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:
- Binance: The billion-dollar crypto exchange, Binance published its Proof of Reserves Report with over $70 billion worth of crypto assets in its cold storage. The exchange advocated a reserve ratio of 101% and provided a snapshot of its balances on November 22nd, 2022. The exchange previously published a screenshot of its hot & cold wallet addresses on November 10th, 2022.
- OKX: Cryptocurrency exchanges OKX released its Proof of Reserves report for public scrutiny on November 23rd, 2022. The report ensures that OKX has 102% of the BTC & ETH coins in case of withdrawals and 101% of the USD Tether coins in case of withdrawals. The exchange has also released an option to view the audit in the OKX application’s dashboard.
- Bitfinex: As one of the oldest crypto exchanges, Bitfinex released its PoR report on the same day, taking a similar approach as Binance. The report findings indicate that the exchange has over $5.06 billion in assets stored in 135 hot and cold wallet addresses.
- Kraken: The digital asset exchange launched a cryptographic PoR audit demonstrating that it has over $19 billion in customer assets in Bitcoin and Ether. It also affirmed that over $3.5 billion worth of Ether is secured in the on-chain staking service by Kraken. Customers will also be able to verify their bitcoin and ether balances on the exchange from their Kraken accounts.
- ByBit: ByBit released its Proof of Reserves Report authenticating the exchange holds all the user assets in a 1:1 ratio. The Proof of Reserves verification was available to funding and trading account users. Assets can be verified across many blockchains, including Ethereum, TRON, Avalanche, Arbitrum, Polygon, Optimism, and BNB Chain.
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.
