Pricing the Unprovable: Ambiguity, Turnstile Runs, and the Verifiability Discount in Crypto Protocols
Researchers quantify a verifiability discount when privacy coins patch flaws without proving past non-exploitation.
The paper defines a verifiability discount: privacy protocols can repair a flaw without proving it was never exploited, even when no theft is reported. VDISC combines Orchard disclosures, reconstructed on-chain flows, earlier Zcash cases, and a 40-event panel. Orchard's muted post-repair reaction contrasted with the largest negative return and shielded-pool outflow when past abuse could not be ruled out. Across 38 events with a public loss figure, market-cap-normalized reported loss and unresolved exposure overlap strongly (Pearson 0.86), so returns alone cannot separate them.
- VDISC records loss, exposure, evidence, returns, and pool flows separately.
- Orchard's worst return and shielded outflow followed unresolved past-abuse uncertainty.
- Across 38 events, reported loss and exposure correlate (Pearson 0.86).
- Authors prioritize past-state evidence, limited blast radius, and explicit uncertainty.
From the original article
1 min read at arxiv.orgPrivacy-preserving protocols can repair a vulnerability without establishing whether it was exploited beforehand, even when no theft is reported and aggregate supply is protected. We call the potential value reduction from this gap the verifiability discount.
By Doohwi Cha · arxiv.org
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