[Paper Pick] Privacy Preserving Proofs of Solvency for Bitcoin Exchanges

This is the first brief in a new series called Paper Pick that will occasionally allow our readers to discover published papers related to Bitcoin technology.

This week’s paper pick, published on Oct 26, 2015, is a privacy-preserving proof of solvency for bitcoin exchanges that does not disclose the exchange’s Bitcoin address, its total holdings or liabilities, or any information about its customers.

Bitcoin exchanges function like banks, securely holding their customers’ bitcoins on their behalf. Several exchanges have suffered catastrophic losses with customers permanently losing their savings. A proof of solvency demonstrates that the exchange controls sufficient reserves to settle each customer’s account. We introduce Provisions , a privacy-preserving proof of solvency whereby an exchange does not have to disclose its Bitcoin addresses; total holdings or liabilities; or any information about its cus- tomers. We also propose an extension which prevents exchanges from colluding to cover for each other’s losses. We have implemented Provisions and show that it offers practical computation times and proof sizes even for a large Bitcoin exchange with millions of customers.


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