Binance, the world’s largest crypto exchange by volume, has launched the Proof of Reserve system on the recent negative developments in the crypto world!
Proof of Reserve System
Binance has released the Proof of Reserve system to refresh and increase the trust of its users after the recent FTX case in the crypto world. The Proof of Reserve System is the name given to crypto exchanges to prove the reserve currencies in their vaults. According to the announcement made by the company, the launch of the Proof of Reserve system will first start with Bitcoin, and other tokens and networks will be added to this system in the coming weeks.
Snapshot of Binance Accaount
On November 22, 2022, Binance shared a snapshot of their account balances and their own Bitcoin reserves and made the following statements:
“When we say Proof of Reserves, we are specifically referring to those assets that we hold in custody for users. This means that we are showing evidence and proof that Binance has funds that cover all of our users assets 1:1, as well as some reserves.”
According to the announced data, it is seen that Binance has 582,485 BTC in its reserve, while the balance of its users is 575,742 BTC. In the light of these data, Binance has a reserve ratio of 101%.
The Way to Verify Bitcoin Holding
Users can verify their personal BTC assets on the trading platform via a shared link or through Binance’s Merkle Trees service. Merkle Trees is a cryptographic tool that combines a large amount of data into a single hash.
As stated in the statement made by Binance, users can confirm the balance of their assets from the Audit tab located in the Wallet section after logging in to the exchange with their own account. Additionally, users who want to go a step further and independently verify their funds can cross-reference themselves by copying the source code into a Python application.
Third-Party Auditors
In addition to all the developments, Binance plans to involve third-party auditors aiming at ‘improving privacy and robustness, and proving the total net balance (USD) of each user is non-negative’ to control the Proof of Reserve system.
With this development, which follows the FTX case, other crypto exchanges have also initiated steps to provide full transparency to users through Merkle Trees.
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