Proof of solvency and collateral
Centralized exchanges (CEXs) are a critical part of the cryptocurrency ecosystem, but they also pose a significant risk to users. In the event of a hack or bankruptcy, users can lose all of their funds. One way to mitigate this risk is to require CEXs to provide regular proof of solvency. Proof of solvency is a way for CEXs to demonstrate that they have enough assets to cover all of their user deposits. There are a number of different ways to implement proof of solvency. One simple approach is for CEXs to simply publish a list of all of their addresses and the corresponding balances. This approach is transparent and easy to verify, but it does not provide any privacy for users. Zero-knowledge Proofs A more secure approach would be for CEXes to use zero-knowledge proofs (ZKPs) to prove their solvency. ZKPs allow exchanges to prove that they have a certain amount of assets without revealing any other information about their balance sheets. This would make it much more difficult fo