Author: Billy Tetrud 2021-07-05 18:24:36
Published on: 2021-07-05T18:24:36+00:00
The author has proposed an idea for proof of reserves that would allow ongoing verification of sufficient reserves. This involves users creating private keys using a seed to generate a public key, which they give to the custodian to represent their account in a public record of account balances. The custodian would update a map of addresses to balances and store funds on one or more HD wallets, creating a proof of ownership using the xpub for the wallet. These structures would be combined and hashed, with the hash published in an on-chain transaction daily. Users could continuously validate their account balance and verify owned addresses have sufficient funds. Receipts could also be requested for any balance update. Recording this on-chain prevents custodians from changing history and enables cross-verification among custodians. Losing keys is not a big deal as users can create a new seed and give a new public key to the custodian. Having a daily record reduces the possibility of short-term loans of large cryptocurrency amounts.
Updated on: 2023-05-21T03:14:37.950218+00:00