- CZ, announced that his exchange would soon launch a Proof-of-Reserves audit mechanism.
- The Twitter community supported the concept of increased Proof-of-Reserve audits.
The CEO of Binance, Changpeng “CZ” Zhao, announced that his exchange would soon launch a Proof-of-Reserves audit mechanism to enable verification of its holdings of digital assets in the wake of the liquidity issue and the acquisition of cryptocurrency exchange FTX.
All crypto exchanges should do merkle-tree proof-of-reserves.
— CZ 🔶 Binance (@cz_binance) November 8, 2022
Banks run on fractional reserves.
Crypto exchanges should not.@Binance will start to do proof-of-reserves soon. Full transparency.
In a tweet on November 8, Zhao promised to develop a Proof-of-Reserve system at Binance to give “complete transparency” through the use of Merkle Trees, a data structure used to more effectively and securely encrypt blockchain data. An independent third party usually performs a Proof-of-Reserve audit to make sure the assets belonging to the custodian are indeed owned as stated.
After agreeing to acquire competitor cryptocurrency exchange FTX, whose CEO Sam Bankman-Fried originally denied the reports that the company was in danger of going bankrupt, the Binance CEO announced his desire to introduce Proof-of-Reserves.
Complete Support From Twitter Community
Director of Digital Assets at Armanino, Jeremy Nau, has already promised to put in place a Merkle-tree-based proof of reserves system on Binance’s behalf. Similar services are already offered by the company to Kraken, which it claims has assets that are greater than 100% of its obligations. Crypto exchange OKX also stated that it also intended to introduce a Merkle tree-based Proof-of-Reserves audit mechanism.
The Twitter community supported the concept of increased Proof-of-Reserve audits almost unanimously, and prominent members of the cryptocurrency industry commented on Binance’s action.
