Tech Talks Daily
00:02:39 · Neil C. Hughes, Harvey Liu
[00:02:39] S0: Awesome. And there are so many crypto exchanges out there, but yours is one of the... Certainly, from what I understand, one of the very few where you can actually connect with each other, connect with other traders. Where did that community aspect come from? What inspired you to to go with the community and and connecting other traders there? [00:02:57] S1: Myself, as I mentioned, I had a a tech background, and I start learning investment and and the business. So back in 2013, when I first get into crypto, so when I met so many, like, earlier crypto investors back in China, we have this offline collapse and the investors collapse. Also, we join frequently, maybe weekly, even monthly. We just share our ideas. But at that time, we think it will be way better we have a a online community. Or we basically just simply has a trading platform where you can just simply communicate with each other and share the trading address, even share live trades. So since that time, I would... I already had the idea to build exchange with all these kind of features altogether. But I I think as time goes on, I think the opportunity is more mature when it's back in two thousand twenty two, twenty three. So that's when I was able to finally make the decision to just leave the venture capital industry and start to building the company myself. Yeah.
00:04:04 · Neil C. Hughes
[00:04:04] S0: I love it. I particularly love that ability to connect with others because I think the world of crypto and blockchain in particular is incredibly complex, and learning from each other, speaking with other people is so important. And on this podcast, every day, I try and demystify areas of tech that people they want to know more about, but often afraid of asking because they want it. They feel stupid or or something like that. So, for example, if we look at a lot of exchanges now, there's been some big changes there. Many now publish proof of reserves, but what does that evidence prove, and and what can it still hide?
00:04:38 · Harvey Liu
[00:04:38] S1: Yeah. Actually, reserves from, I think, from transparency point of view or from building trust as... That that point of view, it's quite important for the centralized exchanges to actually publish that because using that proof of reserves, the the users can easily see or even backtrace their account on the on chain to verification, make sure their... Basically, their access is safe on the centralized exchange. So that's why also so many centralized exchanges doing that is the important part of building the trust with the the users and and also prove themselves is not simply moving the money around. So... But I think, as I mentioned, it's a good things to have, but it definitely... There's something we need also to understand the limitations. Right? So the proof of reserves actually only a snapshot. Basically, if they do it monthly or do it quarterly, depending on the time they they actually do that snapshot, it it just... It's static. It's not dynamic. So that's one thing. It's only proof at that time. The platform would have that... The reserves to actually make sure the user's fund is not... Is fully covered, basically. And and secondly, I think it's also important to know the proof of reserves is only proving was the the assets is long chain. But you don't know if, like, in real world, the companies may have, like, may have a loan from the bank or have a debt from the debtors and then look... All that kind of things. So you don't know. So so that's that's the side. Yeah. And I think the last point is that you you also need to know, actually, the proof of reserves is only useful when the proof reserves contains the quality assets. Basically, the proof reserves, some of the platforms will have their own platform token. If that token becomes a big part of this proof of reserves, then that may be also a question you you may wanna ask. Right? So only, I think, the best quality of the the reserves will be Bitcoin, Ethereum, Solana, USDT. Those kind of assets will be the best. Yeah.
00:06:49 · Neil C. Hughes, Harvey Liu
[00:06:49] S0: Awesome. So when a user lands on an exchange, say any exchange here, and they're looking at that published proof of reserves, does it ever say anywhere when that last snapshot was, when they do snapshots, or are you just still in the dark on that? Is there any way they can find that information out? [00:07:06] S1: Well, I think the mostly... I think the company or the centralized exchange will publish when they will do the proof reserves. Yeah. Also, I think there's ways if you are savvy enough, I think the the exchange will actually label their wallets on... On chain. So you can do on chain analysis to make sure the money has been there all the time, not just last minute. They move it into those wallets, and then just to show it at a snapshot that we mentioned. But it could be that you can check their wallets and make sure the money has been there for a longer period so you know that they are not just moving at the last minute. Yeah. [00:07:44] S0: Got you. And I'd love for you to take us inside some of the engineering choices that are required to provide verifiable solvency without slowing a trading platform down or even exposing it to sensitive information. Can you give us a little peek under the hood there?
00:08:02 · Harvey Liu
[00:08:02] S1: I think it's... Like I mentioned, it's a verifiable solvency. I think when you're trying to do that, the architectural choice, I think, for myself... I'm not fully the technical engineer for my company, but I I... Overseeing some of the the teams doing it. But I understand that it will be a balance, I will say, across security, privacy, and performance. So, basically, we want to choose the... First of we choose the Merkle tree. That... That's one of these... Basically, the users will generate it. At at the tree leaves. The users kind of look like tree leaf. The tree leaves will grow. Then that eventually is gonna build up the tree so they can show the entire assets of the platform. So that's the the crypto... The cryptology that we use that just to to actually display the proof of reserves. So that's the choice of the the mechanism that we use. And also, we we don't want really publish any privacy information. Right? So we only would say we're using... We don't display user IDs or anything. We'd only display a certain, maybe, numbers just showing the user's assets. The user, it will be a chain of... It's shell code. It was... I can put it that way. So the user... Each user will get that code, then they can go on to the Merkle Tree and verify that. Then their account is is located in in the Merkle Tree, and they can see their assets there. So this is verifiable. So... Basically. Also, it's... Also performance is never good. Actually, you you actually do a live quote out of the system. So, basically, we will do... We'll offload some of those datas to maybe, like, an intermediate server so so so the snapshots will take from there. So it will be way better lower load for the system, the whole system. So that... I think that's the way we set up to to do it. Yeah.
00:09:56 · Neil C. Hughes
[00:09:56] S0: And we started our conversation talking about your origin story. What made you want to go out there and create this? But what... I'm curious. Looking back, what did you learn from building LeveX that maybe challenged your earlier assumptions about how exchanges should handle trust and transparency. You probably set out with a certain set of beliefs and why you were doing it. Did that change? Did you learn anything along the way?