Binance announced that it would introduce zero-knowledge proofs to improve the quality of its Proof of Reserves report.

Zk-SNARKs will allow Binance users to securely and privately confirm nonnegative balances and changes of balances using information from its proof of reserves Merkle tree.

As part of the announcement, Binance said it added SHIB, DOT, CHZ, and SOL to the assets covered by its proof of reserves report. Additionally, the exchange will open-source the zk-SNARKs code to improve transparency and to help other exchanges improve their reporting. Binance has yet to reveal the frequency of forthcoming reports.

We are making the code for #Binance’s PoR system open-source because we want to continue to provide more transparency for our users, so that industry peers and the community can benefit from this innovative technology.

Zk-SNARKs, an abbreviation of zero-knowledge succinct on-interactive arguments of knowledge, confirms a statement’s truth without revealing any information about the statement. 

The zk-SNARK will verify that each user’s asset balance set is part of a global state of user funds Binance maintains. Additionally, it will anonymously ensure that the user’s net balance is not negative by including collateral posted for margin trading. Customers can use zk-SNARKs to verify that the Merkle root hash in Binance’s Merkle tree reflects asset balance changes. The Merkle root hash is essentially a cryptographic summary of all user balances. Changes to a user’s asset balances will prompt an update of the Merkle root hash, which the zk-SNARK will confirm.

Binance’s addition of zk-SNARKs is the last step in a transparency roadmap outlined at the end of November 2022. Part of its roadmap involved securing the services of a third-party auditor to audit its proof-of-reserves. This initiative has been jeopardized by the exit of accounting firm Mazars from the crypto space. Mazars was the accounting firm that conducted an agreed-upon procedure for the exchange’s first proof-of-reserves report.

While the technical implementations of PoRs vary, crypto VC Nic Carter expects zero-knowledge methods to supersede the technical limitations of traditional Merkle tree reports. 

However, while zk-SNARKs represent an important step in the right direction for the world’s largest exchange, it is still only one part of a broader toolkit that can prevent collapses like FTX. Blockchain expert Anndy Lian agreed, saying that while not perfect, zk-SNARKs provide a “big enhancement.”

ZK-SNARKs makes Proof of Reserve more transparent. This is one more step closer to building trust in the #crypto space. Binance has launched theirs. This is not 100% perfect, but I consider this move a big enhancement compared to the previous one. https://t.co/cYz0m8w7vu

According to Carter, exchanges need additional rules to segregate corporate and user assets and protect customer assets from bankruptcy. Additionally, U.S. lawmakers must create a viable market for accounting firms to invest in tools to oversee PoR attestations. Doing so would also encourage offshore exchanges to conduct PoR reports.

Because audits are expensive and done quarterly, Carter suggests that they accompany, rather than replace, more frequent PoR reports, which provide updated customer reassurances.

For Be[In]Crypto’s latest Bitcoin (BTC) analysis, click here.

The post Binance Adds ZK-SNARKs to Improve Privacy of Proof of Reserves Report appeared first on BeInCrypto.

Similar to Notcoin - Blum - Airdrops In 2024

origin »

221 +