Cryptocurrency With the collapse of the stock market FTX, it began to be questioned whether the users of the exchanges really held their assets. Binance announced that it has taken its first big step on the subject.
According to the company’s statement, the highly anticipated Proof of Reserves has come to life.
Binance Launches Proof of Reserves App and Announces The Company’s Reserves
Starting with BTC (Bitcoin), every user can verify their holdings on Binance using a Merkle tree.
In its official statement, the company wrote:
“Following our recent announcement outlining our commitment to transparency, Binance is launching the Proof of Reserves (PoR) System, the next step in our effort to ensure transparency over user funds.”
However, the cryptocurrency exchange also shared a table showing that the reserve ratio is currently 101%. According to the exchange’s statement, the company has 582,485 Bitcoins on-chain. The total amount of assets of the company’s customers was determined as 575,742 BTC.
The Merkle Tree is a cryptographic tool that enables large amounts of data to be combined into a single hash. This single hash, called the Merkle Root, acts as a cryptographic seal that “summarizes” all the data entered. In addition, Merkle Trees give users the ability to validate certain content included in a particular “sealed” dataset.
Binance gave the following details about the Proof of Reserves system:
“When we say Proof of Reserves, we are talking specifically about assets that we keep for users. This means that we have proven that Binance has funds and some reserves covering all user assets in a 1:1 ratio.
When a user deposits a Bitcoin, the company’s reserves are increased by at least one Bitcoin to ensure that the client funds are fully backed. It is important to note that this does not include Binance’s institutional assets held on a completely separate ledger.
Our commitment to our community continues as it always has.
What this really means is that we have ensured that the company holds all user assets 1:1 (and some reserves), we have zero debt in our capital structure, and we have an emergency fund (SAFU fund) for emergencies.”
*Not investment advice.
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