Verifying Exchange Asset Inclusion with Merkle Proofs

Summary

The document outlines how a customer can check whether their account balance appears in an exchange’s monthly proof-of-reserves snapshot. The process begins by opening a published audit, then using the account verification feature to calculate a Merkle proof. The user compares the resulting tree’s root hash with the root announced by the platform; the document also describes downloading snapshot data and running an open-source validator for a manual check.

This method can provide evidence that a specific account entry is included in the published snapshot, assuming the snapshot and verification process are authentic. The document does not explain how to verify the exchange’s total liabilities, assess whether assets are free of encumbrances, or independently audit the platform’s controls. Therefore, a successful inclusion check alone does not establish that the exchange is solvent or can meet all withdrawals. The description is platform-specific and relies on the exchange’s own published data and tools.

Key ideas

• A Merkle proof can let a customer check whether an account entry is included in a published snapshot.
• The account proof can be checked by comparing its calculated root hash with the platform’s announced root.
• Downloaded snapshot data can be checked with the platform’s open-source validator.
• Proof of account inclusion does not by itself establish total solvency or withdrawal capacity.

Tags

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