How Deribit Describes Its Merkle-Based Proof of Reserves

Summary

The document explains Deribit’s approach to demonstrating that customer liabilities are covered by assets. It describes daily snapshots, a modified Maxwell-style proof using a binary Merkle tree, and privacy measures intended to let customers identify their own balances without exposing the direct link between balances, identities, and blockchain addresses. Customers can use account-specific identifiers and published verification data to check that their liabilities are included, while the exchange’s disclosed on-chain assets can be compared with total reported liabilities.

The method’s stated coverage has limits. Assets held by third-party custodians are excluded from the directly controlled asset files, snapshots provide only a point-in-time view, and market changes can create differences between snapshots. The document also describes an aggregate margin figure for assets locked against open positions and lists wallet addresses for public checking. Its explanation is useful for understanding proof-of-reserves mechanics, but a snapshot comparison alone does not establish continuous solvency or cover assets omitted from the disclosed scope.

Key ideas

• The proof-of-reserves process compares reported customer liabilities with exchange-controlled on-chain assets.
• A modified Merkle tree is used to support individual balance verification while limiting disclosure of customer information.
• Daily snapshots can be checked by users with account-specific proof data.
• Third-party custody assets are excluded from the described asset files, and snapshots reflect only a point in time.
• The exchange also publishes an aggregate measure of margin locked against open positions.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.