CZ Binance "juggling" Vitalik Buterin's new idea
In short, the father of Ethereum points out two solutions as custodial and non-custodial exchanges.
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The collapse of many major crypto-ecosystems in 2022 has prompted an urgent need to reform the way exchanges operate.
Ethereum co-founder Vitalik Buterin believes in stable exchanges, especially emphasizing Zero-Knowledge Succinct Non-Interactive Argument of Knowledge (ZK-SNARK) technology.
In a nutshell, the ZK-SNARK cryptographic proof helps prevent attackers from entering the system, improving the security of the platform, and speeding up transaction processing.
After discussions with angel investor Balaji Srinivasan and exchanges Coinbase, Kraken, and Binance, Buterin proposed creating cryptographic proof of funds held on-chain, thereby helping centralized exchanges ( CEX) becomes more secure.
Ideally, the system would not allow the exchange to withdraw user funds without permission. Binance CEO also supports this view, wants his exchange to be completely transparent and is ready to start implementing Buterin's idea.
In the beginning, Proof-of-Solvability was born to meet this need, that is, exchanges had to make a list of users and their respective deposits. However, concerns about privacy and security soon brought this option to a dead end. From there, Merkle Tree technology was born.
Vitalik explained that the Merkle Tree technique basically works because it requires exchanges to prove liabilities, but it's still not ideal.
As a result, Buterin bet on ZK-SNARK . Buterin recommends bringing user deposits into the Merkle Tree and using ZK-SNARK to prove the actual value. Adding a layer to the process takes hiding user balances a step further.
Buterin also discussed the implementation of Proof-of-Assets , as fiat money plays an important role in the reserve of assets and the model of the fiat ecosystem would be suitable for this case.
In the long-term, multisig wallets and social recovery wallets will be required, Buterin points out in the interim, with two alternatives, custodial and non-custodial exchanges, as illustrated in the figure. down here:
Buterin added:
“In the long term, my hope is that we are getting closer and closer to all custodial exchanges, at least in the crypto space.”
Earlier this month, Vitalik Buterin updated his Ethereum roadmap, in which he added verification using SNARK technology, to make it easier for validators to process transactions.
Without saying anything or responding in a whisper, the CEO of Binance also continuously set an example and acted after the FTX disaster. From issuing a call for exchanges to release proof of customer deposit, to outlining 6 basic requirements that a healthy exchange needs to focus on.
In the 11/14 AMA or recent tweets, he also repeatedly repeated the concept of non-custodial wallets and decentralized applications. Recently, Binance Pay has been integrated with Trust Wallet.
In addition, the owner of the world's largest crypto exchange is also being watched by officials in many jurisdictions about the action of canceling the contract with FTX, but stated that he could not provide details about the rival exchange.
FoxCryptoNews summary
Nov 20, 2022
