HTX Introduces Zero-Knowledge Proof Technology to its Proof of Reserves Verification

HTX Introduces Zero-Knowledge Proof Technology to its Proof of Reserves Verification

–News Direct–

Singapore September 25, 2023 HTX, a comprehensive ecosystem of blockchain businesses, today announced its PoR (Proof of Reserves) verification system upgrade coupled with the introduction of ZK Proofs (Zero-Knowledge Proofs). Integrating ZK Proofs into the PoR system allows third-party verification of the security of user assets without disclosing sensitive information.

In prioritizing the security of user funds and ensuring solvency to depositors, centralized exchanges, especially global leaders like HTX, are turning to the PoR mechanism. This approach is increasingly recognized as a robust method to enhance investor confidence.

HTX, an early proponent in the industry, initiated monthly Merkle Tree PoR audits in late 2022. Committed to transparency, HTX discloses these audit results to the public, ensuring consistent and secure access to user assets. Building upon the Merkle Tree PoR foundation, HTX has integrated ZK Proofs, amplifying the security and privacy of the assets on the exchange.

What is Proof of Reserves (PoR)?

Proof of Reserves is a cryptographic method verifying that the exchange is holding the users funds in full by proving the deposits match the balances. PoR also offers details like the location of the assets, reassuring users that their funds remain in their accounts and have not been lent out, for example.

From a holistic perspective, PoR serves as a dual benefit conduit. For businesses, it acts as a foundation to strengthen their credibility, thereby enhancing user retention. For users, it diminishes security vulnerabilities and wards off potential malevolent actors with three key elements:

  • On-chain assets in the wallet: Assets in the centralized exchange account 1:1.

  • User assets amount falls within the scope displayed by the exchange.

  • On-chain assets are located at the address held by the exchange.

In a progressive step beyond the simple Merkle Tree-based Proof of Reserves, HTX introduces the Zero-Knowledge Proof of Reserves system. Zero-knowledge Proofs are an innovative cryptographic protocol that allows one party (the provers) to prove to another party (the verifier) that a given statement is true without revealing private information.

Enhancing Trust with Zero-Knowledge Proofs

There are two roles in a Zero-Knowledge Proof system: the prover and the verifier. The prover possesses information and aims to prove to the verifier that the information is true without revealing private information. Based on the information, the prover constructs a proof that does not contain sensitive data.

This proof, typically through mathematical operations, guarantees that the prover holds the information. After receiving the proof, the verifier checks its correctness through a preset verification algorithm. However, the verifier cannot obtain any private information from the proof. If the prover passes the verification, the verifier believes that the prover has the information without gaining any knowledge of the private information.

As the volume of cryptocurrency transactions continues to increase, users need assurance that exchanges have sufficient reserves to support them. However, the details of user assets and specific amounts of reserves are sensitive information that exchanges do not generally disclose. With Zero-Knowledge Proofs, exchanges can confirm they have sufficient reserves and solvency without revealing the specific amount. Proof circuits designed with strict constraints ensure that the final proof is derived through a rigorous calculation process, preventing the occurrence of false proofs.

By integrating this sophisticated cryptographic technology, exchanges can significantly strengthen user confidence and elevate the transparency of their financial holdings, serving as a safeguard against financial vulnerabilities. Compared with traditional external audits, zero-knowledge proofs eliminate the need to transfer the entire reserve to third-party auditors, reducing operational costs and financial risks. This makes PoR a routine process that can be conducted frequently and disclosed regularly.

Taking user data as an example:

UID

BTC

ETH

TRX

HT

USDT

DOT

user_total_net_amount (USDT)

123

1

-1

0

0

0

-100

18,000

456

1

1

0

0

0

-100

20,000

Three important constraints need to be satisfied:

  • Constraint 1:

    • The total net account balance (in USDT) for each user must not be negative.

    • asset(!neg(user_total_net_amount[x]));

  • Constraint 2:

    • The total net asset balance (in USDT) of the exchange must equal the sum of the total net account balance (in USDT) of each user's leaf node during the Merkle tree hash process.

    • CEX_total_net_amount = user_total_net_amount[0] + user_total_net_amount[len – 1];

  • Constraint 3:

    • The constraint during the Merkle tree hash process.

    • merkle_root_hash = hash(user_leaf_node, merkle_proof_path_node…)

These constraints are openly accessible. Users, provided they meet the reserve statistical criteria (generally maintaining a non-zero account balance), can verify their assets proof provided by HTX. This will reassure users that the exchange's reserve proofs meet the constraints and are reliable from a cryptographic consensus perspective.

HTX Leads the Industry with Transparency and Advanced Technology

From late 2022 to the present, HTX has continued to update its Merkle Tree Proof of Reserves data on the 1st day of every month to ensure that the ratio of user assets to reserves remains at a minimum of 1:1.

As per the latest audit results on Sep 1, 2023, HTX has maintained a reserve ratio consistently exceeding 100%. Following the introduction of the ZK-based PoR verification, HTX will continue to disclose monthly audit results to the public. This commitment not only reaffirms the platform's solvency but also underscores its dedication to user privacy and asset security.

This upgrade realizes an open-source verification of wallet address ownership and on-chain assets for HTX users. Through efforts such as the monthly PoR reports since Dec 2022, HTX remains dedicated to spearheading advancements in industry transparency.

About HTX

Founded in 2013, HTX has evolved from a crypto exchange into a comprehensive ecosystem of blockchain businesses that span digital asset trading, financial derivatives, wallets, research, investment, incubation and other areas. HTX serves millions of users worldwide, with a business presence covering over 160 countries and regions across five continents. Its three development strategies – "global development, technology drives development, and technology for good" underpin its commitment to providing comprehensive services and values to global cryptocurrency enthusiasts.

Contact Details

Michael Wang

glo-media@htx-inc.com

Company Website

https://www.htx.com/

View source version on newsdirect.com: https://newsdirect.com/news/htx-introduces-zero-knowledge-proof-technology-to-its-proof-of-reserves-verification-166492387

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