The failure of FTX proved the importance of proof-of-reserves for centralized crypto exchanges. The growing commitment to transparency among crypto firms is encouraging for every other exchange.
Multiple crypto exchanges have expressed interest in publishing Proofs of Reserves, including popular ones, Bitget, Huobi, OKX, Deribit, Binance, Gate.io, KuCoin, Poloniex, Binance, Gate.io, and Bybi.
On Tuesday, Sam Bankman-Fried of FTX received a lethal blow from Binance founder and CEO Changpeng Zhao. He made the odd statement on Twitter that Binance will start issuing “proof of reserves.”
However, an independent audit known as a Proof of Reserves (POR) is carried out by a third party to ensure that a custodian has the assets it says it has on behalf of its clients. This auditor creates a Merkle tree, a privacy-friendly data structure that contains all client balances, using an anonymized snapshot of all retained balances.
The prominent crypto exchanges Gate.io, Coinbase, and Kraken, were the first exchanges to submit proofs of reserves that included liabilities. But despite this, Binance, the leading crypto exchange, started the trend; it hasn’t included its liabilities in its proof of reserves.
Others, including Crypto.com, Bitfinix, and Houbi, produced proof of reserves but did not reveal their liabilities. However, community experts believe that it is a good start but isn’t sufficient.
Vinny Lingham, a trader and investor said on Saturday that displaying reserves was a diversion. He suggested that an accounting of how much a platform owes or evidence of liabilities was truly what was required.
Crypto Exchange Gate.io Completes Proof-Of-Reserves
A third-party approved and user-verifiable Proof of Reserves audit was first made available by Gate.io in 2020, making it the first cryptocurrency exchange to do so. Additionally, the exchange just finished a new audit, which revealed that it has over 100% of its users’ BTC and ETH in reserve.
The Founder and CEO of Gate.io, Dr. Lin Han, said:
Enabling trust and transparency with users is of the utmost importance for market stability and the future of cryptocurrency. Providing 100% Proof of Reserves is a part of Gate.io’s commitment to user asset security and the long-term health of the crypto industry.
The exchange has released the source code for its “Merkle Tree Proof of Reserves” system, shared by the CEO of Gate.io on Twitter. The exchange encourages other exchanges to get consulting and advisory help and expects other platforms to embrace its open-source solution to improve transparency and industry health.
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