Binance unveils its proof of reserves mechanism
- Binance’s proof of reserves system initially shows results for the flagship cryptocurrency Bitcoin.
- The crypto exchange will add other tokens and networks as well as implement ZK-SNARKs.
- Crypto exchanges are looking to show they have the assets they should hold after the shocking collapse of FTX.
Binance has published its proof-of-reserve (PoR) system, days after CEO Changpeng Zhao pledged to have the mechanism in place following the collapse of rival FTX.
The bankruptcy and the contagion that followed crashed the market, with Binance Coin price dropping to lows of $250. Bitcoin price also fell below $16,000, hitting its lowest level since 2020.
In response, multiple exchanges had released a snapshot of their asset reserves. But the crypto community largely noted the snapshot of assets alone wasn’t enough – there was a need to have exchanges’ liabilities also available.
Binance’s proof of reserves showed a 101% ratio
In its update on the issue, Binance has noted its users are now able to verify the exchanges holdings. As for what’s possible now, Binance announced the mechanism will initially support Bitcoin. The exchange will look to add other tokens and networks over the next few weeks.
Binance will also allow for the auditing of its proof of reserves results by third-party auditors and implement ZK-SNARKs to help bolster privacy and robustness.
“Because Binance offers Margin and Loans services, the audit results will show the Net Balance, Equity and Debt of each user, where the Net Balance = Equity – Debt,” the Binance team wrote.
A snapshot taken on 22 November 2022 at 23:59 (UTC) shows Binance’s on-chain Bitcoin balances stood at 582,485.9302, while customer net balance was 575,742.4228. The reserve ratio from the snapshot was 101%, with the margin at 6,743 BTC.
Binance customers can verify whether the exchange holds their crypto as it should.