Your Funds Are Safe

Proof of solvency is a system where we (the exchange) prove that we hold enough assets to cover all of your (all customers of the platform) deposits at any time. We have always been fully compliant with asset segregation requirements in Japan, but now we can prove it - with cryptography, on chain.

Customers of any exchange deserve to know that their funds are safe. This means that customers can know their assets are safe without relying on attestations or claims made by management on social media. With Proof of Solvency, trust in the exchange is based on mathematics, digital signatures, zero knowledge proofs and smart contracts that can be verified on the blockchain.

Don’t trust us, Verify the Blockchain

There are four major concerns to the cryptographic proof for any customer to consider:

1. Is the total reserves held in custody greater than the total customer balances.
   See “Total Company Proof”

2. Is my balance included in the total customer balances?

   See “Individual Receipt”

3. Every listed balance is included in the total assets

   See “Community consensus”

4. All negative balances are excluded from the calculation of total customer balances

   See “zk-SNARK”, where we demonstrate that our exchange does not include negative balances to undervalue our entrusted assets using zk-SNARK. A specific reason for this is to ensure the exchanges cannot maliciously fabricate negative account balances of fake users causing total customer deposits to be underrepresented.

How is it possible to prove that?

To prove that the calculation of the total customer balances is correct, taking into account the first and second points mentioned in the previous section (Don’t trust us, Verify the Blockchain), a simple method is to publish the full list of user balances. This would allow all parties to verify the total liabilities and that their balance is included. However, this would be a major privacy concern and is totally impractical. Therefore, a method is needed to address this issue without disclosing individual user balances or personal information. To achieve this, our company employs the use of a Proven tool, which includes a process for verifying asset solvency while encrypting personal information.

These processes utilize three very interesting algorithms:

1. Digital Signatures & Hash functions: Digital signatures of some information are created which allows you to prove (with 100% mathematical confidence) who created it, in addition to, whether the information has been tampered with.

2. Merkle Tree: A method of summing total liabilities publicly, while preserving the privacy of the users and their balances. You can see only your balance in the tree, and the equation that adds your balance to the total, but no one else's. Furthermore, you can verify that your account balance is included in our published total assets under custody by checking that your own calculated Merkle Root and the value of the Merkle Root provided by us are the same. For more information, see the Individual Receipt section.

3. zk-SNARK: A method of proving that you know something, without revealing what the information actually is. A common example is the “Where’s Wally” puzzle: You could prove you know the answer by taking a close up photo of the character, not revealing any surrounding information that would help someone else to locate him. We use this algorithm to prove that assets exceed liabilities and that no negative balances are included, all without revealing individual user balances.

Can I trust the algorithms?

The algorithms are developed by an independent third party called Proven.tools

This company has published their code and algorithms to GitHub for the world to review, and the code that runs the verification is published to the blockchain as a smart contract.

The Solvenscan website is developed and maintained by our Technology partner Proven: https://www.proven.tools/