• Binance’s addition of zk-SNARKs is the last step in a transparency roadmap outlined at the end of November 2022 after the FTX collapse.
• As part of the announcement, Binance said it added SHIB, DOT, CHZ, and SOL to the assets covered by its Proof of Reserves report.

Binance Improves Transparency and Security with Proof-of-Reserves Upgrade

Binance, the largest cryptocurrency exchange by market capitalization, has announced a major upgrade to its proof-of-reserves (PoR) system. The upgrade includes the incorporation of zk-SNARKs, which will significantly improve the transparency and security of the process.

PoR verification is a process that allows users to verify that an exchange has the assets it claims to have. This is important for ensuring that exchanges are not running fractional reserve systems, where they lend out more cryptocurrency than they actually hold.

Initially, Binance used cryptography to carry out the PoR process. However, the new upgrade uses zk-SNARKs, which are a type of zero-knowledge proof. Zero-knowledge proofs allow one party to prove to another party that they know something without revealing any other information.

This makes zk-SNARKs ideal for PoR verification, as it allows Binance to prove that it has the assets it claims to have without revealing any sensitive information about its reserves.

The upgrade also includes the use of Merkle trees, which are a type of cryptographic data structure. Merkle trees allow Binance to efficiently verify the existence of its assets without having to download the entire blockchain.

The combination of zk-SNARKs and Merkle trees makes Binance’s PoR system one of the most secure and transparent in the cryptocurrency industry. The upgrade is a significant step forward for Binance and the cryptocurrency industry as a whole.

Benefits of the Upgrade

The upgrade to Binance’s PoR system has a number of benefits, including:

• Increased transparency: The use of zk-SNARKs and Merkle trees makes it much easier for users to verify that Binance has the assets it claims to have.
• Improved security: The use of zk-SNARKs makes it more difficult for hackers to attack Binance’s reserves.
• Reduced costs: The use of Merkle trees can help to reduce the cost of verifying Binance’s reserves.

Conclusion

The upgrade to Binance’s PoR system is a significant step forward for the cryptocurrency industry. It makes Binance’s reserves more transparent and secure, and it could help to encourage more users to trust the exchange.

The upgrade is also a sign of the growing maturity of the cryptocurrency industry. As the industry continues to grow, it is important for exchanges to implement transparent and secure PoR systems.