Merkle Tree Asset Verification for Digital Exchange Transparency
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Solution Overview
Problem
Users distrust digital assets service providers due to the risk of unauthorized disposal of user provisions, as the service providers have control over the blockchain network and lack transparency in asset management.
Innovation Solution
A method involving a server that generates snapshots of user identities and assets, transforms them into combined hash values, and uses a Merkle tree to verify the validity of user provisions, allowing for third-party auditing to ensure transparency and accuracy of asset holdings.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If the service provider stores and controls user digital assets in a centralized manner, then the service provider can manage and dispose of assets, but users cannot supervise or verify the actual asset holdings, leading to distrust
Solution Approach 1:
The patent introduces a third-party auditing body as an intermediary to verify the service provider's asset holdings. The auditor independently checks whether the sum of user assets equals the service provider's valid user provisions, and publishes audit results on the blockchain. This mediator resolves the trust issue by providing independent verification without requiring users to directly supervise the service provider.
Solution Approach 2:
The patent implements a feedback mechanism where the third-party auditor regularly audits the service provider's assets and publishes the audit results on the blockchain platform. This feedback loop allows users to verify the service provider's asset holdings at any time, creating continuous transparency and accountability that maintains user trust.
2Productivity
If the service provider has full control over user provisions, then asset disposal is efficient, but unauthorized disposal cannot be prevented and supervision is impossible
Solution Approach 1:
The third-party auditor acts as an intermediary supervisor that independently verifies the service provider's asset holdings without interfering with daily operations. The auditor checks the equality between user assets and valid user provisions, and publishes verification results on the blockchain, providing security oversight while maintaining operational efficiency.
Solution Approach 2:
The patent replaces manual supervision mechanisms with automated blockchain-based verification. The audit results are published on the blockchain, allowing any user to independently verify the service provider's asset holdings through cryptographic proofs, eliminating the need for trusted intermediaries and providing decentralized security verification.
3Reliability
If user asset information is made transparent for verification, then user trust increases, but user assets privacy is compromised
Solution Approach 1:
The patent extracts only the necessary verification information (the equality relationship between user assets and service provider provisions) from the complete user asset data. Instead of publishing detailed user asset information, the system publishes audit results that prove the service provider holds sufficient assets, verifying trustworthiness while preserving user privacy.
Solution Approach 2:
The patent applies different levels of transparency to different types of information. User-specific asset details remain private (local quality of confidentiality), while the aggregate verification data (sum of user assets equals valid provisions) is made public (local quality of transparency). This differentiated approach allows verification without compromising individual privacy.
Data Source
AI summary
Example embodiments relate to methods of proving digital assets. The method includes identifying users on an asset transaction platform. The method includes generating a snapshot for each identified user at a first time. Each snapshot includes a user identity and user assets amount for the user at the first time. The user assets amount is a total amount of digital assets held by the user on the asset transaction platform at the first time. The method includes transforming each snapshot into a string combined hash value. Each string combined hash value is generated by hashing one of the snapshots of the user identity and the user assets amount for the first time. The method includes generating a merkle tree. The merkle tree includes a leaf node for each of the string combined hash values. The method includes performing an audit process of the asset transaction platform for the first time.