Seychelles-headquartered derivative trading platform and cryptocurrency exchange BitMEX has introduced a system where users (depositors) are able to verify the liabilities which they own in the crypto exchange’s total liability balance sheet by themselves. In other words, there is an absence of an intermediary or a third-party auditor in the transaction process.
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According to an official blog post by BitMEX, Merkel tree, a cryptographic data structure will be employed instead of the use of third-party auditors in the Proof of Liability (PoL) system that is now fully live and operational. This system will also be harnessed to ensure the preservation of the client’s privacy.
“All BitMEX depositors can now verify their individual liability is included in the total exchange liability balance. This self-verification process can be conducted without a third-party auditor. Client privacy is preserved because account balances are randomly split into multiple leaves of the Merkle tree. Reserve and Liability snapshots are published twice a week on Tuesdays and Thursdays,” the blog post stated.
BitMEX Regulators to Find ‘Nonce’
Interested depositors will be expected to download the latest liability snapshot after which, they will be expected to install an open-source tool from GitHub. The installed tool can run either on the Terminal app on Mac or Linux through some short commands.
For a complete liability search on the leaves of the Merkel tree, users will need an ‘accountnonce’ for a number of snapshots and just ‘nonce’ for a single snapshot. Every BitMEX user has access to this nonce as it is now automatically given when you log into your account. BitMEX users can find the nonce on the ‘MyAccount’ page.
Once a deposition is in possession of the nonce, he can then run it across the Merkel tree, in search of a collision. The point where the collision happens is the liability balance of the individual. This introduction comes after the sudden crash and bankruptcy filing of the FTX Derivatives Exchange, its sister trading firm Alameda Research and its other associate companies.
BitMEX has announced that it has no exposure to FTX, its token (FTT), or even its sister firm Alameda Research. Others like BlockFi which recently filed for bankruptcy in New Jersey and Metaplex Studios which laid off up to 30% of its staff have been affected.
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