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Binance Presented Merkle Tree-Based Proof of Reserves

The crypto exchange is quick to deliver on its promise to address liquidity transparency issues

Binance proof of reserves

Binance explained how users could use the Proof of Reserves mechanism to verify its holdings. Source: depositphotos.com

In an announcement on the Binance website, the firm explained how users could use the Proof of Reserves mechanism to verify its holdings.

As we have previously reported, Binance CEO Changpeng “CZ” Zhao said that crypto exchanges should learn valuable lessons from the FTX collapse. In particular, they must be transparent about their reserves. Therefore, Zhao promised his exchange will launch a Proof-of-Reserves audit system to allow verification of its digital asset holdings.

Just two weeks have passed and Binance officially presented its response to the pressing industry issue. Currently, the only token available for verification through the Merkle Tree-based system is Bitcoin. However, additional coins will be added in the coming weeks.

Since Binance offers Margin and Loans services, the audit results will show the Net Balance, Equity and Debt of each user, where the Net Balance = Equity – Debt. Later updates will include the involvement of third-party auditors to audit its PoR results and the implementation of ZK-SNARKs in its PoR methods. This will allow proving that users with negative asset balances have enough other assets to cover the funds with collateral.

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Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.