Zhao Changpeng: Maybe banks should use Merkle Tree as proof of reserves

It is reported that Zhao Changpeng, the founder of Coin Security, tweeted that since banks are audited, a bold idea is that perhaps banks should use merkle tree to prove reserves? Some, even if not 100%, we should know some, right?

Interpretation of this information:

The message implies that Zhao Changpeng, the founder of Coin Security, has suggested that banks should use merkle tree to prove their reserves. The basis of this idea is that banks are audited, and using merkle trees could potentially provide more transparency for the public. Although not all information may be disclosed, knowing some information is better than none at all.

Merkle trees, named after their creator Ralph Merkle, are a data structure used in computer science that can efficiently verify the integrity of a large set of data. They are commonly used in cryptocurrency to secure transactions and validate blocks in a blockchain. In the context of banking, merkle trees could potentially be used as a way to prove the validity of a bank’s reserves, providing more transparency for the public.

The mention of audits in the message suggests that Zhao is highlighting the importance of financial transparency. Audits are a common practice in the banking industry and are used to ensure a company’s financial statements are accurate and comply with accounting standards. However, there have been cases of fraudulent activity where audits have failed to detect misreporting. Using merkle trees as an additional tool for verification could provide a more secure and transparent way to prove the validity of a bank’s reserves.

Ultimately, the message seems to be advocating for more transparency in the banking industry. While not all information may be disclosed, providing some level of transparency through tools such as merkle trees can help establish trust between banks and the public. In today’s age where there is growing scrutiny and criticism of financial institutions, this suggestion could potentially improve public perception of banks.