Crypto Lender Celsius makes use of Horizen for the proof-of-reserves-proof-of-concept
Crypto lender Celsius is running a series of experiments over the next few months to test what it would look like for the company to decentralize some of its activities.
Centralized Finance (CeFi) staff are working with Horizen, a platform that develops and manages the ZEN privacy token, to take a look at creating a reserve evidence system that uses Horizen's no-knowledge evidence .
"The biggest challenge with DeFi (decentralized funding) is transparency," said Nuke Goldstein, chief technology officer at Celsius. "How do we show the world that the numbers we report are real?"
The pilot for the proof of reserves would have the information displayed on the Celsius website fed in from a Horizen sidechain in contrast to Celsius' internal servers. The application would first display total customer assets per coin type and eventually unlock Celsius transaction data, which was encrypted using Horizen's knowledge-free toolkit so as not to reveal the customers' personally identifiable information.
However, proof of the reserves would not give customers any insight into which part of Celsius' loan portfolio is unsecured. What proportion of depositors' money was invested in derivative contracts rather than borrowing? or the amount of collateral pledged by borrowers that are being re-mortgaged (i.e., lent) by Celsius.
Nic Carter, co-founder of Castle Island Ventures and Coin Metrics, has written extensively on the evidence of reserves and advocates that every crypto custodian take the transparency measure.
"Since I've never seen any evidence of reserves for a lender, it's difficult to imagine what they're trying to do," Carter said via email. "I'm familiar with ZK proofs for PoR, but they're a bit black boxy. I've never seen them in the wild."
Celsius could not provide a wireframe of the concept. CTO Goldstein added:
"The full implementation automates reserve tracking directly from blockchain feeds and preserves the privacy of individual accounts so that account data cannot be reverse engineered."
The company will initially offer these solutions in retail, added Goldstein.
Celsius will also subject this proof-of-concept to hackathons in the Celsius community.
"We're going to package the ideas and technology so that we can share them with the community and say, 'Try to find loopholes in them, try to figure out what's wrong with them," said Goldstein. "And if you find something, we'll pay you for it. "
However, it will be years before customers see these applications in production, Goldstein said.
"It's a long process, but these phases will bring us closer," he said.