The FTX fiasco raised concerns over unregulated cryptocurrency platforms and a lack of trust in their operations. FTX was a classic example of using deposited customer funds to mitigate own business losses at the expense of the customer’s trust. This sparked grave concerns over trusting unregulated centralized entities. The spiraling of events post the FTX saga created immense havoc and fear in the crypto community until Binance published its Proof of Reserves report to instill confidence in the industry. The FTX’s implosion might have been a catalyst but it triggered massive interest from the community to peek into exchanges’ current reserves and operational activity.
Exchanges started employing Merkle-Tree-based Proof of Reserves to determine the absolute backing of their crypto assets by a third-party crypto auditor. Merkle Tree is a cryptographic tool known for encrypting blockchain transaction data. Users will be able to comprehend the crypto exchanges’ state of finances and also verify personal holdings on the public blockchain. The trend emerged, and the rest is history. We have all witnessed our Twitter feeds filled with PoR reports.
Here are five cryptocurrency exchanges that have implemented Proof of reserves or have publicly disclosed information about their holdings:
Users must always research and perform their due diligence while choosing a crypto exchange. They must also look for additional signs of financial stability, such as an operational track record, credibility, and transparency in the exchange operations. One method to verify the exchange’s credibility and security is by reviewing its PoR(Proof-of-Reserves) report.
Moreover, one must know that Proof of Reserves can be exploited or manipulated. Therefore it is essential to keep track of the exchange’s operation and verify the financial health of the crypto exchange time and again.
