Why you should stay away from exchanges without Proof of Reserves
Crypto enthusiasts should stay away from exchanges without PoR because they are at risk of giving away their assets to insolvent or fraudulent players.
What is Proof of Reserves
Proof of Reserves is an independent check that uses cryptographic techniques and external review to verify that a custodian holds the assets it claims on behalf of its clients.
The primary purpose of a PoR audit is to prove solvency, i.e., demonstrate that a crypto exchange holds enough funds to cover all users’ deposits.
Proof of Reserves Audit uses cryptographic techniques like the Merkle tree to publicly showcase ownership of assets vs. liabilities.
Proof of Reserves makes all the difference for users
Regular users win from Proof of Reserves the most. For users, PoR Audit is the best guarantee they’ll be able to access and withdraw their funds.
According to Hacken’s CEO Dyma Budorin, “all exchanges that cannot pass Proof of Reserves” are mere crypto brokers in the best case and insolvent frauds in the worst case. Proof of Reserves is a viable method of differentiating between the two types.
Proof of Reserves is the only way to differentiate between crypto exchanges that gamble with users’ deposits and exchanges that actually keep users’ deposits safe. Why should users give their money to exchanges that cannot prove their solvency? Why should they risk their financial well-being with insolvent exchanges with fraudulent owners? Exactly. They don’t have to. The PoR Audit would help millions of customers better decide who they can entrust with their money, and who to avoid.
The unprecedented push for transparency is the best thing that has happened to the cryptocurrency industry in a long time. The violent collapse of FTX galvanized calls for Proof of Reserves across the industry. The market is now dead-set on getting solvency proofs. All exchanges must prove that they don’t engage in secretive transactions that put their customers’ funds at risk.
Proof of Reserves is live on CER
It has been a few years in the making, but Proof of Reserves is coming to CER.live and other leading data aggregators. CER.live’s first research on proving solvency and collateralization dates back to 2019.
Your #1 cybersecurity assessment platform now offers a list of Top Crypto Exchanges ranked by Proof of Reserves. Our Proof of Reserves Rating is the most objective crypto exchanges’ solvency rating compiled by a team of independent security specialists who verified all crypto exchanges’ balances and liabilities. We gather and verify the following information:
- Audited assets: The number of audited assets.
- Total balance: Total exchange balance calculated in USD.
- Audited balance: The balance in audited assets.
- Assets liabilities: The balance liabilities of the exchange to its users.
- Merkle proof: A cryptographic method “summarizing” public hash and balance using the Merkle tree sum technique that can be checked by anyone.
The first three exchanges that have completed our criteria are Kraken, Gate.io, and BitMEX. Kudos to them, and waiting for others custodians to follow.
