Binance took its next step to increase transparency about user funds after revealing hot and cold wallet addresses. The new step includes Proof-of-Reserves for BTC and an update using the Merkle Tree data structure to prove BTC balances.
The first version of the feature that provides verification for ETH, USDT, USDC, BUSD and BNB is expected to arrive soon. Binance is also working on hiring the services of an independent third-party controller to verify the site’s financial details.
Binance CEO Changpeng Zhao: This is a huge process
Changpeng Zhao, CEO of Binance, said, “Given the recent events, it’s understandable that the community expects more from crypto exchanges, especially from traditional financial institutions.
That’s why we’re pleased to introduce this new feature so our users can verify their funds. Binance’s user community is vastly larger than the next largest exchange. So this is a huge process…
Therefore, it will take several weeks to develop data for the vast majority of assets in our custody. “We are working to roll out the next update as quickly as possible to meet our community’s expectations.”
Proof of Reserve
The new proof-of-reserve site is designed to show that Binance, as a “trustee”, protects all client funds along with reserves. Like this; When a user deposits a Bitcoin, Binance’s reserves can also increase by at least one Bitcoin to ensure user funds are fully backed.
It also allows users to check the site and see Binance’s Proof of Reserves, which shows customer responsibilities as well as Binance’s reserve ratio.
There are two ways to verify funds
Along with all this, the site offers two new methods for users to easily verify their transactions through Binance’s Merkle tree. The first of the methods is Binance’s official website where users can verify their BTC funds through Binance’s Merkle tree in a few simple steps.
After logging in to Binance’s official website, click on the “wallet” option, then click on the “check” option. In addition to showing that their assets are covered, users can also generate a unique registration ID that validates users’ asset balances at the time of the audit.
Users who want to take things a step further and independently audit their funds can copy the source code into a python application to obtain their own opposing references.
What’s next?
Binance aims to introduce ZK-SNARKs in the coming weeks. ZK-SNARKs is a very powerful tool that brings additional privacy and simplicity benefits to responsibilities with proof of reserve. The reason Binance does this is because Binance offers Margin and Borrow services.
For this reason, audit results will show each user’s Net Balance, Equity and Debt with the equation Net Balance = Equity – Debt, which may result in some users seeing negative asset balances.
Therefore, we are working on adding ZK-SNARKs to prove to users that there are enough other assets to cover the funds with collateral. Thus, it will be proven that the total net balance (USD) of each user is not negative.
Our commitments have not changed
This new update from Binance aims to reassure people that Binance is holding all user assets (and reserves) in a 1:1 ratio. Binance also has zero debt in its capital structure and an emergency fund (SAFU Fund) to protect users in extreme conditions.