Binance has released its proof-of-reserves system, starting with bitcoin, in order to show that the exchange is healthy and solvent.
This comes just weeks after rival exchange FTX collapsed, after seemingly swapping user funds for other, more illiquid tokens — eventually leading to a liquidity crisis. Binance's goal is to show that it holds its users' assets in the same tokens that they have deposited.
For bitcoin, Binance has provided a snapshot of account balances and the exchange's bitcoin reserves. It claims it has 582,485 bitcoin in its reserves, while its users have a net balance of 575,742 bitcoin — giving it a margin of 6,743 bitcoin. It also provided a link for Binance users to verify their own bitcoin on the exchange.
Binance said it will add further tokens and blockchains in the next few weeks. It also wants to involve third-party auditors to check the proof-of-reserves system and to implement zero-knowledge proof technology to provide cryptographic proof of its claims — while protecting user privacy.
© 2023 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.