- Jesse Powell, Founder and Former CEO of Kraken, criticized the Proof of Reserves (PoR) released by ConMarketCap noting that PoR auditing requires cryptographic proof of customer balances and wallet control.
- Powell took as a reference the audit that his exchange has been handling for a few months, which is considered complete and has a “user validation assisted by an auditor with the Merkle approach, point in time.”
Currently the crypto industry has a recurring theme to talk about, the collapse and bankruptcy suffered by the FTX firm. The crisis that the firm is going through has generated some side effects, as if it were dominoes, in addition to a series of comments and analysis by the digital crypto community.
One of the people who has spoken out in this regard is the executive director of Kraken, Jesse Powell, who recently pointed out that what happened with FTX has caused a serious setback in the industry and I am talking about a topic that is also gaining momentum in recent days, reserve tests or PoR for its acronym in English
PoR audit requires a cryptographic proof
Recall that on November 22, the CoinMarketCap portal announced the launch of a function that shows proof of reserves (PoR) for crypto exchanges.
Through a Twitter threadr, Powell talked about the launch and retweeted a status from CoinMarketCap announcing its launch, mentioning that I would be assertive in pointing out the problems this new tool had and one of those was that an auditable Proof of Reserves requires cryptographic proof of customer balances and wallet control.
The former CEO of Kraken took the Proof of Reserves that the exchange he founded as an example, noting that Kraken currently has a “full PoR” which features “auditor-assisted user validation with the Merkle approach, point at which weather”.
And how to make a good auditable system? Powell affirmed that these must have the following three elements:
- Sum of customer liabilities (auditor must exclude negative balances).
- User-verifiable cryptographic proof that each account was included in the sum.
- Signatures proving that the custodian has control of the wallets
It should be said that the PoR theme is presented at a time when the crypto community is a bit on the edge, in addition to the fact that for the same reason, several digital asset exchange houses have promised to share PoR audits with the Merkle test. .
CoinMarketCap’s PoR, an incomplete tool
As we mentioned in a previous article, the new CoinMarketCap tool allows users to see information about the reserves held by the exchanges that have joined this project by identifying them with a small badge next to the name of the exchange. The crypto exchange houses that have decided to participate in this project are Kucoin, Binance, Crypto.com, Bitfinex, OKX, Huobi and Bybit.
However, it is noteworthy that That list did not include the names of five other publicly disclosed exchanges that are in the process of conducting full proof-of-reserve verifications: Gate.io, Kraken, Coinfloor, BitMEX, and HBTC.HBTC.
Similarly, the proof of reserves made by Upbit was also not recognized, in addition to the fact that the most updated version of CoinMarketCap does not have information related to the partial proof of reserves provided by Luno, Bitbuy and Revix.
So, can be said to be a incomplete releasedevoid of basic information.
The future
It is important to note that Proof of Reserves will undoubtedly continue to be a hot topic among industry members.
Likewise, the CoinMarketCap statement makes clear its relevance in what is a first step. The signature treatment of this functionality seems biased and sloppy and lacks the depth evident elsewhere on their website.
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