Cryptocurrency exchange Bybit joins the parade of industry exchanges advocating for transparency in the aftermath of the FTX catastrophe.
On December 12, he announced the launch of a Merkle tree-based proof of reserve system. The new transparency initiative allows its users to directly verify Bybit’s reserves, along with their personal assets deposited on the exchange.
The feature is available to all users with funds in both trading and funding accounts, which also includes cryptocurrency holdings in Bybit Earn products.
Also, The new feature allows verification of ownership of the Bybit wallet, that assets are held at a 1:1 ratio.
Ben Zhou, Bybit’s co-founder and CEO, commented on the use of Merkle trees in liquidity verification:
“The cryptographic solution presents a cryptonative and trustless model to provide verifiable evidence of our on-chain holdings and responsibilities…”
Per the announcement, the exchange is also improving withdrawals and increasing its risk management controls. He also pledged to publish all the content of his Bitcoin (BTC) and Ether (ETH) wallets.
He already published his reserve wallet addresses on November 16, a week after the FTX scandal began to break.
As users turn their attention to the safety of their funds and the accountability of exchanges, many of the major players in the industry have come up with similar transparency strategies.
Binance was the first to make its reserves publicly available and bet on a system based on the Merkle tree, which it published two weeks later.
However, after making some of its internal data public, problems were uncovered in the exchange’s finances, such as its corporate structure, BTC liabilities, and the quality of internal control.
Two other exchanges, Huobi and Gate.io, too, came under scrutiny after sharing snapshots of their bookings using borrowed funds. Grayscale, for its part, is reluctant to publish anything for security reasons.
Jesse Powell, co-founder and CEO of Kraken, made a statement stating that all these proof-of-reserves efforts mean nothing without the sum of customer liabilities.
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