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Gate.io Provides Proof of 100% Collateral (First-Ever Among Mainstream Exchanges)

2020-05-16 23:08:21Read:46954

With its commitment to security and transparency, Gate.io has been attributing great importance to the safety of its users’ assets; always placing asset security as its top priority since it was founded 7 years ago. The assets are protected by a strict financial audit and a set of real-time risk warnings. Each user can trust in 100% collateral provided by Gate.io, which we will elaborate on later in this piece.

Moreover, with hardware wallets, a higher level of asset security can be achieved by separating hot wallets and cold wallets. This eliminates any form of risk. Additionally, supported by the security account element of GateChain, the asset security of blockchain can be achieved through decentralized blockchain asset security solutions.

In 2019, Gate.io gained a certification mark from the global organization Blockchain Transparency Institute based on its real trading volume. At the end of 2019, BitUniverse revealed a list of global crypto exchanges that actually own the supposed digital assets. Gate.io ranked top 10th on the list with apparent digital assets which contain 30,000 BTC.
In February 2020, Gate.io released an announcement of Proof of 100% Collateral Provided by Gate.io, being the first-ever mainstream exchange that commits to provide 100% collateral. Over the past few months, Gate.io has worked closely with the well-known US Accounting and Consulting firm Armanino LLP, providing users with 100% collateral verification in a transparent way by publishing the opening source of blockchain signature and Merkle tree. Each user can verify whether their asset amount is recorded accurately in the Merkle tree. After the strict assessment, we received the BTC Reserves Assessment Report (100% Collateral) on May 11th, 2020. We have published the verification procedure, code and report on Github. For further details, please check here: https://github.com/gateio/proof-of-reserves

Meanwhile, Armanino LLP has provided the verification of reserves (100% collateral) on its official platform. For further details, please check here: https://real-time-attest.trustexplorer.io/proof-of-reserves
Download PDF of Armanino LLP Proof of Reserves Assessment Report:
https://github.com/gateio/proof-of-reserves/blob/master/assessment%20report/Gate.io%20Proof-of-Reserves%20Assessment%20Report%20%5BBTC%5D%20%5BMay-11-2020%5D.pdf
The Announcement of Publicly Reporting Users’ Assets on Gate.io through the Merkle Tree Algorithm
About Armanino LLP
Armanino LLP is a top 25 US Accounting and Consulting firm, and the largest headquartered in California. Armanino’s specialized Blockchain team is composed of CPA’s, attorneys, and consulting professionals, who have been servicing the digital asset industry since 2014.

The Introduction to 100% Collateral
In a centralized exchange for trading blockchain assets, every user’s assets are recorded by the ledger of a centralized database. The recorded assets in the database are the total amount of the user’s assets. Collateral is the amount of user’s assets held by the exchange. For a cryptocurrency exchange, its collateral equals the total amount of assets controlled by the exchange in the blockchain. Collateral can also include the amount of fiat currency in a bank, for fiat trading exchanges. In terms of Gate.io, its fiat trading is performed in a C2C manner without holding any of users’ fiat currency. In a blockchain, 100% collateral of a coin is provided, if the amount of the coin owed by an exchange is higher than or equal to the total number of the coin held by all of its users.

The Importance of 100% Collateral
Assets held by a centralized exchange can’t be monitored by the users themselves. In this sense, an exchange could potentially misuse users’ assets without their knowledge, which could lead to a situation in which the collateral turns out lower than the recorded assets in the database. As a result, users would face tremendous risks, involving delayed withdrawal. Worse yet, users could be unable to withdraw their coins as a result of insolvency of the exchange. All these factors combined will diminish a users’ sense of trust in an exchange. Therefore, if the exchange wants to gain users’ trust, it must be able to prove that the collateral is higher than the recorded assets in a trustworthy manner, so as to sustain sound development in the long run.

What is a Merkle tree?
Merkle tree, a binary hash tree, was invented by Ralph Merkle in 1979. Each leaf node of the tree stores the hash value of a data element. The stored data is irreversible with the hash algorithm of the tree as any changes in the data of the leaf node will lead to a different root hash. In the block of Bitcoin, every transaction is recorded through the tree structure.

How Does Gate.io Prove 100% Collateral
Gate.io provides users with a reliable method that combines the mathematical algorithm and a financial audit to check the collateral, including a user’s total assets on the platform; all whilst protecting users’ privacy from hacking. We adopt two methods to prove the user’s total assets and users’ collateral held by Gate.io. The first method is to store each user account’s hash value of assets in the leaf nodes of the Merkle tree. The second method is to audit those assets in the leaf node of the Merkle tree and verify all the users’ collateral held by Gate.io through an audit of a third party institute. Conclusively, the written audit report and the Merkle tree of the hash value of users’ total assets are open to the public through the audit of the third party. Each user, through the application of mathematical algorithms, can verify whether their assets amount is recorded accurately in the Merkle tree.
Gate.io has launched a feature that allows users to check their balance on the website. Web users can check at “Wallets” on the official website:https://www.gate.io/myaccount/myavailableproof

On January 1st, 2020, we completed a snapshot of all user accounts’ BTC assets, including the following:
- Each trading account’s available balance and taker amount
- Margin trading account’s available balance, including the taker amount
- Borrowing capital and interests that should be paid
- “HODL & Earn” account’s lending and frozen capital
- Periodic investment capital and lock-up capital
- Contract account’s total assets and position gain and amount of loss
- User’s total assets of all accounts.

There are nearly 200 types of tokens on Gate.io, each of which have been verified and audited by the aforementioned auditing institute. Since the transfer of assets would involve the cold wallets and hot wallets that include numerous addresses, the audit must be done in an absolutely safe environment. To avoid safety obstacles and misoperation, we provide users with 100% proof of collateral through an annual audit.
For the mainstream tokens, we will finish each audit report with the cooperation of the audit institute and publish the Merkle tree of the hash value of all users’ total assets, using an open-source verification program on Github platform.
Each user can verify the information through “Wallets”- “Available Balance Proof” on Gate.io and check whether their assets are recorded in the audit through the Merkle tree and verification program.
For other tokens, any project or individual can ask for an audit and make their assets’ Merkle tree public with the same standard, which will incur a fee. The fee standard will be set according to the difficulty of the audit, which will be determined based on whether the token has a multichain storage, PoS & Earn and privacy feature.
Gate.io is a trading platform that does not charge listing fees, only launches quality projects and provides users with proof of assets and audit reports through Merkle tree, aiming to create a safe and transparent trading environment. Any supervision, suggestions or other kinds of feedback is welcome. We appreciate your continued support and trust during the seven-year growth of Gate.io.

Gate.io
May 16, 2020