On-Chain Verification

One of the key advantages of holding assets on a public blockchain is transparency. Investors can independently verify that the positions backing their shares actually exist — without relying solely on Belief Systems’ reporting. This page explains what can be verified, why it matters, and the concept of reconciliation.

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Why On-Chain Verification Matters

In traditional fund management, investors rely on custodian statements and auditor reports to confirm that a fund’s assets exist. These reports are produced periodically (often quarterly) and require trusting the custodian and auditor. With blockchain-based custody, verification is:

• Real-time — Balances can be checked at any time, not just at reporting periods
• Independent — Anyone can query the blockchain directly; no need to request statements
• Immutable — Transaction history cannot be altered after the fact
• Public — The same data is visible to all parties; no information asymmetry

This does not eliminate all trust requirements (see Limitations below), but it provides a layer of transparency that is simply not available with traditional custody arrangements.

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What Can Be Verified

Because all assets are held on the Polygon blockchain, the following are publicly verifiable:

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The Reconciliation Concept

Belief Index maintains an internal ledger that records all positions, cash balances, and share ownership. This internal ledger should agree with what is observable on-chain. Reconciliation is the process of comparing the two:

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Asset-Based NAV Computation

Belief Index computes NAV per share using actual on-chain token balances, not just theoretical index weights. This means:

• Position values are based on real holdings verified on the blockchain
• Each NAV computation records whether it used on-chain data or a theoretical fallback
• Investors can cross-reference the reported position sizes with on-chain balances

How on-chain balances feed into NAV

For each prediction market position in a series:

1. The system queries the custody wallet’s balance of that specific outcome token on-chain
2. The token balance is multiplied by the current midprice to determine position value
3. All position values are summed, custody cash is added, accrued fees are subtracted
4. The result is divided by shares outstanding to produce NAV per share

This approach ensures that NAV reflects what the custody wallet actually holds, not what the system intended to hold. If there is a discrepancy between intended and actual positions (e.g., due to a failed trade), the NAV will reflect the actual state.

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What This Means for Investors

• Positions are real. The outcome tokens backing your shares exist on-chain and can be independently confirmed by querying the Polygon blockchain.
• No hidden leverage. The actual on-chain balances determine position value, not a theoretical model or internal estimate.
• Auditable history. Every acquisition and disposition of positions is recorded immutably on the blockchain. The full transaction history is available to anyone.
• Continuous verification. Unlike quarterly audits, on-chain data can be checked at any time.

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Limitations

On-chain verification confirms that assets exist in the custody wallet. It does not, by itself, confirm:

• Series attribution — That specific assets are correctly allocated to a specific series (this is an internal ledger matter, not visible on-chain)
• NAV correctness — That the NAV computation methodology was applied correctly (requires verifying the computation, not just the holdings; see NAV Methodology)
• Share allocation — That shares are correctly distributed among investors (internal ledger)
• Operational controls — That custody governance and withdrawal safeguards are functioning as described
• Future solvency — That current holdings will be sufficient to meet future obligations

On-chain transparency is one layer of trust. Combined with the published methodology, disclosed operational model, and internal reconciliation checks, it provides a comprehensive picture — but it is not a substitute for independent due diligence.