Two weeks after Binance initially pledged to develop a proof-of-reserve (PoR) mechanism in response to the FTX liquidity and bankruptcy fiasco, it published its official response.
In an announcement on the Binance website, the exchange outlined how users can use the mechanism to verify its holdings. Currently, the only token available to verify through the Merkle Tree-based system is Bitcoin (BTC), though the announcement says additional coins will be added in the coming weeks.
It also highlighted upcoming transparency updates which include the involvement of third-party auditors to audit its PoR results and implementation of ZK-SNARKs in its PoR methods, among others.
Days after Binance announced its intention for PoR, it released the public details of its wallet addresses and on-chain activity.
Binance CEO Changpeng “CZ” Zhao tweeted about the latest update. Naturally, the Twitter community responded and many with positive comments towards the transparency efforts.
This is a great initiative. Perhaps a stand-alone page for Proof of Reserves where users can see all the exchange holdings (updated daily) could be on the roadmap for the future.
— Chief (@satn) November 25, 2022
However, some still had questions as to whether Binance auditing itself is the most efficient way of being transparent.
Related: Proof-of-reserves: Can reserve audits avoid another FTX-like moment?
Binance was one of the first following the FTX to start a trend of releasing proof of funds. Bybit released its reserve wallet addresses on Nov. 16, a week after the initial incident, along with other major exchanges such as Bitfinex, OKX, KuCoin and Crypto.com.
Both Huobi and Gate.io came under fire after publicizing their information which included loaned funds. The cryptocurrency investment product provider Grayscale Investments said it is hesitant to release wallet addresses due to security concerns.
On Nov. 10 Chainlink Labs offered PoR auditing services to exchanges across the space, as a solution to trust issues starting to pop up for centralized exchanges.
Market tracker CoinMarkCap shared on Nov. 22 that it added a new feature, which is a PoR tracker for exchanges who have publicized the information.
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