Future Directions for Proof of Solvency in Digital Assets

This section discusses future work in the realm of Proof of Solvency, including the development of smart contracts for historical tracking, a scoring platform for custodian service providers, and user credit enhancements. These innovations aim to foster greater transparency, trust, and privacy within digital asset platforms, encouraging further exploration in privacy and trust in the crypto space.


This content originally appeared on HackerNoon and was authored by Solvency Ratio Technology

:::info Authors:

(1) Hamid Bateni, Nobitex Labs (hamid@europe.com);

(2) Keyvan Kambakhsh, Nobitex Labs (keyvankambakhsh@gmail.com).

:::

Abstract and 1 Introduction

2 Proof of Liability and 2.1 Commitment

2.2 Merkle Tree

2.3 Leaves Structure

2.4 Proof Statement

3 Proof of Reserve

3.1 Ethereum

3.2 Bitcoin

4 Proof of Solvency

5 Future Works and References

5 Future Works

sented in this paper. We aim to inspire further exploration in the field of privacy and trust in digital asset platforms.

5.1 Contract

One potential area for future work involves the creation of a smart contract for storing the historical data of a business’s Proof of Solvency. This contract would allow businesses to announce new rounds of Proof of Solvency, set the root of the Proof of Liabilities tree and its associated proof, and also submit proofs related to the Proof of Reserves. It would also perform a final check of solvency, ensuring that the total reserves are at least equal to the total liabilities. This could provide a transparent and verifiable record of a business’s solvency over time, enhancing trust in the platform.

5.2 Custodian Scoring Platform

Based on the protocol introduced in this paper, we could also develop a platform for scoring custodian service providers. This platform would evaluate custodians based on their Proof of Reserves, the frequency of their solvency periods, their historical record of solvency, and other relevant factors. Such a platform could provide users with a transparent and objective way to evaluate the trustworthiness of different custodians, aiding in their decision-making process.

5.3 User Credit

Currently, the Proof of Solvency protocol is focused on businesses, but it could be extended to users as well. With some modifications to the protocol and collaboration from businesses, users could create private proofs that they hold at least a minimum balance in the custody of a specific business during their last submitted Proof of Solvency round. Users could also create proofs for historical balances, such as proving that they had at least a minimum balance for the last five submitted Proof of Solvency rounds by a specific business. This could provide users with a privacy-preserving way to demonstrate their financial stability and creditworthiness.

References

[1] Hamid Bateni , Keyvan Kambakhsh. Eip7503. 2023.

\ [2] Vitalik Buterin. Having a safe cex: proof of solvency and beyond. 2022.

\ [3] Nic Carter. Nic’s por, wall of fame. 2023.

\ [4] Kamil Jezek. Ethereum data structures. 2021.

\ [5] Satoshi Nakamoto. Bitcoin: A peer-to-peer electronic cash system. 2008.

\ [6] Maksym Petkus. Why and how zk-snark works: Definitive explanation. 2019.

\ [7] WikiPedia. Merkle tree.

\ [8] DR. GAVIN WOOD. Ethereum: A secure decentralised generalised transaction ledger.

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:::info This paper is available on arxiv under CC BY-NC-ND 4.0 DEED license.

:::

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This content originally appeared on HackerNoon and was authored by Solvency Ratio Technology


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