Binance Improves Proof-of-Reserves System With Zero Knowledge Verification Method
Binance announced Friday it had implemented zk-SNARK, a zero-knowledge verification method, into its Proof of Reserves (PoR) system to protect sensitive information better. The company also added four new crypto tokens to the PoR system, including SHIB, SOL, DOT, and CHZ.
What is zk-SNARK?
Binance upgraded its Proof of Reserves (PoR) Verification System by adding zk-SNARK – a zero-knowledge verification method that aims to improve the privacy and security of sensitive information, the crypto exchange said in an announcement. Further, Binance enabled PoR for four new crypto tokens: SHIB, DOT, SOL, and CHZ.
“Continuing the efforts in providing transparency on user funds, Binance is excited to introduce zk-SNARKs, a zero-knowledge verification method that keeps sensitive information private and more secure, to its Proof of Reserves (PoR) Verification System.”– Binance said in the announcement.
zk-SNARK refers to a method that allows one party to prove to another party that a statement is true without revealing any additional information beyond the statement itself. Binance said this is the first time it has implemented zk-SNARK, adding it is looking forward to receiving community feedback on the new feature. The company will also turn the code for the system into open-source to increase transparency and allow other industry players to implement the technology.
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Binance to Add More Crypto Tokens to PoR System
The move marks the latest upgrade to Binance’s PoR system, with the crypto exchange also saying it plans to add more tokens in the coming weeks. With the addition of four new tokens, the total number of verifiable assets on Binance currently stands at 13.
The world’s biggest crypto exchange launched its PoR system in November 2022 to provide transparency on user assets in the wake of the FTX collapse. In other words, the system aims to prove that Binance holds user assets in the same tokens they have initially deposited.
The FTX fiasco, which led to the withdrawal of at least $20.7 billion from various cryptocurrency exchanges, resulted in calls for better transparency in the crypto space. This pushed the concept of Proof of Reserves (PoR) into the spotlight, but some believe the system alone is just an excellent first step as it does not demonstrate the overall financial health of an exchange.
Do you think a PoR system alone can prove that a crypto exchange is healthy and solvent? Let us know in the comments below.