The phrase “Proof of Reserve” originated as a result of the failure of cryptocurrency exchange FTX. According to statements made by Changpeng Zhao, CEO of Binance, on November 9, “all crypto exchanges should do Merkle-tree proof-of-reserves. Banks run on fractional reserves, Crypto exchanges should not. Binance will start to do proof-of-reserves soon. Full transparency.”
What Is Proof-Of-Reserve?
Proof of Reserve, also known as PoR, is a verifiable auditing process that contributes to increased transparency for centrally managed cryptocurrency reserves. PoR verifies the fund reserves of a centralized platform using cryptographic proofs, checks the legitimacy of public wallet entries, and routine third-party audits. Customers can use this information to determine whether the platform is in a strong financial position and whether customer deposits can be matched. Despite the fact that PoR makes use of blockchain technology, it still relies on the accuracy of the accounting proces
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