The EIP-5988 upgrade request has been filed by Ethereum developers. The proposal proposes a novel pre-compiled solution that intends to increase the effectiveness of running zero-knowledge proofs on the network and decrease the price of reserve proofs, such Merkle-based proofs on the chain.
Zero-Knowledge Proof Systems were taken into consideration when developing the Poseidon arithmetic hash function. Ethereum's roadmap is rollup-centric, therefore in order to interface with the EVM in the best way possible, it must provide capabilities for L2s.
For ZK-Rollups, especially effective cryptographic hash functions that offer proof verification are needed.
The Poseidon hash function, which is a collection of permutations over a prime field, is particularly well-suited for the purpose of constructing efficient ZK/Validity rollups on Ethereum.
Poseidon is one of the best hashing algorithms that may be used in this circumstance. Additionally, it is compatible with all widely used proving methods (SNARKs, STARKs, Bulletproofs, etc.). It would therefore create a good precompile that could be used with several ZK-Rollups.
The fact that ZK-Rollups using Poseidon have chosen different sets of parameters makes it more difficult to generate a single precompile for all of them, so it is important to keep this in mind.
To confirm that a user's crypto assets are fully retained with an exchange or crypto company, proof-of-reserve is frequently utilized. The introduction of EIP-5988 could have unknown effects on the security of the chain, according to Dankrad Feist, a researcher at the Ethereum Foundation, despite the fact that there aren't many hash functions that are friendly to zero-knowledge proofs on the blockchain. This is because any inclusion of a hash function in the Ethereum protocol requires caution.
Whether EIP-5988 will be implemented in the upcoming "Shanghai" upgrade is unknown. Additionally, Tim Beiko, an Ethereum core developer, claimed that the concept has been demonstrated by abdel.stark, the head of the StarkWare browser and an Ethereum core developer.
