Proof of Source of Funds: Efficient On-chain Provenance of Cryptoassets

Computer Science > Cryptography and Security [Submitted on 8 Jun 2026] Proof of Source of Funds: Efficient On-chain Provenance of Cryptoassets Alireza Kavousi, István András Seres, Zhipeng Wang Regulatory compliance is increasingly mandatory for decentralized finance and privacy-enhancing technologies. Current approaches rely on binary inclusion/exclusion lists or retroactive graph analysis by centralized blockchain intelligence firms. This approach strips honest users of their financial privacy, leads to false positives and negatives, and forces decentralized platforms to bear the burden of on-chain transaction monitoring. In this work, we propose a paradigm shift: moving from platform-side surveillance to user-side provenance. We introduce Proof of Source of Funds (PoSoF), a novel cryptographic framework that shifts the burden to the user. Rather than the platform tracing funds, the user locally generates a zero-knowledge proof demonstrating that their deposit originates exclusively from a set of compliant sources. The platform is thus relieved of chain-analysis duties, requiring a constant-time, O(1) verification to enforce admission control. We formulate a unified temporal Directed Acyclic Graph (DAG) abstraction that formalizes both UTXO and account-based ledger histories within a generalized value-flow model. Users extract a compliant sub-DAG of their transaction history and utilize Incrementally Verifiable Computation (IVC) to prove rigorous state-transition predicates that protect against various attack vectors. Crucially, PoSoF provides verifiable cryptographic provenance; it guarantees the legitimacy of the funds without leaking the intermediate transaction topology, intermediary addresses, or the specific origins utilized. We formally define the security properties of PoSoF and evaluate an Ethereum-compatible prototype. Our benchmarks demonstrate that fully private, proactive compliance is highly practical, requiring only ~1.8 s to incrementally update a user's PoSoF per new transaction, and a constant-time ~1.5 ms (~800k gas) for final on-chain EVM verification. Subjects: Cryptography and Security (cs.CR) Cite as: arXiv:2606.10172 [cs.CR]   (or arXiv:2606.10172v1 [cs.CR] for this version)   https://doi.org/10.48550/arXiv.2606.10172 Focus to learn more Submission history From: Alireza Kavousi [view email] [v1] Mon, 8 Jun 2026 21:07:02 UTC (76 KB) Access Paper: HTML (experimental) view license Current browse context: cs.CR < prev   |   next > new | recent | 2026-06 Change to browse by: cs References & Citations NASA ADS Google Scholar Semantic Scholar Export BibTeX Citation Bookmark Bibliographic Tools Bibliographic and Citation Tools Bibliographic Explorer Toggle Bibliographic Explorer (What is the Explorer?) Connected Papers Toggle Connected Papers (What is Connected Papers?) Litmaps Toggle Litmaps (What is Litmaps?) scite.ai Toggle scite Smart Citations (What are Smart Citations?) Code, Data, Media Demos Related Papers About arXivLabs Which authors of this paper are endorsers? | Disable MathJax (What is MathJax?)