What is Proof of Reserves (PoR)?

When we say proof of reserves, we are specifically referring to those assets we hold in custody for our users. This means we are showing proof that OX.FUN has funds covering all of our users' assets 1:1, plus some reserves.

When a user deposits one Bitcoin, OX.FUN's reserves increase by at least one Bitcoin to ensure that customer funds are fully backed. This proves that OX.FUN holds all user assets (plus some reserves) at a 1:1 ratio.

Merkle Tree

How Do We Prove Our Reserves to Users?

To ensure transparency, OX.FUN adopts a 1:1 reserve mechanism, that is, the assets held by the platform are fully matched with the user's assets. To this end, we have built a Merkle tree (as shown below) and support users to conduct independent verification through third-party auditing agencies.

What Is a Merkle Tree?

In cryptography and computer science, a hash tree or Merkle tree is a tree in which every leaf node is labeled with the cryptographic hash of a data block. Every non-leaf node is labeled with the hash of the labels of its child nodes. Hash trees allow efficient and secure verification of the contents of large data structures.

zk-SNARKs

What have we built?

By using a zk-SNARK, a crypto exchange can prove that all Merkle tree leaf nodes' balance sets (i.e., user account balances) contribute to the exchange's claimed total user asset balance. Each user can easily access their leaf node as having been included in the process. For each user's balance set (Merkle tree leaf node), our circuit ensures that:

• A user's asset balances are included in the calculation of the sum of the total net user balances with OX.FUN.
• The total net balance of the user is greater than or equal to zero.
• The change of Merkle tree root is valid (i.e., not using falsified information) after updating a user's information to the leaf node hash.

What is a zk-SNARK?

zk-SNARK, standing for Zero-Knowledge Succinct Non-Interactive Argument of Knowledge, is a groundbreaking tool rooted in cryptography. Utilizing advanced mathematical algorithms, it can proficiently validate the reserve amount without disclosing specific asset details. zk-SNARK not only facilitates swift asset verification but also negates privacy breach risks. Owing to these benefits, coupled with its non-interactive nature and high scalability, it finds extensive applications in areas like on-chain transaction verification, data privacy safeguards, and identity authentication