Confidence and transparency are two important pillars for sustainable development in the crypto market. Bitget has already launched a 200 million USD protection fund to build confidence, and we will soon be ready to share our Merkle Tree proof-of-reserves to promote complete transparency and comprehensive asset auditing.
What is a Merkle tree?
Originally a Merke tree is a data structure that is used in computer science applications. In bitcoin, and other cryptocurrencies, Merkle trees serve to encode blockchain data more efficiently and securely. They are also referred to as binary hash trees.
A Merkle tree is essentially designed to break large pieces of data into considerably smaller chunks, which ensures that all the transactions can be verified in a timely manner. The tree summarizes every transaction by creating a small fingerprint of a specific set of transactions. Due to this organized and structured way of organizing data, it does not only allow the verification process to be very efficient. It also allows detection of any tampering.
Detect any tampering
Every transaction is stored within a Merkle tree as a hash. If the details of a single transaction are changed, those changes will progress into the upper levels of the tree before finally reaching the Merkle root. The Merkle root that's displayed in the header can then be compared to the Merkle root present in the data, so tampering can quickly be detected.
How can this concept be used to show proof of reserves?
Centralized cryptocurrency exchanges (CEX) store information on the assets of each user using a central database ledger. Exchanges can therefore utilize Merkle trees to store the hash value of assets in each user`s account ìn the Merkle Tree`s “lead nodes”. In the second stage of this validation process, a third party audits the assets in the Merkle Tree`s leaf nodes tò veri`fy ànd authenticate user holdings.
Transparency is more important than ever
Since our humble beginnings, Bitget has worked with users like you worldwide as the market has undergone growing pains and earned your trust and support. Those of us here at Bitget cannot be more grateful for the trust you've placed in us and will continue to have your backs as the market continues its volatility.
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The information provided above is not financial advice but for educational and entertainment purposes. Please do your own due diligence or consult a financial advisor before investing in any digital assets.
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