Cryptocurrency exchange, Binance, made significant upgrades to its Proof-of-Reserve system (PoR). It has integrated a zero-knowledge verification method called zk-SNARKs, which will help improve transparency.
Announcing this in a Twitter post, Binance stated the PoR system with zk-SNARKs will be open source, so it can benefit the Binance community and the entire industry.
The zk-SNARKs is a form of zero-knowledge proof that keeps sensitive information private and more secure to the PoR Verification System. Combining this new upgrade with the Merkle tree information, users now have a new and improved way of verifying Binance’s reserves.
Binance initially released its PoR system in November 2022, utilizing a Merkle tree cryptographic technique that allowed users to verify their holdings. However, the advancement had two shortcomings.
The Merkle root could not reflect the sum of its leaf node’s balance information and the entity whose reserves were being verified could add a negative balance under a fake account.
These problems are now solved with the zk-SNARKs upgrade. All leaf nodes of the Merkle tree are now contributing to Binance’s claimed total user balance of each asset. Also, no user with a negative total net balance is included in the Merkle tree.
According to a statement by the exchange,
“Since Binance offers margin, crypto loans, and futures trading products, each user’s balance of each crypto asset may be comprised of assets and liabilities. A user’s balance of a particular crypto asset can be negative, but their total net balance across all crypto assets should not be negative (as all loans are fully collateralized).”
As part of the upgrade, Binance added four new tokens to the PoR system. They are the Solana, Shiba Inu, Polkadot, and Chiliz tokens. This brings the total number of verifiable assets to thirteen popular tokens.
