A ZK-SNARK based Proof of Assets Protocol for Bitcoin Exchanges

Abstract

This paper proposes a protocol for Proof of As-sets of a bitcoin exchange using the Zero-Knowledge Succinct Non-Interactive Argument of Knowledge (ZK-SNARK) without revealing either the bitcoin addresses of the exchange or balances associated with those addresses. The proof of assets is a mech-anism to prove the total value of bitcoins the exchange has the authority to spend using its private keys. We construct a privacy-preserving ZK-SNARK proof system to prove the knowledge of the private keys corresponding to the bitcoin assets of an exchange. The ZK-SNARK toolchain helps to convert an NP-Statement for proving the knowledge of the private keys (known to the exchange) into a circuit satisfiability problem. In this protocol, the exchange creates a Pedersen commitment to the value of bitcoins associated with each address without revealing the balance. The simulation results show that the proof generation time, size, and verification time are efficient in practice.