Correct. A ZK Proof backed identity system is a significant bump up in both privacy and security to even what we have right now.

Everyone does realize we're being constantly tracked by telemetry, right?

A proper ZK economy would mitigate the vast majority of that tracking (by taking away any excuse for those in power to do so under the guise of "security") and create a market for truly-secure hardware devices, while still keeping the whole world at maximal security and about as close to theoretical optimum privacy as you're going to get. We could literally blanket the streets with cameras (as if they aren't already) and still have guarantees we're not being tracked or stored on any unless we violate explicit rules we pre-agree to and are enforceable by our lawyers. ZK makes explicit data custody rules the norm, rather than it all just flowing up to whatever behemoth silently owns us all.