shabbiryk/checkpoint

an AI-powered zero-knowledge application that tracks the reserves of major CEXes to ensure low liquidity challenges.

Checkpoint

Version: 1.0.0
Last Updated: March 18, 2024

Overview

Checkpoint is a revolutionary project aimed at ensuring transparency and accountability in the reserves of centralized crypto exchanges (CEXs). In light of recent incidents such as FTX's collapse, there is a growing need for solutions that mitigate risks associated with custodial ownership and opaque financial practices.

This project proposes a decentralized self-regulatory platform built on zero-knowledge (ZK) technology to address these challenges. By leveraging advanced cryptographic functionalities and community-driven governance, Checkpoint aims to empower users to independently verify CEX reserves while reducing reliance on third-party auditors.

Abstract

Centralized crypto exchanges (CEXs) pose a significant threat to user funds due to custodial ownership and opaque financial practices. FTX's recent collapse exemplifies this, with user funds misused, misrepresented, and ultimately lost. To combat this, we propose Checkpoint, a self-regulatory platform built on any Zk-based L2s to ensure transparency and accountability in CEX reserves.

Problem

• CEXs hold user funds in custodial accounts, creating a single point of failure and potential for misuse.
• Lack of on-chain verification of reserves leaves users vulnerable to manipulation and fraud.
• Reliance on third-party audits introduces additional costs and vulnerabilities.

Solution

Checkpoint offers a decentralized self-auditing framework for CEX reserves, leveraging Starknet's advanced cryptographic functionalities:

• Stark-powered Proof-of-Reserves (PoR): Exchanges prove possession of user funds without revealing sensitive transaction details using Starknet's zero-knowledge (ZK) proofs. This ensures transparency while preserving privacy.
• Continuous Monitoring: On-chain smart contracts track reserves in real-time, detecting discrepancies and automatically triggering alerts for suspicious activity.
• Community-driven Governance: A decentralized autonomous organization (DAO) governs the platform, enabling community participation in setting auditing standards and resolving disputes.

Target Exchanges

• Binance
• Crypto.com
• BitMex
• OKX
• Huobi
• Bitfinex
• Bybit
• Kucoin
• Deribit
• Kraken ... and more

Tech Stack

• Cairo programming language:
• Proofs: ZK proofs for reserve balances while keeping transaction details confidential.
• Decentralized File Storage: Ensures permanent and tamper-proof record-keeping of reserve proofs.
• Off-chain oracles: Feed external data (e.g., exchange addresses) into Starknet contracts for comprehensive auditing.

Benefits

• Enhanced Transparency: Users can independently verify CEX reserves, building trust and mitigating systemic risk.
• Reduced Reliance on Third Parties: Eliminates dependence on centralized auditors, lowering costs and increasing resilience.
• Early Warning System: Continuous monitoring detects potential issues before they escalate, protecting user funds.
• Decentralized Governance: Community-driven decision-making ensures fairness and transparency in the auditing process.

Development Roadmap

1. Phase 1: Develop core smart contracts for reserve PoR and on-chain monitoring on Starknet.
2. Phase 2: Integrate off-chain oracles and decentralized storage solutions.
3. Phase 3: Launch the platform for select CEXs, iterate based on community feedback.
4. Phase 4: Expand platform functionalities and support for additional exchanges.

License

This project is licensed under the [insert license name]. See the LICENSE.md file for details.

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