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Binance Launches Proof of Reserves for Bitcoin

source-logo  financemagnates.com 25 November 2022 21:56, UTC

Binance, the world’s largest cryptocurrency exchange by trading volume, on Friday launched the Proof of Reserves (PoR) for its Bitcoin (BTC) holdings in its latest show of transparency to reassure customers of its health following the sudden collapse of top cryptocurrency exchange FTX.

A PoR is an independent audit conducted by a third party that seeks to confirm that a digital asset custodian truly holds the assets it claims it has in reserves to secure customers' funds. The fall of once-beloved FTX is currently driving renewed interest in PoR in the cryptocurrency community.

As part of our ongoing commitment to transparency, we have provided new updates on #Binance’s Proof of Reserves.

Further updates for $ETH, $USDT, $USDC, #BUSD & #BNB will be coming in the near future.

Stay tuned.

— Binance (@binance) November 25, 2022

Merkle Tree Data

The new update comes two weeks after Binance published the cold wallet addresses and balances of six of the 600 coins traded on its platform. Details shared by the top exchange showed that it has about 475,000 BTC, 4.8 million ETH, 17.6 billion USDT, 21.7 billion BUSD, 601 million USDC and 58 million BNB.

In a statement shared with Finance Magnates on Friday, Binance noted that it has also made it possible for users to verify its BTC holdings with the Merkle Tree data structure. The exchange described the PoR for BTC as “the first interaction of the feature,” adding that it will introduce verification for Ether, USDT, USDC, BUSD and BNB "soon."

A Merkle Tree is a cryptographic tool that enables the consolidation of large amounts of data into a single hash.

On #Binance, you can use Merkle's Trees to verify your #Bitcoin is held 1:1, and you can have it verified by a third-party audit agency.

Here's how it works ⤵️ pic.twitter.com/ZH1DN27jWO

— Binance (@binance) November 25, 2022

“Binance is also working to onboard an independent third-party auditor to validate the Merkle Tree data,” the exchange said, adding that it has designed a new PoR site to show that it holds client funds in full, with reserves.

“So, in simple terms, when a user deposits one Bitcoin, Binance’s reserves increase by at least one Bitcoin to ensure client funds are fully backed. People will be able to check the site and see Binance’s Proof of Reserves, showing Binance’s reserve ratio alongside customer liabilities,” Binance explained.

‘Massive Undertaking’

In the statement, Changpeng Zhao, Binance’s CEO and Founder described the new project as “a massive undertaking.” He added that developing the data required for the majority of assets under the exchange's custody requires a few weeks.

“Given recent events, it is understandable that the community will demand more from crypto exchanges, far more than what is currently required of traditional financial institutions. That’s why we are pleased to provide this latest feature for our users to verify their funds,” Zhao explained.

The CEO assured that the firm was working to get the next update out as quickly as possible to meet the expectations of the cryptocurrency community.