Binance has upgraded its proof-of-reserves (PoR) system with zk-SNARK verifications, a form of zero-knowledge proofs that preserves the privacy and security of sensitive user information.
Binance first published its PoR system in November 2022 as users started demanding more transparency from exchanges in the aftermath of the FTX collapse. At the time, Binance used Merkle tree cryptography to enable users to verify their holdings.
The zero-knowledge verification system can ensure that all leaf nodes in the Merkle tree have contributed to Binance’s claimed total user balance of each cryptocurrency. It will also ensure that there is no user with a negative balance included in the tree.
Binance will generate and publish zk-SNARK proof for the construction of the Merkle tree to prove its reserves. By verifying the Merkle proof Binance users can check whether their balance is included in the Merkle tree root. Users can verify the zk-SNARK proof to ensure that the Merkle tree construction was free from any tampering.
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