts (like they do in Brazil), so that the bank only has to ask the central bank to give you an ok. But that is a whole lot of power in the hands of a central authority, as well as a single point of failure, which is something banking systems should avoid imo

[AmericanChopper]

> How does citibank know that the account at GS has the money to cover this transfer?

At the moment this is all handled with Swift, and I’m not sure you what you gain from adding ZKPs. Depending on the transaction you might send a Swift MT799 with a pre-advice letter, a proof of funds letter, or a blocked funds letter. Again depending on what you’re doing you might need a MT760 to send a bank guarantee or some sort of letter of credit, and finally a MT103 to initiate the actual transfer of funds.

At this point your counter party risk lies with the banking institution itself, and their willingness and ability to complete the transactions they have legally committed to, rather than the account holder, and this risk doesn’t go away with the addition of ZKPs.

[nowayno583]

But Swift is just a messaging protocol, right? It doesn't handle trust at all - like you said, you need an awful lot of documents for a single transfer.

I think what could be gained with a zkp protocol would be timeliness. Not needing to confirm if the client has funds in the other institution manually or from trusting their in house APIs would be pretty nice.

The Brazilian central bank has a system that does essentially that, and wires here (even for very large sums) take seconds to fill, instead of the usual 2 days for US interbank wires.

[gbasin]

This should not be down-voted