Would you trust a proof of reserves that doesn’t reveal any addresses?

[Antidote47k]

While reading about recent work on bitcoin privacy, I came across a proof of concept called zkPoH(Zero Knowledge Proof of HODL) and how it could potentially influence how proof of reserves are confirmed.
Proof of reserve is a way a custodian proves it actually holds the bitcoin it claims to hold on behalf of customers, so normally this is done by publishing its reserve addresses where any can look it up on the blockchain and verify that they really contain them. Now publishing these addresses exposes wallet balance, structure and transaction history, The advantage of this approach is that anyone can independently verify the reserve addresses on-chain without relying on the exchange’s word, this is where zkPoH comes in, it aims to let someone prove they control a certain amount of bitcoin without necessarily revealing UTXOs and addresses they belong to.
This is an interesting concept but the downside is that currently it does not yet prove ownership I.e it can currently prove that a qualifying UTXO does exist in the snapshot but can’t prove that said coins belongs to a particular person basically it’s still in development.

That brings us to my question, bitcoin has always valued transparency cause everything is publicly verifiable so if a cryptographic proof could provide the same assurance without revealing addresses, would that be enough for you or do you still believe that for trust, reserves should be visible on chain?

[Ambatman]

This has been suggested to Saylor for years to prove the Bitcoin they holding
Since he normally argues and try to protect their funds privacy.

bitcoin has always valued transparency cause everything is publicly verifiable so if a cryptographic proof could provide the same assurance without revealing addresses, would that be enough for you or do you still believe that for trust, reserves should be visible on chain?

If it can evolve towards showing proof of ownership and prevent double counting while making it possible that anybody can independently verify the proof
Then yes it would be enough for me.

Bitcoin isn't just about transparency or making things public
It's that information or claim are verifiable without requiring trust.

Brings to Verify. Don't trust. So I believe verification over visibility since privacy here is a feature.

[hmbdofficial]

That brings us to my question, bitcoin has always valued transparency cause everything is publicly verifiable so if a cryptographic proof could provide the same assurance without revealing addresses, would that be enough for you or do you still believe that for trust, reserves should be visible on chain?

For me I would prefer cryptographic proof over publicly visible addresses, in as far as it proofs the right thing. The thing is that proving that an exchange controls a certain amount of bitcoin is not the same as as proving it is solvent. A stronger system would actually prove both control of sufficient BTC and coverage for costumer liabilities without exposing addresses UTXO’s or users balances.
Bitcoin’s transparency is valuable because claims can be independently verify not because everyone must see the underlying data. So I think the ideal future should be like;
Don’t show me everything, just give me a proof I can independently verify that can actually provide both privacy and verifiability.

[BALIK]

Hmm, I also find this concept of ​​zkPoH very impressive.
But, replacement for Proof of Reserve? no way.
At most OK, I see it as an extra layer.

Cause, you know, main purpose of Proof of Reserve is to show actual control over asset, not just the existence of the UTXO.

Another thing is that Proof of Reserve was never enough on its own. After FTX, you may have noticed exchange have many liabilities, offchain debt, collateralized loan or other financial obligation are hidden. So, showing reserve does not prove its solvency. So, yes zkPoH could protect privacy but user can still be misled if those liabilities remain undisclosed.

[thesebassv]

That brings us to my question, bitcoin has always valued transparency cause everything is publicly verifiable so if a cryptographic proof could provide the same assurance without revealing addresses, would that be enough for you or do you still believe that for trust, reserves should be visible on chain?

Yes, totally. And I do not agree that reserves should be visible on chain, that can become a huge risk. But having a proof of reserve is more than enough to increase trust. Actually a lot of exchanges and projects already use ZKP-based proof of solvency or proof of reserve, like Binance, OKX, and Aave. Because they understand that having some level of proof benefits them, and I believe that once zkpoh is already tested and completely running, most of them will implement that to increase that trust

[PX-Z]

The advantage of a zero knowledge approach like zkPoH is that it can prove ownership or control of a certain amount of bitcoin without revealing wallet addresses or balances. That significantly improves privacy and reduces the risk of exposing an organization's entire treasury.

However, a proof that reveals no addresses requires trust, and it's contradicting how cryptography principle "Don't trust, verify"

Issue is, that proof of reserves alone has never been enough. Even if zkPoH proves an exchange controls say, 100,000 BTC, it says nothing about liabilities. An exchange could still owe customers 150,000 BTC and remain insolvent.

[Smack That Ace]

Well, best solution in this issue could be using hybrid system. Exchanges could use zkPoH to keep customer privacy and wallet structure secret if they want. But same time they will also need to have cryptographic proof of ownership. So, they also need to ensure liability verification and regular independent audit. You know, many Proof of Reserve implementation now use Merkle trees and zkPoH, but they are not full solution. Cause exchange could theoretically borrow UTXOs from somebody else before taking snapshot and still emerge fully reserved.

That brings us to my question, bitcoin has always valued transparency cause everything is publicly verifiable so if a cryptographic proof could provide the same assurance without revealing addresses, would that be enough for you or do you still believe that for trust, reserves should be visible on chain?

no, only cryptographic proof is not enough for me. Dont get me wrong, I am for privacy, but privacy should not diminish accountability, right?
I dont want to trust anyone, i want to verify.
If any significant part of verification become opaque then we will start relying on trust again.

[PrivacyG]

That brings us to my question, bitcoin has always valued transparency cause everything is publicly verifiable so if a cryptographic proof could provide the same assurance without revealing addresses, would that be enough for you or do you still believe that for trust, reserves should be visible on chain?

You call it proof your self.  It would be hard coded and impossible to forge I assume.  So.  What is the point in asking for more than cryptographic proof of someone holding a particular amount of Bitcoin?

More over.  Another Privacy feature is another step forward for Bitcoin I would say.  If you need to see the numbers, the address strings, balances et cetera with your own eyes to consider it proof then wait until you hear about Monero!

[RoseAPT]

At this point, KPMG, or any big 4 auditor, are way more reputable than hardware wallet makers

[Lida93]

. You know, many Proof of Reserve implementation now use Merkle trees and zkPoH, but they are not full solution. Cause exchange could theoretically borrow UTXOs from somebody else before taking snapshot and still emerge fully reserved.

A  possible scenario to be wary of which I totally agree with you because a situation of trust is rather created, which opens room for exploit by bad actors in the ecosystem. The zkPoH rather brings back trust instead of taken it off. Scammer exchanges could take ill advantage of this to scam customers along as they can easily return their borrowed money after sometime of gaining the public trust they need.