- Binance has officially launched its system that will allow all Binance users to verify Bitcoin exchange reserves through a Merkle Tree-based system.
- Merkle trees are data structures that have been created with the aim of facilitating the verification of the integrity of a data set.
- According to PoR, Binance holds 582,485 BTC in its reserves, while its users have a net balance of 575,742 BTC.
just ten days ago Binance announced that it would start working on offering a proof of reserve (PoR) system in response to the liquidity crisis that various crypto platforms have suffered, and now, officially publishes a system that will allow all Binance users to verify the reserves of the crypto exchange.
At the beginning of November FTX, which was one of the largest crypto exchanges in the industry, collapsed and evidenced one of the most important liquidity crises in the crypto industry. as soon as this happened Changpeng Zhao, CEO of Binance, has pledged to provide “full transparency” through Merkle Trees with the aim of regaining investor confidence.
Almost instantly, Binance made its hot and cold wallet addresses public while pledging to work with Ethereum co-founder Vitalik Buterin to develop a Proof of Reserves (PoR) protocol.
And, almost ending the month of November, Binance officially offers users the possibility to verify the reserves of the platform in Bitcoin through a system based on Merkle Trees.
How does Binance manage to offer transparency of its reserves?
You need to start by understanding that Merkle trees are data structures that have been created with the aim of facilitating the verification of the integrity of a data set.
According to the Binance explanation, this system allows people to verify their asset holdings using their own generated Merkle hash/log. And therefore, they can make sure that their funds are kept 1:1 and even external auditing agencies can verify it too.
“When we say Proof of Reserves, we refer specifically to those assets that we have in custody for users”said Binance. “This means that we are showing evidence and proof that Binance has funds that cover all of our users’ assets 1:1, as well as some reserves.”
This reserve proof system is currently exclusively available for Bitcoin. Nevertheless, Binance has promised to add other cryptocurrencies in the next two weeks.
In this way, Binance claims to have 582,485 BTC in its reserves, while its users have a net balance of 575,742 BTC. That is, Binance has in its reserves the amount of BTC that its users have plus an additional one, or a reserve rate of 101%.
How can users verify their holdings?
Binance explained that when logging into the crypto exchange website you will need to click on “Wallet”. A list of options will be displayed and at the end, click on “Audit”.
In this section you will see your Merkle Leaf along with your registration ID. Later you can select the date you want to verify. You will then find confirmation of the type of audit, your registration ID, the assets covered, and the balances of your assets at the time of the audit.
What are Binance’s next plans?
In addition to adding other cryptocurrencies to this verification system, Binance plans to include the participation of third-party auditors. who will be in charge of guaranteeing the veracity of the PoR results as well as the implementation of ZK-SNARK in their PoR methods.
As expected, many users in the crypto community have appreciated Binance’s effort to bring much-needed transparency to the crypto exchange industry.
Especially for the value that the crypto exchange has in the market. Other crypto exchanges have published their wallet addresses such as Bybit, Bitfinex, KuCoin, Crypto.com, and OKX. These crypto exchanges and others will probably need to follow in Binance’s footsteps to stay competitive.
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